The new transformation law ...
On 1 March 2023, the Act Implementing the Reorganisation Directive (UmRUG) came into force. The final law largely corresponds to the draft bill presented about a year ago. The UmRUG will make cross-border transformations considerably easier, at least for corporations. The core of the UmRUG are the new regulations on the German side on cross-border demergers and changes of legal form for corporations. Despite many demands, the scope of application was not extended to partnerships. The UmRUG also has some innovations for domestic German transformation cases. It should be emphasised that in the case of a spin-off for absorption, a capital increase at the acquiring company can now be dispensed with.
... contains comprehensive protective regulations ...
The aim of the UmRUG is in particular to protect (minority) shareholders, employees and creditors.
The protection of shareholders is to be ensured by the fact that in all forms of cross-border conversion they can assert a right of withdrawal against cash compensation or a claim for improvement of the exchange ratio. The compensation for an inadequate exchange ratio to be determined in the appraisal proceedings may also be created as additional shares instead of additional cash payments.
Similar to the SE model, negotiations on co-determination in the resulting company are provided for in order to protect the co-determination of the employees. Such negotiations are already mandatory if a participating company employs a number of employees that is at least four-fifths of the threshold that triggers company co-determination in the exit member state. In Germany, the threshold is 500 (One-Third Participation Act) or 2,000 employees (Co-Determination Act).
To ensure that creditors' claims are not jeopardised by the conversion, they can now enforce their claims for security before the registration court responsible for issuing the merger certificate.
The individual areas of protection are flanked by an abuse check on the part of the commercial register, which is to subject abusive arrangements to a judicial abuse control if there are indications of abuse. In this context, the legislator has defined indications from labour law. These non-exhaustive examples of rules are to be further developed by the courts in the future.
... but there are still gaps
The UmRUG represents the largest reform of transformation law to date and creates a comprehensive legal framework for cross-border transformations. In times of globalisation, the simplifications are to be welcomed. However, there is a need for further reform in the future, especially with regard to partnerships.