Our commitment
As a notary firm located in a major city, we have considerable experience in company law and in advising companies (passive holding companies as well as operative companies). Our expertise lies in consulting at the legal interfaces. Companies are used, for example, as a means of asset succession and asset protection. We also advise shareholders on resolving matrimonial issues through marriage contracts. Both notaries have a background in tax law, complemented by an entrepreneurial mindset and the ability to work closely with your tax and legal advisers. We also have our own in-house team that deals primarily with company law matters. Together with our team, we cover all aspects of company law: formation, creation of holding company structures, ISHAs, reorganisation, profit transfer agreements and sales of shares.
Formation of GmbHs and other company forms
If you are considering establishing a GmbH (limited liability company) or another company form, we will support you in selecting the most appropriate legal structure, taking into account the applicable legal and tax considerations. We can provide you with model contracts for the most common forms of companies, namely GmbH, GbR (civil law partnership) and GmbH & Co. KG (limited partnership with a GmbH as the general partner). For formations involving multiple persons, we will also advise you on the drafting of the articles of association or the partnership agreement. Typical issues in this context include the allocation of capital, voting rights and profit shares, the transferability of shares, arrangements for termination, compulsory retirement and settlement if a shareholder leaves the company.
Holding company structure
One of the typical primary aspects for notarisation is the creation of a holding company structure on top of an operating company. This is easy to implement if the holding company structure is already planned at the time of formation. If you want to create a holding company structure after formation, existing shares must be transferred to the holding company. The aim of this arrangement is to avoid a situation where hidden reserves have to be realised. In the typical case of an interest in a GmbH, a distinction must be made in this respect as to whether or not there is a majority interest. A majority interest can be transferred to a holding company GmbH by means of a ‘qualified share exchange’. Qualified share exchanges are common, which is why we can provide you and your tax advisers with appropriate templates on request. If there is no majority interest in the operating company, a GmbH & Co. KG is often used as a workaround. The GmbH interest is initially transferred to a newly formed GmbH & Co. KG. In a second step, the GmbH & Co. KG is reorganised as a GmbH through what is termed ‘extended accrual’. In both cases where a holding company structure is created after formation, holding periods under reorganisation tax law must be complied with (usually seven years).
Outside investors – Financing round
We regularly notarise financing rounds for start-ups in German and English. These financing rounds centre around a capital increase during which investors acquire shares in a GmbH. The capital increase is accompanied by an investment and shareholders’ agreement (ISHA). In the investment part of the ISHA, the investors commit to paying a premium into the company’s capital reserves and the founders provide certain guarantees. In the shareholders’ agreement, the shareholders agree the arrangements governing their relationships with each other. In many cases, rights of first refusal are created, tag-along and drag-along rights are established, and liquidation preferences are agreed. Our office is familiar with the market standards for such financing rounds.
The notary fees for a financing round are based on the monetary value of the individual agreements. The substance of the ISHA is therefore the decisive factor in each individual case, which is why it is not possible to set a flat rate for notary fees. At the same time, however, it is important for the costs of the financing round to be transparently determined before it is implemented. We can make this determination for you if you provide us with the post-money valuation of the company and the key data of the financing round (LOI).
Reorganisation of companies
It may emerge during the lifetime of a company that the chosen legal form is no longer appropriate. If this occurs, the company’s legal form can be changed. Changing from a corporation to a partnership (e.g. from a GmbH to a GmbH & Co. KG or vice versa) is usually done for tax reasons. Changing between two types of corporation (e.g. from a GmbH to an AG (stock corporation) or vice versa) is usually because of the number of shareholders.
In a corporate structure, it may also become necessary to spin off individual business units into independent companies (through division or spin-off). Conversely, there may be a need to merge different companies (merger).
Our office has experience in implementing all types of reorganisation.
Profit transfer agreement, Profit and loss transfer agreement, Control agreement
If you are planning to combine different levels within a corporate structure (e.g. parent and subsidiary) for tax purposes, you will often have to enter into a profit transfer agreement. In a profit transfer agreement, a GmbH (tax group subsidiary) agrees to transfer all of its profits or losses to a controlling company (tax group parent). This is also referred to as a ‘profit and loss transfer agreement’. Entering into a profit and loss transfer agreement is a requirement for establishing a consolidated corporation tax group.
A control agreement, under which a GmbH subordinates itself to the management authority of a controlling company, is a less common solution. A control agreement may be necessary to establish a consolidated VAT group.
Sale/purchase of shares (SPA)
Purchasing shares in a GmbH must be notarised. This applies in particular to acquisitions by way of an all-share deal, which involves selling all shares in a GmbH. Selling shares in partnerships (GbR, KG, GmbH & Co. KG) also often requires the involvement of a civil law notary. As a neutral intermediary, the civil law notary stands between the seller and the buyer and ensures that the usual safeguarding mechanisms for protecting the parties involved are observed. A special case involves the purchase of shell companies that have not yet engaged in any business activities and are only activated in the course of the purchase.