The new EU reorganization law

Legal formations and reorganizations take place not only domestically, but also across borders. In order to create a correspondingly uniform framework within the EU, to harmonize reorganization processes and to increase legal certainty, the EU Mobility Directive on cross-border transformations, mergers and divisions was issued. The Austrian legislator has to implement this directive in national law, with the implementation deadline ending on 31.1.2023. However, the corresponding EU Reorganization Act has not yet been enacted, so it remains to be seen whether it will become law.

So far only cross-border mergers explicitly regulated

Up to now, only cross-border mergers have been expressly regulated in an EU directive (e.g. an Austrian GmbH is merged with a German AG and absorbed by the latter). Furthermore, cross-border conversion, which can also be referred to as cross-border transfer of the registered office, was already possible up to now on the basis of the case law of the European Court of Justice (ECJ). This is the case, for example, if a German AG transfers its registered office to Austria and transforms into an Austrian GmbH. Within the country, there is already a legal regulation for cross-border mergers, but not for cross-border demergers or transfers of the registered office across the border (conversions).

No domestic changes

Now, the EU Reorganization Act - in accordance with the requirements of the EU Mobility Directive - newly regulates the cross-border transfer of registered offices, mergers and demergers for the purpose of new formation, providing in particular for regulations on the protection of company creditors, employees as well as minority shareholders and related strict time limits. This does not affect the legal provisions for purely domestic reorganizations; the domestic Reorganization Tax Act thus does not undergo any changes as a result of the new law.

A significant innovation in terms of content is the abuse control, which in future must be carried out by the competent authority of the Member State of departure (in Austria by the Commercial Register Court) in the case of all three cross-border types of reorganization. This control is intended to prevent cross-border reorganisations from being used for abusive, fraudulent or criminal purposes.

The EU Reorganization Act does not regulate:

• cross-border demergers for incorporation
• cross-border reorganizations with reference to third countries or reorganizations of companies other than corporations, e.g. partnerships or cooperatives

Tip: If you are considering a cross-border reorganization, we recommend early planning and comprehensive advice, as such legal forms always involve tax problems in addition to civil law issues.