In every company – regardless of its size and corporate structure – the question of its long-term continued existence or at least its corporate restructuring arises, when the circumstances so require. This can result in the sale, merger or transfer of a sole proprietorship or a partnership to the next generation. In the case of a corporation, the question may arise as well whether other companies, establishments or business units should be acquired or whether own holdings or business units should be sold.
The key factor in all such transactions is their significance for the company as such and, as a rule, the considerable legal and tax consequences that may result from such transactions.
Our legal advice is an essential part of our services in this field. In this context, we focus on our client's wishes, the details of which are determined at the outset in accordance with transactions. When, for example, buying or selling an investment in a company, the first step is to identify any legal pitfalls in the company to be acquired or to examine how the client's own company can be developed for sales purposes in terms of the associated legal aspects. The clarification of such questions is regularly required as part of a legal due diligence.
In this context, the preparation of comprehensive contracts is an important element of our work. The necessary contractual design must ensure a comprehensive legal representation of all issues at hand. In the case of corporate acquisitions and/or sales, for instance, employment law issues must also be considered. However, financing agreements (loan agreements, internal group cash pooling, profit transfer agreements, etc.) may also have to be drawn up or terminated.
Issues regarding gift and inheritance law may also become relevant. For instance, when transferring companies or shareholdings to the next generation, it is often necessary to include safeguarding clauses which are regularly required to balance the interests of both the transferor and the transferee.
Comprehensive and qualified legal advice is an essential prerequisite when contracts are drafted for mergers, demergers, split-offs and spin-offs of parts of companies or the contribution of companies or business units to partnerships and corporations, as well as the entry or exit of shareholders and must be reflected in corresponding contractual agreements.
Yet our activity does not end with the conclusion of these contracts. Instead, we also provide you with comprehensive support during the implementation phase, which can extend over multiple years, for instance in the event of a management buy-out or earn-out clauses. And should questions arise at a later stage that were not considered by our clients in the original planning due to unforeseeable developments, we will be happy to make ourselves available to work them out as well.
The proper fiscal implementation of the various operational restructurings and changes, also at shareholder level, is necessary to avoid unpleasant tax surprises and additional burdens.
In this respect, the gift and inheritance tax burden are consistently at the centre of attention when it comes to company succession (in the family). In this context, the aim is to benefit from relevant tax breaks (for example, relief) in order to keep the tax burden as low as possible.
However, the design of corporate acquisitions and sales also requires regular tax optimisation. In this context, the legal structure of the object of purchase is particularly important, as is the acquirer's classification under corporate law.
The Reorganisation Tax Act provides the option of tax-neutral transfers for many different transactions (for example, mergers, demergers, split-offs, spin-offs, contributions of business units or companies, etc.). However, such options are linked to many different conditions which must be met consistently and comprehensively at the time of transfer and in some cases for quite a few years afterwards in order to avoid tax disadvantages.
It is therefore strictly necessary to seek competent, long-term tax advice to secure these tax benefits.
In this practice group, auditor activities are aimed particularly at the carrying out of a tax and management due diligence. This is to ensure that there are no tax risks hidden in the existing properties and/or that the acquisition makes economic sense, also in terms of the purchaser's previous activities.
A further focus of an auditor's work in this context is the company valuation, i.e. finding a resilient company value of the property in order to determine an appropriate purchase price or to investigate potential tax risks.