Changing legal status – Must the commercial register be changed?
Companies can generally change their legal status without a prior liquidation. The law determines conclusively what conversions are allowed. In order to ensure legal certainty, any transformation of legal status must be entered into the commercial register.
Changing Legal Status in Merger Act
Companies can change their legal status in accordance with the merger act (FusG). Art. 54 FusG exhaustively specifies the permissible changes. A sole proprietorship cannot be changed but must first be liquidated in order to subsequently transfer the assets and liabilities to the newly established company (see Check list for Changing a Sole Proprietorship).
Conversion Process
When converting legal status, the previous form it took should be replaced with a more suitable one (e.g. the shareholders of a corporation shrink to a few large shareholders who guide the company itself and therefore prefer the person-related elements of a limited liability company (GmbH)).
The following points are necessary for a conversion:
- Creating a conversion balance and inventory list
- Creating a written conversion plan (Art. 59 FusG)
- Checking of the conversion plan by a reliable auditing expert (Art. 62 FusG)
- Coming to a conversion decision by the general meeting or shareholders’ meeting (Art. 64 FusG)
- Officially recording the decision (Art. 65 FusG)
- Entering it into the commercial register (Art. 66 FusG)
Documents for the Commercial Registry Office
Art. 136 HRegV (commercial registry ordinance) specifies the documents which are to be handed in for a conversion in the commercial register. When doing so, it must be taken into account that a conversion report must be handed in for all conversions. (Exception: Converting a general partnership into a limited partnership and vice versa). The recording of the conversion must be registered with the commercial registry by the highest management or administration body. The conversion is only in effect once it has been entered into the commercial registry (Art. 67 FusG).
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