Ltd. (Limited) in Germany and #Brexit? Act now!

Due to the introduction of the UG (limited liability company) in Germany, the Limited (under English law), with German administrative headquarters, have declined significantly. However, older companies in particular are still in existence, since this legal form, unlike an entrepreneurial company, could only be changed to a German legal form in a cumbersome manner. Moreover, such a conversion is quite costly. Nevertheless, there are currently probably 8,000 to 10,000 such companies, often founded to circumvent the high share capital hurdles in Germany.

With the now very real threat of a disorderly #Brexit, the question now is what will become of these societies in Germany. After all, these can be continued without further ado after a Brexit. All limited companies with their administrative headquarters in Germany can no longer rely on the freedom of establishment. According to the current view, this would result in the company becoming a partnership under the domicile theory applicable in Germany. Particularly when operating a commercial enterprise, which would then create a general partnership, this would have serious effects on the representation regulations and liabilities of the partners.

Companies should therefore be sure to seek advice from a lawyer, because the actions that should now be taken depend on the individual cases. Sometimes it may be possible to transfer contracts, rights and assets to a German company, but often existing debts or receivables as well as tax law aspects, such as loss carry-forwards, could argue against such an arrangement. Therefore, only actions under the German Transformation Act are often eligible. However, it will generally not be possible to complete the necessary formalities by the time of the presumed #Brexit. The amendments made by the Fourth Act Amending the Reorganization Act are also unlikely to help in reality.

Under certain circumstances, the only option is to wind up the company in an orderly manner, to accept the liability risk (or to reduce it) or, for example, to transfer the shareholder shares to a German company (resulting in nesting). Whatever you decide, time is running out and anyone who does NOT want to suddenly be fully liable with their own private assets after a disorderly Brexit should act soon.