German Holding, Group & Company Group
Scope of application of german group structures
Particularly in the case of larger and more diverse business activities, the creation of a group in Germany of several independent companies in a corporate group structure often makes sense. However, even in the case of smaller structures or those still in the process of being established, the establishment of a group structure can already make sense.
In this case, the parent company controls the subsidiaries and, if applicable, sub-subsidiaries. If the parent company is not itself operationally active, but merely acts as a holding company, this is referred to as a holding company. Group and holding structures in Germany can be used to create important operational, legal and tax relationships.
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Our expertise in transformations, structuring and holding/group structures in German Law
The ROSE & PARTNER team of tax advisors, lawyers specializing in german corporate law and tax law, and tax consultants assists companies in reviewing, creating and optimizing group and holding structures in Germany.
- Advising founders on corporate group structures from a legal and tax perspective.
- Review of existing corporate structures and development of new solutions under german transformation law
- Implementation of structural measures and corporate transformations
- Adjustment of functional, liability and tax relationships at the legal entity and shareholder level, including drafting shareholder agreements
- Comprehensive accompanying advice on holding and group structures, for example in labor law, distribution law and copyright law
Market, competitive and tax conditions force groups of companies and corporations to adapt to changing circumstances in an ongoing process. Holding and financial structures of group entities can be readjusted with legal instruments.
Overview of different group structures
What distinguishes a corporate group from several cooperating companies? In individual cases, the classification and categorization of a group of companies as a corporate group, for which corporate and tax law provides special rules, is not entirely straightforward. This is not least due to the fact that there is no comprehensive group law in Germany. The German Stock Corporation Act (AktG) contains a number of provisions on affiliated companies in Sections 15 et seq. Aktiengesetz (German Stock Corporation Act), there are some regulations on affiliated companies.
If the merger of a controlling company and one or more controlled companies presents itself as an economic unit and is subject to uniform management, one can speak of a corporate group. However, the existence of such a group does not alter the fact that the grouped companies remain legally independent entities. However, the existence of shareholdings under company law or inter-company agreements within the meaning of Sections 291 et seq. of the German Stock Corporation Act (AktG) regularly gives rise to a directorship. German Stock Corporation Act (AktG), the parent company of the group regularly has the right to issue instructions.
However, the subsidiaries under the unified management of the parent company are often economically and financially dependent on it. The uniform management of the parent company, which constitutes the group, is generally established by a control agreement (Sec. 291 AktG) or an integration (Sec. 319 AktG). In principle, any control - even indirect - can constitute a corporate group within the meaning of the law. In practice, corporate groups are usually formed through organic growth by successively establishing subsidiaries. In addition, an expansion strategy often results in a corporate group through the acquisition of companies.
The economic and financial dependency of group companies has legal and tax consequences in german tax law. Since each group company remains a legally independent entity, the statutory regulations under company law continue to apply without restriction to each of these group companies. From the point of view of liability, however, structures should be created which take account of the dependency on the parent company in particular and also lead to acceptable results from the point of view of the boards of the controlled companies. From a legal as well as a tax point of view, for example with regard to so-called transfer prices, it must be ensured that the standard of third party or arm's length comparison is also observed within a group of companies.
Holding company in Germany
A holding company is a company by which or through which a shareholding in other companies is managed, but which as a rule does not itself have any operating activities, or only to a limited extent. A holding structure therefore consists of at least two companies, the holding company and another company whose shares are held in full or in part by the holding company.
While in the SME sector the holding company is organized both as a partnership and as a corporation, the holding structures in the more recent startup environment are dominated by corporations. Here, the company founders hold their stakes in the operationally active startup in the form of a low-cost UG. Such a capital company holding is intended to reduce the tax burden after a successful exit (so-called Schachtelprivileg) and to facilitate reinvestment in new startup businesses.
Holding structures are widely used in private asset management as well as private equity (private equity, venture capital and startup sector). In practice, one can find diverse holding forms, which are also combined: Holdings with the objective of asset management. In larger groups, one finds holding companies that provide affiliated companies with the necessary capital. If, exceptionally, the holding company itself is operationally active, virtually providing the largest operation alongside the subsidiaries, this is referred to as an operational holding company. If the management of a group of companies is bundled in the parent company (management, controlling and steering) in order to steer subsidiaries and sub-subsidiaries, this is referred to as a management holding. An organizational holding aims at an internal organizational objective, for example, two different business units can be spun off into two independent companies.
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