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10 August 2022 New Corporate Law: The (intended) acquisition of assets (no. 7)

The new company law, which comes into force on 1 January 2023, brings many changes. In our current blog series, we present these in detail.

One change brought about by the revised company law concerns the intended acquisition of assets. The relevant provisions will be deleted without replacement.

This article deals with what the revision of the company law entails with regard to the intended acquisition of assets.

What is an intended acquisition of assets?

The intended acquisition of assets constitutes a qualifying act of the contribution. In the case of an (intended) acquisition of assets, the company (in the context of an incorporation or share capital increase) takes over or intends to take over assets from a shareholder or a related person. Although the obligation to contribute is fulfilled in cash, the company being formed has already undertaken to use these funds to purchase certain assets.

Under current law, the (intended) acquisition of assets constitutes a qualifying act, i.e. an incorporation report and an audit report by a licensed auditing expert are required. In addition, the acquisition of assets must be entered in the articles of association and in the commercial register, stating the object and the consideration.

The primary objective of the provisions currently in force is to prevent circumvention of the contribution in kind rules. Apart from this risk of circumvention, the protective provisions are also intended to prevent an overvaluation of the assets contributed or taken over. Such an overvaluation would not only affect the creditors, but also any co-shareholders, as it would lead to a dilution of their shareholding from an economic point of view.

What changes under the new company law?

In the new company law, which will come into force on 1 January 2023, the provisions on the acquisition of assets will be deleted without replacement. As a result, the intended acquisition of assets will no longer be a qualifying event in an incorporation or capital increase. This has far-reaching consequences: The associated publication in the articles of association and register no longer applies and the further safeguards of qualifying incorporation or capital increase also cease to apply. For example, there is no longer an obligation to prepare an incorporation or capital increase report and an audit confirmation.

Some feared that this would no longer take sufficient account of the requirements for capital protection and that the contribution in kind rules could easily be circumvented. The previously strict regulations were intended to protect deposits and were thus intended to provide protection against the share and participation capital serving as a liability substrate for creditors not existing in full from the outset or being eroded.

According to the dispatch, however, the strict regulations offered only selective protection, because a company could conclude rental and other contracts or carry out other legal transactions immediately after its incorporation without the protective mechanisms of the acquisition of assets taking effect. In these transactions, too, there is a risk that share and participation capital serving as a liability substrate will flow away. For example, there is a situation in which the company rents a property from a shareholder and pays an excessive rent.

The acquisition of assets from shareholders or persons close to them is already subject to the provisions of capital maintenance and responsibility law (Art. 754 CO). Thus, Art. 678 CO also provides for a reimbursement situation. Not only the acquisition of assets can give rise to a claim for restitution, but also the conclusion of other legal transactions, provided that the performance is obviously disproportionate to the consideration (Art. 678 para. 2 CO).

All these protective mechanisms, which are not limited to the acquisition of assets but are of a general nature, provide for a more comprehensive protection of the contributions or the liability substrate. However, they also require a precise examination of the intended legal transactions so that boards of directors and persons entrusted with the management do not expose themselves to any liability risk.  

Our team will be happy to answer any specific questions you may have.

Other articles in the series:

Authors: Francesca Pesenti, Roland M. Müller