Home / Insight / Brexit / Corporate/M&A

Corporate/M&A

TopicTransition PeriodAfter Transition Period (from 1 January 2021)
UK companies (particularly private companies limited by shares ("Ltd.") and limited liability partnerships ("LLP")) with their place of effective management in Germany

Ltds. and LLPs were recognised as UK companies despite having their place of effective management in Germany (incorporation theory).

Companies from third countries are generally only recognised if their place of effective management is in the relevant third country (seat theory).

Ltds. and LLPs with their place of effective management in Germany are to be regarded as partnerships with personal liability of their partners after the end of the transition period on 31 December 2020 (seat theory).

This legal consequence came into effect automatically at the end of the day on 31 December 2020, so companies that have not made arrangements should review their legal form as soon as possible. In particular, it must be clarified whether there is personal liability on the part of their partners for old liabilities that were established before 31 December 2020 and how this potential risk is to be dealt with.

Sections 122a ff. German Transformation of Companies Act (Umwandlungsgesetz) allow an EU/EEA joint stock company to merge with a German joint stock company or commercial partnership (with fewer than 500 employees) such as a limited partnership (Kommanditgesellschaft) under German law. A grace period applies for British companies: if the draft terms of the merger were notarised before the end of the transition period and the merger is duly registered within two years of that date, a merger between a UK and a German joint stock company or commercial partnership will be possible in spite of the UK's withdrawal from the EU. Sections 122a ff. German Transformation of Companies Act do not apply to LLPs. 

Societas Europaea ("SE") in the UKThe SE Regulation stipulates that an SE may only be established in a Member State and must have its registered office and central administration there.

The SE Regulation ceases to be valid in the UK, so it is no longer possible to establish new SEs in the UK. 

SEs registered in the UK at the end of the day on 31 December 2020 were automatically transformed into a UK societas, a legal form specifically regulated for this case in UK law.

The law on the public limited company ("PLC") is mainly applicable to the UK societas.

The UK societas may continue as such, be liquidated or transformed into a PLC.

M&A – contract clausesPolitical and economic developments can also have an impact on purchase agreements (e.g. in the context of earn-out, MAC and purchase price clauses).

Existing agreements should be checked for the effect that the UK's withdrawal from the EU could have on them.

The outcomes of the negotiations on the Trade and Cooperation Agreement between the EU and the UK (restricted access to the single market, introduction of customs duties in certain areas) should be taken into account when negotiating the relevant clauses. The Trade and Cooperation Agreement is provisionally applicable until 28 February 2021 and until it is ratified by the contracting parties.

Mutual recognition of court decisions is governed by bilateral or multilateral conventions and agreements (see Dispute Resolution). 

The UK is now a third country and thus falls fully within the scope of the investment review under foreign trade law. Reporting obligations, prohibitions on putting a concentration into effect, etc. must be observed in the case of cross-border transactions. According to the Federal Ministry for Economic Affairs and Energy (BMWi), no investment review is (yet) expected to be carried out for transactions for which the signing took place in 2020.