News on the requirements for a cross-border change of legal form, taking into account the decision of the Higher Regional Court of Karlsruhe of 24 April 2024

​The company in question, originally founded as a limited liability company in Switzerland and without employees, wanted to move its registered office from Switzerland to Luxembourg and change its legal form to a Luxembourg "société à responsabilité limitée" (S.à r.l.). This process was duly completed and the company was entered in the commercial register in Luxembourg.

The company then applied to the Mannheim Local Court (Amtsgericht Mannheim) for the entry of its formation in the German commercial register by means of a cross-border change of legal form that preserves its identity. The responsible German register court rejected this entry and rejected the application as it considered the change of legal form to be inadmissible due to the company's formation in a third country (in this case Switzerland) and pointed out that the provision of Section 334 sentence 1 no. 1 UmwG only applies to companies formed in the EU. The registry court argued that a company founded under the law of a third country could not invoke the freedom of establishment in order to carry out a cross-border change of legal form to the EU.

The company lodged an appeal against the rejection. The registry court did not uphold the appeal and referred it to the OLG Karlsruhe for a decision.

The appeal was successful.

​However, the OLG Karlsruhe took a different view to the registry court. It argued that the company originally founded in Switzerland should be treated de facto as a company founded in Luxembourg due to its form-preserving conversion to Luxembourg. The decisive factor was that the company was currently registered and recognised in an EU member state (Luxembourg) under local law, not that it was originally founded in a third country. The judges of the OLG Karlsruhe emphasised that this was in line with the European principle of freedom of establishment.

The OLG Karlsruhe overturned the decision of the registry court and ruled in favour of the complainant. The decision of the OLG Karlsruhe clarifies that the decisive factor for the ability of a company to change its legal form is not its original formation, but its current status as a company recognised under the law of an EU member state. It is therefore sufficient if the company has been recognised in an EU member state (in this case Luxembourg) as a result of the change of legal form and has fulfilled the formal requirements for its legal personality there.

​The decision of the OLG Karlsruhe shows that the original formation in the third country is irrelevant for the recognition of the company in Germany if the company was registered in an EU member state by way of a change of legal form. According to the OLG Karlsruhe, the registry court cannot refuse registration in these cases as long as a proper preliminary certificate is available (in this case, the preliminary decision was not yet available at the time of the OLG Karlsruhe's decision, so that the case was returned to the registry court by the OLG Karlsruhe in order to obtain the change of legal form certificate accordingly).

In addition, the decision also addresses possible abuse constellations and refers to the EU Directive, which allows the refusal of registration if there are indications of abusive or fraudulent use of the change of form. However, this control is primarily the responsibility of the authority in the country of departure and not the immigration register.

​The decision of the OLG Karlsruhe strengthens the freedom of establishment in the EU and, in principle, also allows companies originally founded in third countries to migrate across borders to the EU as long as they have been recognised in an EU member state. This can be an important option for companies in third countries to gain access to the European market and at the same time facilitates the legal framework for international corporate structures.