Recent rulings of German and Austrian courts on cross-border conversions suggest making use of the legal possibilities to choose the law applicable offered by the competition between legal orders in a conscious, active and particularly timely manner!

Already several years ago, in its rulings Sevic, Cartesio, Vale and Polbud, the ECJ has left no doubt that with regard to companies incorporated under the laws of an EU Member State, cross-border conversions must be enabled on the legal basis of the liberty of establishment without any prior adoption of procedural rules governing such a cross-border transformation being necessary. It is only required that the hosts State´s domestic law admits the possibility of a conversion in mere domestic issues.

For progressive legal orders in this regard such as for example Spanish law, which even has been offering for years the possibility to perform cross-border conversions in its domestic law, this is taken for granted. However, for other legal orders, such as for example German and Austrian law, which both contain rules on conversions even though exclusively for domestic conversions, initially the compulsory admission of its cross-border variant too represented a significant innovation. Nevertheless Austrian and German courts too adopted quickly the requirements established by the ECJ (such as the Austrian Supreme Court (OGH) with regard to the inbound-conversion of an Italian partnership into an Austrian one, the Higher Regional Courts (OLGs) of Nuremberg, Düsseldorf and the KG of Berlin with regard to inbound-conversions of corporations incorporated under the laws of other Member States into corporations governed by German law as well as the OLG Frankfurt on the Main with regard to the outbound-conversion of a German GmbH into the corresponding legal form under Italian law.

Due to the former absence of harmonisation of the procedural rules applicable to these issues, all of the aforementioned courts complied with the requirement established by the ECJ to apply exclusively their domestic rules governing domestic conversions by analogy pursuant to the principle a equivalence. As a consequence thereof, in the past the interpretation maintained by critical legal scholars arguing for a selective application by analogy of the stricter rules on cross-border mergers or the Transfer of the registered office of an SE has been rejected correctly and without any exception. However recently, with the decisions of the OLG of Vienna (analogous application of the rules on the transfer of an SE´s registered seat) and the OLG Saarbrucken (analogous application of the rules laid down in the Directive 2017/1132 which has already entered into force but which must not be transposed until 2023 and which until today has not yet been transposed neither under German, nor Austrian nor Spanish law), for the first time also several courts have adhered to this strict interpretation. In practice, this opinion leads to numerous complications, delays and additional costs because unlike as for domestic conversions a lot of disclosure and reporting requirements as well as particular substantive rules on the protection of creditors and (minority) shareholders must be met.

Apart from the fact that in accordance with the prevailing case-law, due to various dogmatic reasons we hold such selective application of the rules laid down in the Directive 2017/1132 prior to its transposition into domestic law to the exclusive detriment of the cross-border variant of conversions incompatible with the laws of the European Union, it is worth noting that due to the given possibilities to choose the law applicable to a company in the framework of the so-called competition between legal orders, prior to the transposition of the Directive 2017/1132 companies are still enabled to avoid to a great extent, the jurisdiction and the law applicable to such strict commercial courts and courts of appeal. In this regard, companies are not only enabled to choose the law applicable of any Member State of the EU which best fits its economic needs, but also to determine the statutory seat and consequently the competent commercial register within this jurisdiction dependant on the respective legal order chosen. In other words: You should avoid Vienna and the Saarland to the extent legally possible, whereas entire Spain, Berlin, Düsseldorf and Frankfurt on the Main offer competitive locations for the establishment of a company´s statutory seat. To that regard, it must be pointed put that the existing legal possibilities to make such a double choice of law should be used at short term, because following the transposition of the Directive 2017/1132 they will be considerably reduced. LEXPORTATEU is pleased to offer you its services in this complex area of law not only by granting high-end legal advise, but also by taking care of the practical coordination between the commercial courts involved, latter being indispensable in order to successfully complete such a kind of cross-border transformation!

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