Cross-border mergers under the UmRUG: procedure, deadlines, co-determination

How does a cross-border merger work?

The process is divided into three phases. During the preparatory phase, the companies involved draw up the joint merger plan, the minimum content of which is prescribed by law. Namely, the articles of association of the acquiring legal entity, the share exchange ratio, details of the impact on employment and creditors, and a cash compensation offer to the shareholders of the transferring company who object to the merger. In addition, there is the merger report, which explains the legal and economic consequences for shareholders and employees, and, in principle, an audit by a court-appointed merger auditor. The report and audit may be waived under strict conditions, for example where all shareholders consent or in the case of 100 per cent intra-group mergers.

The plan is disclosed during the resolution phase. It must be filed with the commercial register and published at least one month before the meeting at which the resolution is to be passed, together with a notice stating that shareholders, creditors and the employees’ representatives may submit comments up to five working days before the resolution is passed. The shareholders' meeting then approves the plan by a qualified majority — in the case of a GmbH, at least three-quarters of the votes cast; in the case of an AG, at least three-quarters of the share capital represented at the time of the resolution. The resolution must be notarised. During the implementation phase, the registry court of the transferring German company checks that the requirements are met and issues the preliminary certificate, on the basis of which the host country carries out the registration. The merger takes effect upon registration with the acquiring legal entity in accordance with its law.

The preliminary certificate and the new anti-abuse check

At the heart of the UmRUG procedure is the preliminary certificate issued by the registry court. The German registry court thereby confirms to the foreign registry that the German part of the procedure has been duly completed. A new feature is the explicit abuse control mechanism: the court may refuse to issue the certificate if the merger is intended to serve abusive or fraudulent purposes, such as circumventing employees’ rights or creditors’ claims, or for criminal purposes. The standard time limit for the review is three months, which the court may extend in complex cases. It may request further documents and call in experts. 

For project planning, this has two implications. The days when the certificate was a mere formality are over. Unusual arrangements, such as demergers carried out shortly before reaching thresholds relevant to co-determination or in close proximity to creditor disputes, must expect to be subject to in-depth scrutiny and should be proactively documented and explained. Furthermore, the sequence of deadlines must be planned backwards. From the intended registration, through the certification and the one-month disclosure period, to the lead time for co-determination negotiations, which may dominate the process.

Protection of creditors and minority shareholders

Creditor protection is brought forward in the case of cross-border mergers. Creditors of the transferring German company may demand security if, within three months of the publication of the merger plan, they bring their claim before a court and demonstrate that the satisfaction of their claim is at risk as a result of the merger. The security is a prerequisite for the merger’s validity prior to its completion; it is not a subsequent legal remedy. Contracts themselves are transferred by way of universal succession. Change-of-control clauses in key contracts and financing arrangements remain unaffected by this and should be included on every due diligence checklist for the project.

The cash compensation offer provides protection for minority shareholders: shareholders of the transferring company who object to the merger and have their objection recorded in the minutes may withdraw from the company in return for appropriate cash compensation. The fairness of the compensation and the exchange ratio is not reviewed in annulment proceedings but in the assessment proceedings, which shields the transaction from actions intended to block it. In valuation practice, this means that the amount of the compensation must be supported by an expert opinion from the outset, as it will be verified during the adjudication proceedings.

What are the rules on co-determination?

In the case of cross-border mergers, corporate co-determination is governed by a separate regime under the MgVG: the guiding principle is a negotiated solution, whereby a special negotiating body representing the employees concludes an agreement on participation with the management. If negotiations fail, the statutory fallback provision applies, which maintains the existing level of co-determination in the acquiring company. The UmRUG has tightened these safeguards: Negotiations must be held as soon as the company employs, on average over the six months prior to the disclosure of the plan, at least four-fifths of the number of employees that would trigger co-determination under national law. This largely prevents companies from circumventing co-determination shortly before reaching the thresholds.

Employee participation rights run in parallel: the merger report must set out the consequences for employees and be made available to them or their representatives in good time, and the right to comment up to five working days before the resolution is passed also applies to the employee side. Anyone who treats the employee aspect as an afterthought will lose months in the process. Anyone who factors it in at an early stage gains planning certainty for both sides.

Taxation, third countries and project practice

From a tax perspective, a merger within the EU may be carried out at book value – and thus without the realisation of hidden reserves – subject to the conditions set out in the German Transformation Tax Act, provided that German tax law is not restricted. In the case of a merger involving a transfer of assets, it is precisely this issue that is the critical point for scrutiny, ranging from the allocation of permanent establishments to the unwinding of tax liabilities. If domestic land forms part of the assets, the transfer triggers land transfer tax. The group clause in Section 6a of the Land Transfer Tax Act (GrEStG) may help, but it requires pre-retention and post-retention periods. Tax structuring must therefore be addressed at the outset of the project, not in its final phase.

Outside the EU and the EEA, Sections 305 et seq. of the German Transformation Act (UmwG) do not apply: Mergers with companies from third countries, such as the United Kingdom or Switzerland, are only possible in accordance with the relevant international company law – in the case of Switzerland, for example, via its IPRG rules – and require a separate feasibility assessment. In such cases, an asset deal or the ‘accrual’ solution often leads to the desired outcome more quickly. Our pages on company law and M&A, and on transaction management, illustrate how we structure and manage cross-border restructuring measures. For the reverse approach – establishing German entities rather than merging them – see the article on choosing between a branch and a subsidiary.

Last updated: July 2026.