Legal changes in the year 2024

The new year 2024 brings with it many national and European legislative changes that companies have to deal with. For some regulations, it is not yet clear whether, when and with what exact content they will come into force. It is therefore important to keep an eye on further developments. As in previous years, we would like to briefly present the most important changes that entrepreneurs should be aware of, although we will only address the numerous tax changes selectively.

1. The Supply Chain Due Diligence Act applies to more companies

The Supply Chain Due Diligence Act (LkSG) came into force on January 1, 2023. It obliges companies to monitor their own supply chain and establish appropriate control mechanisms. We already reported on this in our article on the changes for 2023. On January 1, 2024, the scope of the Act was extended. Prior to this, the obligations of the LkSG only applied to companies with more than 3,000 employees. The due diligence obligations now apply to all companies with more than 1,000 employees. The LkSG will also have an indirect impact on other companies with fewer employees if they are part of the supply chain of a company with a direct obligation.

In addition, just before the end of last year, agreement in principle was reached at European level on the structure of the EU Corporate Sustainability Due Diligence Directive (CSDDD). Although this still has to go through the legislative process, it is likely to require further amendments to the LkSG and further expand its scope of application.

2. Growth Opportunities Act and Future Financing Act

With the Future Financing Act (ZuFinG), the national legislator is pursuing the ambitious goal of creating better conditions for start-ups and SMEs and modernizing the German financial centre. To this end, the ban on majority voting shares in Section 12 (2) of the German Stock Corporation Act (AktG) has been lifted, allowing shareholders with smaller shareholding to exercise a high degree of control. This will provide legal leeway that family businesses may also be interested in considering. In addition, the introduction of the shell company based on the model of special purpose acquisition companies (SPACs) opens up an alternative route to the capital market for start-ups and SMEs.

The ZuFinG also brings tax relief for employee stock ownership plans (ESOPs). These play an important role in incentivizing and recruiting employees, especially for start-ups. The main changes include raising the thresholds in Section 19a of the German Income Tax Act (EStG) and alleviating the existing problem of "dry income" taxation. The aim is to ensure that beneficiaries only have to pay taxes when they actually receive proceeds from the investment.

In addition, the Growth Opportunities Act is intended to improve the liquidity situation of companies and encourage them to invest more in the long term in order to promote the transformation of the economy. This is expected to strengthen the competitiveness of the economy, its growth opportunities and Germany as a business location. The draft Growth Opportunities Act proposed a number of tax changes,  particularly with regard to depreciation allowances. Research and development was also to be improved by increasing the tax incentives for contract research. However, the Bundesrat did not approve the proposed legislation. The Growth Opportunities Act will have to be revised by the Mediation Committee. It is therefore not yet possible to reliably predict the form and scope of the Growth Opportunities Act.

3. Modernization of the German Partnership Law

The Act on the Modernization of Partnership Law (MoPeG) brings far-reaching changes to partnership law, in particular to the law governing civil law partnerships (GbR) and general partnerships (oHG).

As part of the modernization, the legislator has taken the opportunity to codify principles on legal capacity and liability that were previously uncodified but developed by case law. New features include the introduction of the right to pass resolutions based on the model of stock corporation law for partnerships as well as the distribution of voting rights and participation in profits and losses according to the (agreed) shareholding ratios - and not according to heads. In addition, the withdrawal of partners  no longer lead to the dissolution of a GbR unless the partnership agreement provides otherwise. In January 2023, we already pointed out a possible need for action for existing partnership agreements.

A register similar to the commercial register has been introduced for GbRs. Although registration is in principle voluntary, in many cases there is a de facto obligation to register. Companies that hold registered rights (in particular real estate, company shares, patents or trademarks) in their assets must be registered. Personal details of each shareholder must also be entered, as well as the registered office of the company. This is generally the so-called administrative seat, i.e. the place where the company actually conducts its business. However, the law makes it clear that the shareholders can agree on a different registered office.

4. Whistleblower Protection Act

Since December 18, 2023, all companies with 50 or more employees have been obliged to install and operate secure internal whistleblower systems. Companies that fall within the scope of the Whistleblower Protection Act and have not yet implemented a whistleblower system should urgently address this issue. Failure to do so could result in substantial fines.

5. Prevention of money laundering

Companies obliged to prevent money laundering must register in the reporting portal provided for this purpose by January 1, 2024. Obligated to register are not only companies active in the financial sector such as banks and insurance companies, but also so-called goods traders within the meaning of Section 2 (1) No. 16 of the German Money Laundering Act (GwG).

6. Climate protection

In order to strengthen climate protection and promote the transition from fossil fuels to renewable energies, the legislator has decided to further increase the price for the emission of climate-damaging carbon dioxide. After the price increase was suspended last year due to high energy prices, the price per ton of CO2 increased from 30 euros per ton to 45 euros per ton from January 1, 2024. In 2025, the price is set to rise further to 55 euros per ton of CO2.

The long-controversial Buildings Energy Act (GEG), colloquially known as the Heating Act, has also come into force on January 1, 2024. The GEG stipulates that newly installed heating systems must be powered by at least 65% renewable energy. However, some building types are expressly excluded from the application of the GEG. The GEG also provides for subsidy programs to financially support the installation of a new heating system. However, the state subsidy for the purchase of electric cars has been canceled in order to save costs for the 2024 federal budget.

Since January 1, 2024, grid operators have the right to temporarily limit or reduce the electricity supply of new controllable heat pumps or charging stations if there is a risk of overloading the electricity grid. In return for the throttling, reductions in grid charges will be granted.

7. Changes in labor and employment law

The minimum wage (to 12.41 euros), the minimum training allowance and the (severely disabled) equalization levy have been increased with effect from January 1, 2024. An amendment to the Working Hours Act is expected, which sets out the requirements of the Federal Labor Court case law on the recording of working hours and was actually already planned for 2023. According to the draft law, employers will be obliged to record and archive working hours electronically. Deviating terms in collective agreements are expected to be permitted.

Employers can now report accidents at work and occupational illnesses electronically to the employers' liability insurance associations and accident insurance funds. However, it will still be possible to submit reports by post for the time being. Since December 7, 2023, telephone sick notes have been possible for minor illnesses - as was already the case during the coronavirus pandemic. In addition, the duration of entitlement to child sickness benefit will be increased. From April 1, 2024, the income threshold for parental allowance will be reduced from 300,000 to 200,000 euros for couples. In 2025, the income limit will then fall further to 175,000 euros.

The Immigration Act for Skilled Workers, which is intended to make it easier for foreign skilled workers to immigrate to Germany and address the shortage of skilled workers in Germany, has been gradually coming into force since November 18, 2023. To this end, the requirements for issuing the Blue Card, the residence permit for skilled academic workers from outside the EU, are to be lowered. From March 2024, regulations to simplify the recognition of foreign professional qualifications will come into force. In addition, the Western Balkans regulation, which was initially only limited in time, has been extended and the quota will be increased to up to 50,000 people per year from July 2024.

8. Other changes

From July 1, 2024, certain safety-relevant technical components, including the so-called Event Data Recorder, a type of black box, will become mandatory for many vehicle groups. Also from the beginning of July 2024, the toll obligation will be extended to all HGVs with a technically permissible gross weight of more than 3.5 tons. However, craftsman vehicles under 7.5 tons are exempt from this.

With the law amending the Radio Equipment Act (“Funkanlagengesetz"), the USB-C charging cable will become the standard cable for many electronic devices by the end of 2024. This will not only benefit consumers, but is also expected to reduce electronic waste. The recycling and circular economy will also be affected by a new legal that will come into effect on July 3, 2024. The law requires that closures must be firmly attached to single-use beverage packaging, including beverage cartons with a volume of up to three liters.

9. Planned changes

Further projects have already been announced at European level that companies should keep an eye on.

For example, political agreement has been reached on a new EU product liability directive. This is to contain stricter rules for companies with regard to the burden of proof in the event of damage caused by product defects, extend liability and extend the liability period to up to 25 years. Furthermore, the Cyber Resilience Act will focus on the cyber security of products that are connected to each other or to the internet. The obligations of manufacturers, distributors and importers for these products are to be based on how critical they are for the cyber infrastructure. Further efforts are being made, particularly at European level, to regulate the risks of artificial intelligence.

The year 2024 brings important changes for entrepreneurs. Some changes are currently still being discussed - also in view of the budget crisis in Germany. We will keep you up to date on further developments and will be happy to support you with your questions.