Requirements for the closing balance sheet under transformation law

Under the German Transformation Act (Umwandlungsgesetz – UmwG), companies can reorganize through mergers, demergers, or changes of legal form. A common demerger type is a spin-off, where a business unit is transferred from one company (the transferring legal entity) to another (the transferee). The spin-off takes effect automatically under the UmwG, avoiding the need for third-party consent and enabling tax neutrality.

A spin-off must be registered with the commercial register. As per Sections 125 and 17(2) UmwG, a closing balance sheet of the transferring entity must be attached to the registration application. This balance sheet must not be older than eight months from the filing date.

Although there has been legal debate over whether this balance sheet must be prepared and approved before filing or can be submitted later, recent court decisions have clarified the issue. The Court of Appeal in Berlin (Feb 18, 2025, 22 W 64/24) ruled that the balance sheet must be prepared and approved at the time of filing. This interpretation is supported by the law's wording and ensures accounting continuity, creditor protection, and prevents manipulation of deadlines. A similar ruling was made by the Court of Appeal in Düsseldorf (Jan 2024).

In the case before the Berlin court, a GmbH had signed a spin-off agreement and filed for registration in August 2024, referring to a balance sheet dated December 31, 2023, which was not yet prepared due to pending audits. The registry court rejected the application, and the appeal was dismissed. The case now awaits a decision by the Federal Court of Justice (BGH) to ensure consistent case law.

Practical takeaway

The closing balance sheet must be fully prepared and approved before filing a spin-off for registration. Companies should plan their restructuring timelines accordingly.