Partner
Attorney at Law (Germany)
Corporate Codetermination Updates
- Federal Government Intends to Limit Structuring Options.
- Federal Court of Justice Confirms Statutory Interpretation.
- Structuring Alternatives Continue to Exist but Must Be Initiated in Timely Manner.
On July 2, 2026, the German Federal Government announced in its reform program “For Economic Recovery and Employment” its intention to end the use of shelf SEs “to circumvent German codetermination law.” How this will be implemented legislatively remains open. Meanwhile, the Federal Court of Justice clarified that, for the 500-employee threshold for one-third codetermination on the supervisory board, only the employees of the specific company count, not those of a group-wide joint operation.
In the 34-point reform program “For Economic Recovery and Employment,” the Federal Government announced its intention to end the use of shelf SEs for so-called circumvention of codetermination (Point 21). The wording is noticeably heavily politically charged. In fact, the use of shelf companies represents a legitimate and frequently chosen structuring option in the day-to-day corporate law practice of corporate groups.
In this approach, companies that have already been formed and registered in the commercial register are acquired through share purchase and then put into economic operation for the first time. This also applies to shelf SEs, i.e., European Companies (SEs) that are established through the prescribed formation process – significantly more complex for this legal form – and offered by specialized service providers including the minimum share capital.
In recent years, many German family businesses represented throughout Europe via their own subsidiaries have opted to use the SE when structuring their group parent companies, either directly as an SE or as a limited partnership in the form of an SE & Co. KG. From the owners’ perspective, in addition to its international appeal as a legal form, the individually negotiable design of corporate codetermination with the workforce speaks particularly in favor of the SE, which is perceived as more appropriate compared to the rigid threshold policy of the German Codetermination Act and One-Third Participation Act.
Added to this is the option to choose either a dualistic management model consisting of a management board and supervisory board or a monistic administrative board model. For family businesses, the monistic system can be attractive as an “owner-managed governance structure” that allows shareholders who are members of the administrative board to directly influence the instruction-bound managing directors of management.
The Federal Government has so far left open how the reform objective is to be implemented in legislative terms. A purely national implementation could once again fail due to the fact that the SE is a legal form that derives its framework from EU law. The previous coalition government had already politically targeted the SE in its coalition agreement without later practical implementation.
Given the renewed political relevance, however, it should be considered that planning and implementing an SE structure requires time.
Companies considering an SE structure should bear in mind that its implementation requires a certain lead time. We recommend analyzing the appropriate structure of the company in timely fashion and possibly examining a conversion into an SE or SE & Co. KG.
Meanwhile, the Second Civil Senate of the Federal Court of Justice clarified in two decisions dated June 23 of this year (II ZB 11/25 and II ZB 12/25) that for the threshold of 500 employees as a prerequisite for one-third codetermination on the supervisory board, only the number of employees of the specific commercial company is relevant, not that of a group-wide joint operation. From a legal advisory perspective, this case law is not surprising but provides important structuring certainty for corporate structuring practice.
From the newsletter
“Corporate Law, Deals & Capital Markets” Subscribe to the newsletter
here