M&A activities in Germany and their cross-border implications: Universal succession in Asia-Pacific


published on 24 February 2021 | reading time approx. 7 minutes

The economic impacts of the Covid-19 pandemic differ between industries, and in many cases the final bill has yet to come. Lockdowns, travel restrictions, disruption in supply chains and changes in consumer behaviour might take their toll and require businesses to adapt. One way of adaptation lies in reorganizing the business structure in order to achieve an enhanced efficiency. Reducing redundancies in the corporate structure may not only have cost-saving effects, but also lead to a more streamlined organisation, which might be the better fit in a post-Covid world.

Another way to prepare for post-Covid times is by strategically acquiring other businesses which might allow for an improvement or modernisation of the already existing business. Many experts predict a very active M&A market driven by potential opportunities in the area of distressed M&A, but also driven by the need to secure supply chains and to respond to future consumer behaviours. One way or the other, it can be expected that M&A activities will increase in the future.

In Germany, M&A activities depending on the type of company or partnership are governed by several laws, such as the Civil Code (“Bürgerliches Gesetzbuch”), the Commercial Code (“Handelsgesetzbuch”), and in particular the German Transformation Act (“Umwandlungsgesetz”). One major concept in this regards is the doctrine of universal succession (“Gesamtrechtsnachfolge”). A universal succession allows the transfer of all rights and liabilities as an entirety, triggered by a single event instead of requiring separate transactions for each right and liability. By allowing the transfer as entirety, the universal succession provides legal certainty to third parties. A common form of M&A activity where the doctrine of universal succession is relevant, is the merger under the German Transformation Act. Section 20 (1) No. 1 of the German Transformation Act outlines the effect the universal succession as one of the effects of the registration of a merger with the German commercial registry.

The universal succession might also have implications on shareholdings in other jurisdictions. When a legal entity, which functions as holding entity for shares in a foreign subsidiary is being absorbed by an absorbing entity, the absorbing entity becomes the new shareholder of the foreign subsidiary. Because the absorbing entity is a different legal entity, the German merger causes a change of shareholder in the other jurisdictions. Depending on the jurisdictions, such change of shareholder can have various legal and tax implications. Some jurisdictions might not even recognise the legal effects of the universal succession and would require a separate share transfer for the change of shareholder to be effective. In other countries, stamp duty or other taxes might be triggered by the change of shareholder. The matter becomes even more complex in jurisdictions, which impose restrictions on foreign investors by complex licencing regimes or the like.

In the following, we would like to outline if and how the doctrine of universal succession is recognised in some of the major jurisdictions in Southeast Asia.



Indonesian law does not acknowledge the doctrine of universal succession and respective deals would still require a separate share transfer. In this regard the acquiring party should be aware of investment restrictions that could affect the local transaction. General foreign investment in Indonesia is regulated under specific investment laws and regulations, which have been revised by an omnibus law in November 2020; related implementing regulations have not yet been issued to date. If a foreign buyer intends to acquire shares in an Indonesian company, then for a range of industries a certain ownership limitation or specific licensing requirements will be applicable and monitored by the Investment Coordinating Board (BKPM). Other industries under specific regulation, such as banking, finance and telecommunications, are subject to the authority of specific government agencies, e.g. the Financial Services Authority, Bank Indonesia or the Ministry of Communication and Informatics. Furthermore, the transfer may trigger minimum capitalisation requirements of generally 10 bio Indonesian Rupiah.


Malaysia, likewise to Singapore, is also a Common Law jurisdiction. Given the shared legal history, Malaysia’s corporate law applies very similar legal concepts. In the High Court’s (Kuala Lumpur) decision United Renewable Energy Co Ltd v TS Solartech Sdn Bhd, [2020] 7 MLJ 141 (“URE”) from 2019, the doctrine of universal succession was recognized. In URE, several companies in Taiwan entered into a merger agreement according to which all parties would merge into one company. One of the Taiwanese companies was shareholder in a joint venture company in Malaysia. The Malaysian joint venture partner refused to accept the change in shareholding based on universal succession. The parties had different views on the relevant Section 109 (1) of the Companies Act of Malaysia, which stipulates that shares can be transmitted to a person by operation of law. The Malaysian joint venture partner claimed that the transmission by operation of law is limited to cases of death of one shareholder or bankruptcy. The High Court applied a wider view and stated that the wording of the section does also cover transmissions via a universal succession. In its decision, the High Court followed the findings of English court decisions and also referred to the JX Holdings of the High Court of Singapore.

The recognition of the doctrine of universal succession means that in case of an overseas merger, the change of shareholder can be registered with the Companies Commission of Malaysia (“CCM”) without the need of an instrument of transfer. The absent of an instrument of transfer also means that the change of shareholder does not trigger stamp duty in Malaysia.

In practice, companies which intend to undergo a M&A activity with the consequence of an universal succession overseas should assess if the respective M&A activity qualifies for a transmission by operation of law under Section 109 (1) of the Companies Act of Malaysia. Furthermore, the company secretary of the Malaysian company should be instructed to lodge a change of shareholder with CCM and not to request an instrument of transfer.


The High Court of Singapore has recognised the doctrine of universal succession in 2016 in the landmark decision JX Holdings Inc and others v Singapore Airlines Ltd [2016] SGHC 212 (“JX Holdings”). In JX Holdings the main question was if a Japanese company obtained ownership of shares in a Singapore company as the legal successor of another Japanese company due to a merger and other restructuring exercises under Japanese laws. In following the certain criteria developed by English courts, the High Court of Singapore acknowledged the effects of the universal succession under Japanese law. Furthermore, the High Court considered the change of shareholder to take part as “transmission” and not “transfer” of shares, which refers to the relevant Section 130 of the Companies Act of Singapore even if the “transmission” occurs under a foreign law. Section 130 Companies Act of Singapore applies to public companies, but is mirrored by Section 126 Companies Act of Singapore which applies to private limited companies. This distinction has practical implications as it means that in the scenario of a universal succession no share transfer form, which is the legal transfer instrument under Singapore law, must be executed. This means that in such scenario no stamp duty would apply.

A contributing factor to the JX Holdings decision might have been that the Companies Act of Singapore also allows companies to merge, called amalgamation. Similarly to Section 20 of the German Transformation Act, Section 215G Companies Act of Singapore describes the effect of amalgamations. Among others, all the property, rights and privileges of each of the amalgamating companies shall be transferred to and vest in the amalgamated company and all the liabilities and obligations of each of the amalgamating companies shall be transferred to and become the liabilities and obligations of the amalgamated company.

In a similar case, BNP Paribas Wealth Management v Jacob Agam and others [2017] 4 SLR 14, the Singapore International Commercial Court also applied the concept of universal succession. From a practical perspective, companies that plan for a merger or other M&A activities in Germany where the doctrine of universal succession applies, they should assess if such M&A activity satisfies the criteria set out in JX Holdings. In case the M&A activity satisfies the criteria, they should liaise with the respective company secretary of the company in Singapore. As not every company secretary in Singapore is aware of the JX Holdings decision and it might be the case that the company secretary in charge intends to file a share transfer which would result in the application of stamp duty.


Vietnam is a civil law jurisdiction, and traditionally the concept of universal succession in connection with corporate amalgamations has been recognised under the Vietnamese civil and enterprise law. However, it is a concept which has not yet been clearly defined, which means that the application (or the lack of it) of the concept always depend on the circumstances of the specific case. Formally, the information in respect of a Vietnamese company related to its shareholders is recorded in the so-called Enterprise Registration Certificate (“ERC”). This includes the name, incorporation number, address and corporate representatives of shareholders for the purpose of the ERC. Based on this, practically two scenarios are encountered in Vietnam:

  • If the merger of two foreign companies (one of which is the shareholder of a Vietnamese subsidiary) results in the general information recorded in the ERC not changing, then there is generally no requirement to take action to amend the information contained in the ERC. This case can be considered one of an universal succession in which the share in the Vietnamese subsidiary passes automatically from the initial shareholder to the post-merger entity.
  • If a merger results in the general information recorded in the ERC changing to a different entity, this will trigger a procedure to change the details and identity of the current shareholder of the Vietnamese subsidiary in the ERC to the post-merger entity, which does not happen automatically. The details of the procedure may vary depending on the facts of the specific case.

It is also important to note that there are some precedents related to Vietnamese tax law, which may be relevant here. Both scenarios described above may, depending on the specific facts, face the question if the foreign or offshore M&A procedure has an effect within Vietnam, e.g. that due to the structure of the M&A transaction certain taxes in Vietnam are not being paid. If the answer is yes, Vietnamese authorities may argue that any such transaction (in Vietnam or abroad) is subject to the jurisdiction of Vietnamese authorities and cannot happen automatically by way of universal succession.

Conclusion and practical considerations

In conclusion, the recognition of the concept of universal succession differs widely within the jurisdictions in Southeast Asia. While Singapore and Malaysia do recognise the concept, Indonesia does not acknowledge such universal succession. Vietnam, on the other hand, does recognize the concept but applies it in a less stringent manner. The difference in recognition and application of the concept of universal succession highlights the relevance of regional holding structures in Southeast Asia, but also imposes potential obstacles in the implementation of M&A activities in Germany.

Legal counsels and legal advisors in Germany, who are handling M&A activities on a German level of a corporate group with subsidiaries in Southeast Asia, should consider potential complications with regard to the recognition of the concept of universal succession. Timelines for implementations and deal structures might need to be adjusted and considered carefully before committing to financial or corporate obligations.

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Markus Schlüter


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Dr. Paul Weingarten

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Michael Wekezer


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