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Change of Legal Form of SAF-HOLLAND S.A. into an SE and Transfer to Germany

SAF-HOLLAND S.A. plans the conversion of its legal form into a European company (Societas Europaea, SE) and subsequent transfer of its registered office to Germany. In the following, we will first answer questions on the conversion (I.) and then questions on the transfer of the registered office (II.).

 

I. Conversion of legal form

1. What is an SE?

The abbreviation SE stands for Societas Europaea. It is a European company, i.e. a company whose share capital is divided into shares and held by shareholders. The SE is a legal form under European law which is available in all member states of the European Union and other signatory states to the Agreement on the European Economic Area (EEA). It is intended in particular for companies operating across borders. An SE with its registered office in Luxembourg is largely comparable with a Luxembourg public limited liability company (Société Anonyme, S.A.), which in turn largely corresponds to a German stock corporation.

2. Which other companies have chosen this legal form?

In the meantime, many renowned and, especially, globally active companies originating in Europe have chosen the legal form of an SE, for example

in the DAX the companies:

  • Allianz SE
  • BASF SE
  • E.ON SE
  • SAP SE
  • Vonovia SE

in the MDAX, inter alia, the companies:

  • Airbus SE
  • Evotec SE
  • Fuchs Petrolub SE
  • ProSiebenSat.1 Media SE
  • Puma SE
  • Rocket Internet SE
  • Uniper SE
  • Zalando SE

in the SDAX, inter alia, the companies:

  • Aixtron SE
  • Bilfinger SE
  • HelloFresh SE
  • Klöckner & Co SE
  • New Work SE
  • Norma Group SE
  • RIB Software SE
  • SGL Carbon SE
  • Sixt SE
  • Traton SE
  • Wacker Neuson SE.

3. Why SAF-Holland S.A. should be transformed into an SE?

The SE as a European legal form stands for internationally active companies that see themselves not only as part of a national legal system, but want to signal internationality and openness to the world as a European company. The legal form of the SE is recognized and positively assessed by the capital market and other market participants. SAF-HOLLAND S.A. therefore considers the legal form of the SE to be especially suitable to emphasize its international orientation.

In addition, the legal form of the SE offers flexible structuring options: On the one hand, a cross-border transfer of the registered office within the EU or the EEA area is permissible on the basis of express statutory regulations, while maintaining the legal entity and legal form. On the other hand, the SE offers the choice between a monistic system, which assigns the management and supervisory functions to a uniform body (so-called administrative board), and a dualistic system with separate bodies for management (management board) and supervision (supervisory board).

SAF-HOLLAND S.A plans, following the conversion of the company to an SE, to transfer the registered office of the Company to Germany (see II.). In addition, as part of the transfer of the registered office, the Company's management system is to be transformed from a monistic into a dualistic management system, consisting of a management board as a management body and a supervisory board as a supervisory body, and thus adapted to the actual organizational structure of the SAF-HOLLAND Group.

4. What are the essential steps of a conversion of legal form from an S.A. to an SE?

First of all, the Board of Directors of the Luxembourg S.A. decides that the conversion process should be initiated. In parallel, the necessary documents for the legal implementation of the conversion are being prepared, such as the Conversion Plan, the adapted Articles of Association and the Conversion Report of the Board of Directors. The Conversion Report is a document in which the legal and economic aspects of the conversion are explained and justified and the effects of the conversion to the legal form of an SE on the shareholders and the employees are explained. Furthermore, an auditor must certify that the net assets of the company are at least equal to the amount of the share capital plus non-distributable reserves. The Conversion Plan shall be published in accordance with the legal provisions applicable in Luxembourg. The general meeting shall resolve on the conversion as well as on the conversion documents required under the company law at the earliest one month after publication of the Conversion Plan. Finally, the conversion into an SE must be filed for registration in the commercial register in Luxembourg.

5. Is there a quorum for holding the general meeting?

The general meeting of the Company has a quorum if shareholders holding more than 50% of the voting rights are present or represented.

6. Which majority is required for the resolution on the conversion at the general meeting?

The resolutions on the conversion require the approval of more than 2/3 of the votes of the shareholders present or represented.

7. What happens if the quorum under No. 5 is not achieved?

If the previously mentioned quorum is not reached at the general meeting, the Company may convene a further general meeting, which may also pass resolutions without a quorum. At this further general meeting too, the approval of more than 2/3 of the votes of the shareholders who are present or represented is required.

8. At what time does the conversion come into legal effect?

The conversion becomes effective when it is registered in the Luxembourg commercial register. It is currently planned to achieve this registration shortly after the extraordinary general meeting, which is expected to take place in February 2020.

9. Does the conversion have an effect on the stock exchange listing?

No. The listing of SAF-HOLLAND's shares on the Frankfurt Stock Exchange is not affected by the conversion. The shareholders' rights and the financial reporting will also not be affected by the conversion.

10. What will change for shareholders?

Nothing will change for the shareholders except that they will no longer be shareholders of SAF-HOLLAND S.A. once the conversion comes into legal effect, but they will automatically become shareholders of SAF-HOLLAND SE.

11. Does the WKN or ISIN change?

No, the WKN and ISIN remain unchanged.

12. Does the conversion of the S.A. into a SE trigger substantial income tax effects at level of the company?

The conversion of the S.A. into a SE should not trigger substantial income tax effects at level of SAF-HOLLAND S.A./SE.

13. Does the conversion of the S.A. into a SE trigger income tax effects at level of German tax resident shareholders?

No substantial tax effects at level of the German tax resident shareholders should be triggered by the conversion. Notwithstanding the foregoing, the assessment of the tax consequences requires a consideration of the individual circumstances of the shareholder. It is therefore recommended that shareholders consult their own tax advisors with respect to their individual tax situation.

II. Transfer of the registered office

1. Why should the registered office of the company be transferred from Luxembourg to Germany?

SAF-HOLLAND S.A. is a holding company. This has historical reasons and is related to the shareholder structure prior to its IPO in 2007. One of the main subsidiaries of the SAF-HOLLAND S.A. is SAF-HOLLAND GmbH, which has its registered office in Bessenbach, Germany. It has around 1200 employees of whom around 45 work in functions for the entire SAF-HOLLAND Group, precisely for SAF-HOLLAND GmbH and its direct and indirect subsidiaries. The transfer of the registered office is intended to achieve the combination into one common location of the registered office of SAF-HOLLAND S.A. as the holding company with the operational functions of SAF-HOLLAND GmbH. This would facilitate the management of the SAF-HOLLAND Group as a whole and reduce administrative costs. In addition, the transfer of the registered office reduces costs, e.g. with regard to accounting. The transfer of the registered office to Germany would lead to the company having its registered office in the country in which its shares are listed. At the same time, the transfer of the registered office is intended to reduce the complexity of the current group structure and the related costs.

2. Why will the company’s share capital be increased as part of the transfer of the registered office?

The increase of the share capital is generally not a prerequisite for the transfer of the registered office of a company. However, for the purpose of transferring the registered office, each SAF-HOLLAND share must correspond to at least 1.00€ of the share capital. At present, SAF-HOLLAND S.A.’s shares have a nominal value of 0.01€ per share. In order to increase the proportionate amount of the shares in the share capital from 0.01€ to 1.00€, an increase in the share capital from company funds is planned.

3. What are the financial effects of the transfer of the registered office for the SAF-HOLLAND Group?

It is expected that the transfer of the registered office will lead to sustained savings in annual running costs. In particular, there will be no longer expenses for maintaining the holding functions in Luxembourg or for regular trips to Luxembourg. In addition, savings can be achieved in consulting costs.

4. Does the transfer of the registered office change the legal form of the SE?

The transfer of the registered office does not lead to a change in the legal form of the SE. The SE as a European legal form enables the migration from one member state of the European Union or another signatory state to the Agreement on the European Economic Area to another member state or signatory state. However, SAF-HOLLAND SE, which is primarily governed by Luxembourg law, will be governed by German law as of the date the transfer of the registered office comes into legal effect. With the transfer of the registered office, the SE largely corresponds to a German stock corporation.

5. Which effects will the transfer of registered office have on shareholders?

The legal relationships of SAF-HOLLAND SE, which is primarily governed by Luxembourg law, are subject to German law as of the date of the transfer of the registered office and, thus, also the rights and obligations of the shareholders. Therefore, the Company will adapt its Articles of Association to the requirements of German law by transferring its registered office; in addition, changes to corporate governance are also planned (see below question 12).

6. What are the main steps of a transfer of a registered office from Luxembourg to Germany?

The transfer of the registered office of a Luxembourg SE requires first of all a resolution of the Board of Directors, the preparation of the documents required under company law, such as the transfer plan and the transfer report of the Board of Directors. The transfer report is a report that explains and justifies the legal and economic aspects of the transfer and states the effects of the transfer on shareholders, creditors and employees. Furthermore, the Articles of Association must be adapted to the requirements of German law and a resolution must be passed by the general meeting of the company.

7. Is there a quorum for holding the general meeting?

The general meeting of the Company has a quorum if shareholders holding more than 50% of the voting rights are present or represented.

8. Which majority is required for the resolution on the transfer of the registered office at the general meeting?

The resolution on the transfer of the registered office requires the approval of more than 2/3 of the votes of the attending or represented shareholders.

9. What happens if the quorum under No. 7 is not achieved?

If the previously mentioned quorum is not achieved at the general meeting, the Company may convene a further general meeting, which may also pass resolutions without a quorum. At this further general meeting too, the approval of more than 2/3 of the votes of the shareholders who are present or represented is required.

10. When shall the transfer of the registered office take place?

It is planned that the extraordinary general meeting of the company, which is expected to take place in the second quarter of 2020 following the annual general meeting, will decide on the transfer of the registered office. According to European and Luxembourg law, it is not possible to decide at the same general meeting on the conversion of the legal form into an SE and the transfer of the registered office to another member state of the European Union or another signatory state to the Agreement on the European Economic Area. The legal preparation of the transfer of the registered office will begin after the conversion of the legal form of the company into an SE. A period of at least two months must pass between the publication of the transfer plan and the general meeting which is to decide on the transfer of the registered office.

11. When shall the transfer of the registered office come into legal effect?

The transfer of the registered office becomes effective when it is registered in the German commercial register. It is currently planned to achieve this registration shortly after the general meeting, which pass a resolution concerning the transfer of the registered office. This general meeting is scheduled for the second quarter of 2020.

12. Is a change in the corporate governance of the company planned with the transfer of the registered office?

One idea of transferring the registered office is to transfer the existing management structures of the SAF-HOLLAND Group to the structure of a supervisory board and a management board which is common in Germany. There is currently (and also after the conversion of legal form of the company to an SE) a Board of Directors and a Group Management Board. Following the envisaged transfer of the registered office, the Board of Directors will be structured as a supervisory board with respective control and monitoring functions. The planned transfer of the registered office also enables the Group Management Board to be structured under company law as the management board of a German stock corporation. Thus, the rights and obligations of the individual members of the Group Management Board are clearly regulated under German stock corporation law. The company would therefore have a dualistic model with a management board and a supervisory board, which exists for German stock corporations and most German SEs. In this way, the management structure of the SAF-HOLLAND Group would be adapted to the governance structure customary in the new country of domicile, Germany.

13. Does the Luxembourg capital increase trigger substantial tax effects at level of German tax resident shareholders?

No substantial income tax effects at level of German tax resident shareholders should be triggered by the Luxembourg capital increase from share premium account. With respect to a capital increase from share premium account without the issuance of new shares, however, there is no clear guidance from German tax authorities available. Moreover, also no clear tax literature opinion or court rulings exist.

In the past, German depositary banks levied withholding tax or adjusted acquisition cost in case of foreign capital measures to which no clear legal situation applied, even if the income tax neutrality of the foreign capital measure was later confirmed by German tax authorities.

Currently, SAF-HOLLAND S.A. is in coordination with German tax authorities, in order to receive confirmation of the tax neutrality of the capital increase from share premium account in advance. Based on this confirmation, depositary banks can then refrain from withholding withholding taxes or adjusting acquisition costs.

Notwithstanding the foregoing, the assessment of the tax consequences requires a consideration of the individual circumstances of the shareholder. It is therefore recommended that shareholders consult their own tax advisors with respect to their individual tax situation.

14. Does the migration trigger immediate income tax effects at level of SAF-HOLLAND SE?

As a result of the migration, the company will have to determine its profits for Luxembourg tax purposes as if it were liquidated. This applies to any gains allocable to the participation in SAF-HOLLAND GmbH. However, such gains are generally tax exempt. It is currently assumed that no significant income tax burden is triggered at level of SAF-HOLLAND SE for Luxembourg tax purposes.

SAF-HOLLAND SE becomes subject to unlimited corporate income tax liability in Germany following to the migration. As a result, SAF-HOLLAND SE is generally subject to corporate income tax plus solidarity surcharge and trade tax with its total income in Germany.

15. Does the migration trigger immediate income tax effects at level of German tax resident shareholders of SAF-HOLLAND SE?

Generally, no immediate income tax burdens should be triggered for German tax resident shareholders. Notwithstanding the foregoing, the assessment of the tax consequences requires a consideration of the individual circumstances of the shareholder. It is therefore recommended that shareholders consult their own tax advisors with respect to their individual tax situation.

16. Does the migration trigger tax effects with respect to taxation of dividends and capital gains at level of German tax resident shareholders?

Dividends and capital gains remain subject to German unlimited income / corporate tax liability at level of German tax resident shareholders.

Depending on the individual situation of the shareholder, Luxembourg could, however, have had a withholding taxation right with respect to dividends. In this case Germany generally had to credit such withholding tax. After the migration, Luxembourg does no longer have withholding taxation right. With respect to capital gains, a Luxembourg taxation right should have been excluded by the double taxation treaty between Germany and Luxembourg for shareholders entitled to treaty benefit.

Notwithstanding the foregoing, the assessment of the tax consequences requires a consideration of the individual circumstances of the shareholder. It is therefore recommended that shareholders consult their own tax advisors with respect to their individual tax situation.

17. Does the migration trigger tax effects with respect to taxation of dividends and capital gains at level of non-German tax resident shareholders?

Dividends received by a shareholder not tax resident in Germany will firstly be subject to German withholding tax at 25% plus 5.5% solidarity surcharge thereon. However, (i) a corporate shareholder may apply for refund of German withholding tax exceeding 15% plus 5.5% solidarity surcharge thereon; (ii) in case the foreign corporate shareholder is resident in a EU-member state holding directly at least 10%, withholding tax is reduced to nil; (iii) in case the non-German shareholder is resident in a treaty jurisdiction, a refund to usually 15% (possibly further refunds possible) can be claimed according to the relevant double taxation agreement. Both the refund and the reduction of German withholding tax depend on whether certain additional prerequisites can be fulfilled (e.g. formal and substance requirements).

Capital gains from the sale of shares by a shareholder not resident in Germany are only taxable in Germany if the shareholder holds a qualifying shareholding (i.e. at least 1% of the capital within the last five years has been held directly or indirectly; gratuitous transfers from predecessors must be taken into account). In such cases, the relevant double taxation treaties usually provide for partial or complete exemption from German taxation.

Notwithstanding the foregoing, the assessment of the tax consequences requires a consideration of the individual circumstances of the shareholder. It is therefore recommended that shareholders consult their own tax advisors with respect to their individual tax situation.