Definition and basic meaning of ‘Structural’
In a legal context, the term ‘Structural’ has a multifaceted meaning and encompasses various aspects of structural composition, design, and organization of legal, corporate, and regulatory entities. In both German and international legal systems, ‘Structural’ is particularly used in connection with corporate law, regulatory, and supervisory law issues.
Definition
‘Structural’ refers to anything concerning the fundamental organizational form, structure, or construction system of a legal entity. The term is used both in statutory provisions and contractual agreements, as well as in the design of corporate structures and in matters of compliance. In a broader sense, ‘Structural’ relates to structural measures, changes, or characteristics that affect the legal organization and appearance of an entity.
Areas of application of the term Structural in law
Corporate law
In corporate law, ‘Structural’ describes all measures and conditions relating to the setup, composition, and alteration of the corporate structure.
Structural Measures
This includes, for example, mergers, demergers, transformations, or changes in shareholding ratios (‘structural measures’). These are subject to the Transformation Act (UmwG) and the Stock Corporation Act (AktG), and often special legislation. The implementation of such structural measures generally requires the approval of qualified majorities and is subject to particular transparency and formal requirements.
Structural Change
A ‘Structural Change’ describes a significant alteration in the organizational structure, for example through merger, consolidation, or demerger of companies. Legally relevant in this context is especially the protection of minority shareholders, safeguarding of creditors’ rights, and compliance with information duties.
Capital market law
In capital market law, structural changes—so-called ‘Structural Transactions’ or ‘Structural Reorganizations’—are processes that have significant effects on the shareholder structure, capital base, or control relations of listed companies. Such changes are often subject to notification and transparency requirements pursuant to the German Securities Trading Act (WpHG) and the Market Abuse Regulation (MAR).
Supervisory law
In banking and insurance supervisory law, ‘Structural’ refers to structural requirements for the organization, division of business areas, and internal control systems of institutions. The implementation of such requirements is governed by laws such as the Banking Act (KWG), the Insurance Supervision Act (VAG), and relevant EU regulations (e.g., CRD V, Solvency II).
Labor law
In labor law, ‘structural changes’ can be found in connection with operational changes in accordance with § 111 Works Constitution Act (BetrVG). These include, in particular, mergers, demergers, or other profound changes in the business purpose or company organization. Here, co-determination rights and, in some cases, claims to reconciliation of interests and social plans exist.
Legal consequences and protective mechanisms in structural changes
Co-determination, approval, and information
Structural measures are subject to strict procedural requirements. This includes:
- Formal requirements (e.g., notarial certifications)
- Disclosure obligations (register entries, announcements)
- Participation requirements (involvement of employee representatives)
- Approval from certain bodies (e.g., general meeting, supervisory board)
- Creditor protection regulations
Minority protection
Legal regulations ensure that minority shareholders receive special protection in structural measures. This takes place, for example, through mandatory offers, cash compensation, or legal remedies (appraisal proceedings).
Insolvency and liability law aspects
For ‘structural reorganizations’ or transformations, it must be examined the extent to which existing liabilities remain or new ones arise. In the event of insolvency, certain structural legal acts may be subject to contestation if they adversely affect the interests of creditors.
International aspects and comparative law
European corporate law and international standards
In the context of cross-border transformations under the EU Transformation Directive, international mergers, or recognition of foreign companies, specific ‘structural requirements’ and minimum standards must be observed.
Cross-border structural measures
Cross-border measures, such as mergers across national borders, must comply with the requirements of European corporate law as well as the mutual recognition of structural measures in the jurisdictions involved.
Practical significance
Contract drafting
Contractual clauses on ‘Structural Changes’ or ‘Change of Control’ are frequently found in loan agreements, share purchase agreements, or investment agreements. They serve risk management and protection against unforeseen structural changes.
Corporate Governance
Structural requirements and changes are a central component of corporate governance. They affect both the design of management and control systems, as well as ensuring compliance with statutory and regulatory requirements.
This article provides a comprehensive legal classification and analysis of the term ‘Structural’ under German and international law, with particular focus on the diverse practical and regulatory implications of structural measures and requirements.
Frequently asked questions
What legal requirements apply when implementing structural adjustments in companies?
For structural adjustments—such as restructurings, mergers, or demergers in companies—a wide range of legal requirements apply, primarily governed by the German Commercial Code (HGB), the Transformation Act (UmwG), and relevant labor law provisions. Core requirements pertain in particular to the proper notification duty to employees (§ 613a BGB in the case of business transfers), information and involvement of the works council (§§ 111 ff. BetrVG), and the formal procedure required to alter the company structure. There are also reporting and registration duties with the Commercial Register and, where necessary, antitrust or financial supervisory approvals. Compliance with deadlines and the individual procedural steps is mandatory, as violations can result in serious legal consequences—such as nullification of the transformation or claims for damages by affected parties.
What is the legal role of the works council in structural changes?
In the case of structural changes, such as business closures, relocations, or the introduction of new structures, the works council is entitled by the Works Constitution Act (BetrVG) to comprehensive participation and co-determination rights. According to § 111 BetrVG, the employer must inform the works council in good time and fully about planned measures which may cause significant disadvantages for the workforce. In the context of so-called reconciliation of interests and social plan negotiations, consensual agreements on implementation and on compensating social disadvantages for employees are to be reached. If no agreement is reached, the conciliation committee may be called in. Failure to involve the works council properly may render certain measures ineffective and result in claims for damages.
What requirements apply to termination of employees in the course of structural adjustments?
The termination of employees due to structural adjustments—such as downsizing or site closures—is subject to strict legal requirements under the Protection Against Dismissal Act (KSchG). The decisive factor is the social justification for termination (§ 1 KSchG), which regularly requires a business-related reason. Employers are obliged to carry out a proper social selection, taking into account factors such as length of service, age, maintenance obligations, and severe disabilities. Furthermore, the works council must be consulted in accordance with § 102 BetrVG. In cases of collective redundancies, notification to the Federal Employment Agency is required pursuant to § 17 KSchG. Violations of these requirements usually render the termination invalid.
What legal risks arise from incorrectly implemented structural measures?
Structural measures carried out incorrectly—such as by disregarding statutory provisions—entail significant legal risks. This includes, in particular, the invalidity of transformation resolutions, contestability of resolutions of general meetings, liability claims against management, or tax disadvantages. From a labor law perspective, improper terminations or failure to involve the works council may result in claims for reinstatement, fines, and claims for damages. Failure to fulfill reporting obligations can also result in fines. In a corporate law context, members of corporate bodies may face personal liability for breaches of their duties of care.
Are there specific information and reporting obligations towards authorities in the context of structural changes?
Yes, there are numerous information and reporting obligations towards authorities in the context of structural changes. Examples include: notification of transformation measures and their entry in the commercial register (§§ 16 ff. UmwG), reporting of mass layoffs to the Federal Employment Agency (§ 17 KSchG), notification requirements under foreign trade law for international transactions, as well as, depending on company size, potential notification requirements to the Federal Financial Supervisory Authority (BaFin) or the Federal Cartel Office. Omissions or late notifications can result in severe sanctions and impair the effectiveness of the measures taken.
What transparency requirements must be considered when implementing structural measures?
Structural measures are shaped, among other things, by capital market and corporate law transparency requirements. In particular, listed companies must fulfill ad hoc disclosure obligations (Art. 17 MAR), as measures with stock price relevance must be published without delay. In addition, the regulations on disclosure in the annual financial statements and information duties towards shareholders must be observed. However, confidentiality obligations must not be neglected if they serve to protect trade secrets, though this is not to lead to the circumvention of statutory disclosure obligations.
What tax aspects must be considered in structural changes?
Structural changes often have significant tax implications. Key issues include the tax transfer and acquisition of assets, real estate transfer tax in property transactions, and VAT consequences. Under the Transformation Tax Act (UmwStG), for instance, special conditions must be met to achieve a tax-neutral transformation. Likewise, extensive rules must be observed in the transfer of hidden reserves or loss carryforwards. Careful tax planning is essential to avoid unexpected tax burdens and back payments, and to benefit from available tax structuring options.
