The term Success in the legal context
Definition and origin of the term
The term ‘Success’ originates from English and generally means ‘success’ or ‘achievement of a set goal.’ In the legal context, however, ‘Success’ primarily refers to the occurrence or realization of a specific legal consequence, particularly in connection with contractual, procedural, or inheritance law matters. In legal scholarship, ‘Success’ is often associated with the Latin term ‘succedere’ (to succeed, to enter), from which different areas of application can be derived.
Success in inheritance law
Succession and universal succession
In inheritance law, the term ‘Success’ is used as a synonym for the so-called ‘universal succession.’ According to Section 1922 (1) of the German Civil Code (BGB), the heir(s) enter, at the time of the testator’s death, immediately and as universal successors into all the testator’s assets and liabilities. This includes not only rights but also obligations (‘successio universalis’). Universal succession is a core manifestation of the concept of Success.
Individual succession (Singular Success)
By contrast, there is the ‘singular succession’ or individual succession, where specific assets are transferred intentionally by inter vivos disposition or by reason of death. Individual succession applies, for example, to legacies, where rights and obligations are transferred only in respect to a particular item.
Distinction from other types of succession
Certain special types of succession, such as the transfer of tenancy agreements under Section 563 BGB or insurance policies under Section 1922 BGB, are independent regulatory areas but are also covered by the term Success, provided legal positions are transferred in whole or in part with effect for and against the successor.
Success in corporate law
Business acquisition and legal succession
In corporate law, ‘Success’ encompasses the assumption of corporate positions in the case of universal succession (e.g., mergers under the Transformation Act, Sections 2 ff. UmwG). Here, the acquiring legal entity steps into all the rights and obligations of the transferring legal entity. This assumed position is a typical case of Success in the sense of legal succession.
Liability consequences and continuation of contractual relationships
Within the scope of corporate transformations (mergers, spin-offs, change of legal form), far-reaching legal consequences arise: liabilities are assumed and contracts are taken over unless otherwise agreed individually. The concept of Success thus encompasses all aspects in which successors must assume responsibility for existing and future rights and obligations.
Success in contract law
Assignment of claims (cession) and assumption of debt
In contract law, ‘Success’ is synonymous with the assumption of existing contractual claims or obligations, such as in the assignment of claims (Sections 398 ff. BGB) or the assumption of debt (Sections 414 ff. BGB). The successor assumes the affected legal positions, and in many cases consent requirements or special formalities must be observed.
Contract for the benefit of third parties
So-called contracts for the benefit of third parties (Section 328 BGB) are special forms that also present a Success scenario: by agreement, the third party obtains an independent claim against the debtor. The success and enforcement of this claim depend mainly on the agreements made and the applicable statutory requirements.
Procedural Success
Change of party and procedural standing
In civil procedure law, the term ‘Success’ also arises in connection with changes of party (Section 265 CPC, legal succession during proceedings) or procedural standing (Section 51 CPC). After the occurrence of Success, the new legal entity is entitled to all procedural rights and is subject to all procedural obligations.
Extension of res judicata
If a legal succession is established in the proceedings, the res judicata pursuant to Section 325 (1) CPC extends to and against the successor. Thus, subsequent legal entities are also bound by court decisions.
Success in international law
Conflict-of-law aspects
In private international law, the Success concept is used to determine which law applies to a legal succession. Especially in inheritance and corporate law, it must be checked which substantive provisions and conflict-of-law rules are relevant. Here, the term ‘Success’ refers to the transfer of legal positions due to various national legal affiliations.
European Succession Regulation
The European Succession Regulation (EuErbVO) has harmonized the concept of Success at the European level. According to Art. 21 EuErbVO, Success as universal succession is governed by the law of the country in which the deceased had his or her last habitual residence, unless a choice of law was made.
Fiscal Success
Legal succession in tax law
In tax law, ‘Success’ is also of significance, for example in the assumption of tax obligations by heirs or legal successors (Sections 45, 46 AO). Here, not only tax rights but also enforcement and assessment notices are transferred by way of Success.
Business succession and tax benefits
Within the framework of business succession, numerous tax regulations exist to facilitate a smooth Success, especially concerning inheritance and gift tax (Sections 13a, 13b ErbStG). Various tax exemptions and relief provisions promote the preservation of business assets across generations.
Summary
The term ‘Success’ in the legal context is a multifaceted term that describes entry into existing legal positions, rights, and obligations, both in private and public law. Areas of application range from universal succession in inheritance law, to corporate law succession, to procedural and tax constellations. The precise legal design of the concept regularly depends on the specific field and the relevant statutory provisions.
References and further reading
- German Civil Code (BGB)
- Code of Civil Procedure (ZPO)
- Transformation Act (UmwG)
- Fiscal Code (AO)
- European Succession Regulation (EuErbVO)
- Inheritance and Gift Tax Act (ErbStG)
- Palandt, Commentary on the German Civil Code
- Munich Commentary on the BGB
(This article does not constitute legal advice and serves general information on the term and areas of application of Success in law.)
Frequently asked questions
What legal requirements must be considered when measuring ‘Success’ in companies?
Numerous statutory requirements must be observed in the evaluation and documentation of business success. In particular, the German Commercial Code (HGB) obliges companies subject to accounting requirements to correctly and completely present business success in the annual financial statements, including the balance sheet, profit and loss account, and – for corporations – also in the notes and management report. Transparency and traceability of the success components must be ensured under the reporting obligations pursuant to Section 264 HGB. Key compliance requirements, such as the Stock Corporation Act (AktG) and the Limited Liability Companies Act (GmbHG), may impose further requirements on the reporting of success (for example, for general meetings or shareholders’ meetings). In addition, tax regulations must be complied with, as ‘business success’ affects the tax base (income tax, corporation tax, trade tax). For listed companies, capital market regulations (e.g., ad hoc publicity under MAR, disclosure requirements) also apply.
What reporting obligations exist with respect to business success?
Companies are subject to extensive statutory reporting obligations arising, among other things, from commercial, tax, and capital market law. These include in particular the obligation to prepare and disclose annual financial statements (Sections 242 ff. HGB), the management report (Sections 289 ff. HGB), as well as for listed companies, quarterly and half-yearly financial reports under Section 115 WpHG. For larger companies and groups, consolidated financial statements (Sections 290 ff. HGB) must also be prepared. Non-compliance with these obligations may result in fines as well as liability and recourse claims against managing directors. The reports must reflect the actual economic success (or failure), which is why both valuation regulations and the Accounting Directives Act (BiRiLiG) must be observed.
What legal risks exist in misleading communication about business success?
Deliberate or negligent misleading of business partners, investors, or the public regarding business success constitutes a significant legal risk. Under Section 331 HGB, intentional or grossly negligent misreporting is a criminal offense. Civil liability offenses such as prospectus liability, fraud (Section 263 StGB), investment fraud (Section 264a StGB), or market price manipulation may also be relevant. In capital markets law, misrepresentations may result in fines from BaFin or claims for damages. This is particularly important in the context of capital raising, such as IPOs or the raising of debt capital.
What statutory requirements apply to employee profit sharing?
Profit-sharing models are subject to various employment, tax, and, if applicable, corporate law requirements. The Works Constitution Act (BetrVG) obliges employers to involve the works council in the introduction and structuring of profit sharing (§ 87 BetrVG). Tax aspects mainly concern the distinction between current wages and other remuneration, which affects tax liability (§ 19 EStG). In terms of corporate law, regulations from the Limited Liability Companies Act or the Stock Corporation Act may become relevant when employees acquire company shares. Co-determination rights and any blocking minorities must also be observed.
How do compliance violations affect the legal assessment of ‘success’?
Compliance with statutory and internal corporate requirements has a decisive impact on the legal assessment of business success. Profits achieved through breaches of law (e.g., corruption, antitrust law, data protection violations, etc.) are not only subject to penalties but may also be subsequently confiscated (e.g., profit confiscation under Section 73 StGB; fine proceedings under OWiG/KartG). Furthermore, such successes may render the annual financial statements incorrect and trigger follow-up obligations such as correction reports and notifications to supervisory authorities. In severe cases, personal liability of management and unwinding transactions may follow.
What is the significance of the legal term ‘materiality’ in connection with business success?
In the context of accounting and reporting, materiality is a central legal assessment criterion. Information about business success must be disclosed or treated with particular care if it is of material importance for assessing the financial position and profitability of the company (Section 264 (2) HGB). In capital markets, this applies especially to ad hoc disclosures (Art. 17 MAR): events that significantly affect success (e.g., extraordinary profits, loss notification, insolvencies) must be published without delay. The legal consequences of omitted or delayed notifications include liability, fines, and in some cases criminal sanctions.
What special considerations apply to cross-border success reporting?
Companies operating internationally must observe not only German but also foreign legal requirements regarding reporting, accounting, and communication of success. International accounting standards (IFRS/IAS) apply to the presentation of success in addition to national regulations. Incomplete or divergent reports may result in additional or double taxation, fines, and criminal proceedings. In addition, various disclosure obligations must be observed, including those set out in the EU Transparency Directive (2004/109/EC), the Sarbanes-Oxley Act (SOX, USA), or the relevant stock exchange rules. This also concerns the use and recognition of success indicators and the liability of involved organs.
