Europe News

Thousands of British firms could be allowed to convert to being German after Brexit

Chloe Taylor
Key Points
  • Germany has proposed new legislation to allow British SMEs to become German.
  • Around 10,000 German-based businesses are registered under British rules.
  • The new legislation was adopted by Germany’s cabinet on Wednesday.
Frankfurt skyline and Romerberg City Hall Square in the German city of Frankfurt. 
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Germany is planning to allow thousands of small businesses registered under British rules to convert to being German firms after Brexit.

The draft bill, seen by CNBC and put forward by the Federal Ministry of Justice and Consumer Protection, was adopted by the German government Wednesday. If passed through the German parliament, amendments could be made to the country's Transformation Act, affecting around 10,000 small to medium-sized businesses.

Under EU freedoms, those businesses were able to register their firms under British rules despite being based in Germany. Reasons for this were that it was considered cheaper and simpler.

Current laws dictate that to become a German limited liability company, small firms must have a minimum share capital of 25,000 euros ($28,809) – higher than the share capital required to register as a British limited company. Share capital is the total value of all the shares that a company issues.

Under the new regulation, companies registered as British will be able to convert without increasing their capital.

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"Many small companies and people who set up their own business have in the past opted for the British limited, a form of incorporation which is simple to set up," German Justice Minister Katarina Barley told newspaper Handelsblatt last month.

"Brexit poses a serious challenge for them. We want to help them."

The business conversion law is the latest in a string of plans Berlin has made in preparation for Brexit.

Legislation will reportedly be updated to ensure British citizens can remain employed as teachers in Germany after Britain leaves the EU, as civil servants are currently required to be EU citizens.

Germany has also submitted a bill for a law that would allow Britons living in the country to become German citizens post-Brexit, while retaining their British citizenship.