Table of Contents:
1. Key Aspect – Pre-Division Analysis
2. Are We Dealing with a ZCP?
3. Check the Property Status
4. Employee-Related Issues
Key Aspect – Pre-Division Analysis
When dividing a company, it is crucial to thoroughly analyze grants, permits, administrative decisions, and contracts concluded by the company being divided. As a result of the division, a new company is established based on a ZCP (Organized Part of an Enterprise). In principle, the division plan stipulates that permits, licenses, and contracts are automatically transferred to the new company through partial universal succession.
However, in some cases, the conditions of obtained permits, licenses, or specific contract provisions may impose additional requirements or restrictions related to the division. This may require obtaining approval from an administrative authority or a business partner to transfer rights and obligations.
Failing to conduct a thorough analysis of these aspects can have serious consequences. For instance, a business partner may be entitled to impose contractual penalties, suspend financing, or even terminate the contract.
Are We Dealing with a ZCP?
In the process of dividing a company, it is crucial to determine whether both the part of the business remaining in the divided company and the part transferred to the new company meet the criteria of an Organized Part of an Enterprise (ZCP). If the transferred part meets the statutory criteria of a ZCP, the division is tax-neutral.
However, each case must be assessed individually, and in some instances, it may be necessary to apply for an individual tax ruling.
Check the Property Status
If the divided part of the company includes real estate, special attention should be paid to agricultural properties as defined by the Agricultural System Development Act and the KOWR regulations (National Agricultural Support Center). It is important to note that real estate transactions conducted without KOWR’s approval may be considered null and void.
Employee-Related Issues
The company division process has direct consequences for employees. Some employees may be transferred to another company, either immediately upon division or at a later stage under different conditions, depending on business arrangements.
If the division involves the transfer of employees to a new entity, it constitutes a transfer of part of a workplace under the Labor Code. This entails specific obligations imposed by the Labor Code regarding the transfer of an enterprise.
