Definition and Legal Classification of the Company Station within a Group
Die Company Station within a Group is a term used in connection with the organization, structure, and legal relationships of the various components of a corporate group. It describes an organizational and often operational unit that is legally distinguishable from the parent company and the other group companies but nevertheless remains committed to the overall structure of the group. The company station is frequently not an independent legal entity but part of a legal unit within the group.
This definition and legal treatment are especially relevant in the context of interpreting group law regulations and are significant in corporate law, labor law, tax law as well as in supervisory and co-determination law.
Structure and Manifestations of the Company Station within a Group
Business and Organizational Distinction
Company stations within a group manifest as distinct organizational units within a larger legal entity (e.g., operation, branch, subsidiary office), or as independent economic subunits assigned to a specific purpose or business area. As a rule, they report directly to management or to an intermediate company.
Legal Status
From a legal perspective, company stations generally do not have their own legal personality. They are parts of an independent company but can act in an economically and materially separable manner and are, to a large extent, organizationally independent. Their legal classification differs fundamentally from subsidiaries, which are separate legal entities. Company stations are thus partial assets or operational units within a single legal entity, such as a GmbH or AG within the group association.
Legal Aspects of the Company Station within a Group
1. Significance in Corporate Law
a. Integration under Group Law
Under German group law according to §§ 18 et seq. German Stock Corporation Act (AktG), different internal group units are distinguished. Unlike subsidiaries, company stations are not legally independent companies but organizational structures within one or more corporations. Nevertheless, internally they may represent their own organizational units, departments, plants, or branches within the group.
b. Liability Regulations
The company station does not bear its own external liability; rather, the company to which it belongs is always liable, both internally and towards third parties. Nevertheless, internal conduct obligations and rights of direction within the group may also be regulated with respect to managers and personnel in the company station.
2. Labor Law Implications
a. Assignment of Employees
From a labor law perspective, employees of a company station are generally employees of the legal entity to which the station is assigned. Company affiliation, co-determination rights (e.g., pursuant to the Works Constitution Act), notice periods, and social compensation plans depend on this affiliation. Nevertheless, company stations may establish works councils (if the company size pursuant to § 1 Works Constitution Act is met) and can be treated separately in the case of business transfers under § 613a BGB.
b. Co-determination Rights
With regard to corporate co-determination, it is crucial how company stations are legally assessed as independent or jointly managed operations within the group. This affects the appointment and composition of the works council as well as the election of employee representatives to the supervisory board.
3. Tax Aspects
a. Permanent Establishment Definition
For tax purposes, the company station is relevant in connection with the concept of permanent establishment according to § 12 Fiscal Code (AO). For income tax purposes, a company station may qualify as a permanent establishment of the group or respective company if it has a fixed business facility serving the performance of the business activity. This influences profit determination and the allocation of income within the group.
b. Intra-group Transfer Pricing
If company stations operate internationally, issues regarding correct transfer pricing and documentation are relevant. These must comply with the requirements of the Foreign Tax Act and the OECD Transfer Pricing Guidelines, especially where business relationships exist with other group entities in different countries.
4. Supervisory Law and Regulation
In a supervisory context, especially for credit institutions or insurance companies, the company station within the group is significant for the assessment of risk distribution and the structure of supervision. It may be taken into account when allocating monitoring and reporting obligations.
Distinction from Other Internal Group Units
The company station is not equivalent to a legally independent subsidiary or a legally dependent permanent establishment. Its distinguishing features include:
- Lack of independence as a legal entity
- Limited external effect
- No own liability assets
- Full legal integration in the parent company or top-level group company
Special Features and Distinguishing Criteria
Functional Demarcation
The term company station is essentially to be regarded functionally: it regularly refers to a product, market, or task orientation within the group, without being separated from the overall organization.
Typical Examples
- Representations, service centers, or production sites
- International branches that are organizationally but not legally independent
- Sales and logistics centers abroad, which do not exist as independent subsidiaries
Relevance for Group Structure and Management
The precise definition and legal treatment of the company station are crucial for the structuring of responsibilities, liability matters, risk and compliance management, as well as tax optimization in multinational corporate groups. Especially in matrix organizations and divisional structures, the legal classification of the company station plays a pivotal role in the design of internal control and management systems.
Literature and Further References
- Legal Foundations: §§ 18 et seq. AktG, § 12 AO, Works Constitution Act, Co-determination Act
- Specialist Literature: Basic works on corporate law, group law, and labor law
- Administrative Regulations: BMF letters on permanent establishments; Guidelines of the Federal Financial Supervisory Authority (BaFin)
Conclusion
The company station within a group forms a significant element in group organization that touches upon various areas of law. It is neither identical to a subsidiary nor to an independent permanent establishment, but rather constitutes an organizational unit within an existing legal entity. The legal perspective is important for liability, labor, tax, and regulatory aspects and significantly influences the group and management structure. Correct classification contributes to legal certainty in group management as well as compliance with external requirements.
Frequently Asked Questions
1. What legal requirements must be met for assigning a company station within a group?
Assigning a company station within a group requires compliance with the legal framework conditions, particularly regarding labor law, co-determination rights, and any collective bargaining provisions. It must first be determined whether existing employment contracts permit a transfer or assignment to another group company or station; this affects, for example, the formulation of the place of work or the definition of the task area. Under works constitution law, the works council pursuant to § 99 Works Constitution Act must generally be involved in individual personnel measures, such as transfers. In addition, any individual and collective transfer protection clauses as well as the co-determination right according to § 102 Works Constitution Act concerning ordinary dismissals should be observed, especially if the assignment entails termination of the initial employment relationship. For foreign postings, further national and international labor law regulations as well as tax and social security aspects apply, such as the A1 certification procedure for EU postings. Any approval requirements from the Employment Agency or other authorities must be adhered to if employment subject to work permits is involved. Additionally, intra-group data protection rules must be checked when transferring personal data between group companies in accordance with GDPR.
2. What labor law risks exist with an internal group transfer to another company station?
An intra-group transfer comes with several labor law risks. A unilateral transfer without contractual basis may represent an impermissible change to the employment contract and, as such, render the action invalid or even qualify as a dismissal if a change notice as defined in § 2 Protection Against Dismissal Act is not properly executed. There is a risk that the employee will object to the action and bring a claim for continued employment at the original location. If the transfer brings about detrimental changes in working conditions, such as salary reductions, worsened commuting, or diminished social benefits, these may also be legally contestable. Inadequate or omitted involvement of the works council may render the transfer invalid under § 99 para. 1 Works Constitution Act. Principles of equal treatment or the General Act on Equal Treatment (AGG) may also be affected if certain groups of employees are favored or disadvantaged. Finally, labor court disputes regarding the validity and appropriateness of the transfer may arise, leading to financial and reputational costs.
3. How does the assignment of a company station affect the existing employment contract?
The assignment to another company station within the group can—depending on the specific provisions of the contract—be structured as a transfer within the existing company, as an intra-group secondment, or as a change of contractual employer. If the employment contract is flexible enough, it allows assignment to various places of work or company divisions without requiring an amendment to the contract. In many cases, a permanent assignment to another group company, however, requires contractual adjustment, possibly associated with a business transfer under § 613a BGB. In this case, employees retain certain rights and protections, such as the continued application of collective regulations. If only a temporary secondment is agreed upon, the current employment contract usually remains in force, but the role, tasks, and return possibilities must be set out in detail in order to clarify status issues (e.g., company affiliation, authority to issue instructions). Changes to material terms—such as remuneration, working hours, or social benefits—require express agreement.
4. Under what circumstances is the works council’s involvement required in an intra-group transfer?
The works council’s involvement is generally required under § 99 Works Constitution Act when the transfer qualifies as such under § 95 para. 3 Works Constitution Act. This is the case when the employee is assigned to another area of work permanently or when the measure is expected to last longer than one month and thus significantly changes the function. This also applies to intra-group transfers, provided the employee remains formally employed at the previous location. If a complete change of employer to another group company takes place, both the old and the new works councils must be involved, for example in the context of transfer of business regulations. If the company fails to involve the works council in these cases, the transfer is legally invalid. In addition, obligations to inform employee representatives or parties to collective agreements may arise.
5. Do tax and social security aspects have to be taken into account when changing the company station?
Yes, when changing the company station—especially in the case of cross-border transfers or secondments within a group—both tax and social security provisions must be observed. From a tax perspective, it should be clarified whether a change of residence or taking up employment abroad leads to limited or unlimited tax liability and how the taxation of salary, social benefits, and any additional benefits is to be handled. Double taxation agreements between the relevant countries must be observed to avoid double taxation. From a social security perspective, the key issue is which social security system (home or host country) the employee falls under. For deployments within the EU, the A1 certification procedure is typically mandatory; for assignments outside Europe, bilateral agreements may exist or the conclusion of secondment agreements may be necessary. Significant fines and back payments can result from paying social security contributions into the wrong system.
6. What data protection requirements must be observed in intra-group assignments to a company station?
The intra-group transfer of employee data in the course of an assignment or transfer is particularly sensitive under data protection law. Under the General Data Protection Regulation (GDPR), corporate groups are required to base the transfer of personal data (name, address, employment data, and as needed, health data for occupational safety) between different companies on a legal basis. Usually, this is based on the fulfillment of the employment contract according to Art. 6(1)(b) GDPR and legitimate interests under Art. 6(1)(f) GDPR. Technical and organizational measures must be implemented to prevent unauthorized third parties from accessing the transferred data. For international data transfers, especially to third countries outside the EU, it must be ensured that an adequate level of data protection exists (e.g., through standard contractual clauses or binding corporate rules). The employee must be informed about the nature, purpose, and scope of the data transfer (Art. 13 GDPR), and rights of access, correction, and erasure, if necessary, must be guaranteed. A data protection officer should be involved in the process.