Since February, Ernst & Young has not been a GmbH but a KG. picture alliance/dpa/dpa-Zentralbild | Soeren Stache
Since February, the auditing firm Ernst & Young (EY) has been restructuring from a GmbH into a limited partnership.
The reason for this step is that the German EY will adapt better to the structures of other EY companies worldwide.
However, the restructuring also has tax and legal advantages should there be another legal dispute in the future.
A few weeks ago, the auditing firm Ernst & Young (EY) announced its restructuring from a GmbH to a limited partnership (KG). The “Handelsblatt” reports this in one go Article. In addition, EY’s internal structure also changed in order to legally separate all matters relating to tax advice, consulting and auditing from one another.
EY officially justifies the restructuring in Germany by saying that the structure is harmonized with other companies in the EY network in Europe and worldwide. But the move should also have tax advantages.
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EY established four limited partners
The restructuring was notarized in January and came into force in February. Since then, EY has been a limited partnership. EY set up new companies in one go and renamed its own GmbHs. EY also founded a holding company with operationally and legally independent units, as the “Handelsblatt” explains. Around 11,000 employees across Germany will be affected by the changes.
In such a limited partnership there are so-called partners, the general partners, who are liable for the company – in an emergency even with private assets. On the other side are the limited partners, who only have limited liability. However, the company assets lie with them. At EY, the limited partners would be liable for two to three million euros in future legal cases. This is the amount of the mandatory deposits that all limited partners have contractually agreed to, reports the “Handelsblatt”.
Since the restructuring, EY has had four limited partners, the newspaper continues. The company organizes its auditors and administrative functions in the first limited partner, EY Germany. A second company, EY Tax GmbH, provides tax advice for EY. The newly founded EY Strategy & Transactions is responsible for strategy consulting. In the future, EY will handle all other consulting services under Etventure GmbH.
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The restructuring will enable EY to better respond to legal problems
These drastic steps are officially justified by the fact that EY is adapting to the structure of other companies in the EY network in Europe and worldwide. The company would be in a better position if the global group were to split, writes the “Handelsblatt”. Because the split of the global EY group may be under discussion again.
In recent years, EY has been planning to split its global audit and consulting businesses into two independent companies. However, the so-called “Everest” project was paused in April 2023. But EY’s current restructuring could revive this plan.
EY should now also be better positioned for tax and legal purposes. With the structure of a limited partnership, the partners’ liability for legal cases and liabilities is reorganized and limited, writes the “Handelsblatt”. This can be an advantage in legal cases if there are new legal complications – such as with Wirecard.
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According to “Handelsblatt”, there is a suspicion that EY wants to avoid responsibility in the Wirecard case through the restructuring. The company faces consequences after breaches of duty were discovered during Wirecard’s balance sheet audit. But lawyers consider this to be unlikely and EY itself denies it.
Despite EY’s reorganization into a limited partnership, the group may face consequences for the errors in the Wirecard scandal. The “Handelsblatt” refers to German conversion law and emphasizes that newly founded successor companies must assume the existing legal risks and claims and be responsible for them with their entire assets.
md