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.