Mergers and Acquisitions in Germany
Mergers and Acquisitions in GermanyUpdated on Monday 14th September 2015
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The legal framework regarding mergers and acquisitions in Germany
There is no specific legislation for mergers and acquisitions (M&A) in Germany. As each transaction is treated individually the advice of a German law firm is very important. Among the German laws regarding M&A transactions the most comprehensive are the Commercial Law, the Stock Corporation Act, the Limited Liability Company Act, the Takeover Act, the Securities Trading Act, the Stock Exchange Act and the German Civil Code. In merger and acquisition transactions in Germany an important law that also applies is the Work Constitution Act.
Types of acquisitions in Germany
The acquisition transaction between German companies or a foreign and a domestic company can be divided into a share deal or an asset deal. The asset deal is characterized by the transfer of defined assets between a seller and a purchaser. The parties will usually decide on the assets to be sold, respectively bought. It is also possible for parties to decide on a total or partial transaction. In order to be valid, an asset deal must specify each asset and its liabilities individually. The assets and liabilities may be specified in an acquisition agreement or in a transfer agreement. According to German laws, business licenses and permits may also be transferred in an acquisition. In cross-border acquisitions the foreign investor is advised to open a company in Germany in order to conduct the acquired vehicle’s operations.
Share deals are simpler than asset deals as they only consist in the partial or total transfer of the shares in a company. Pursuant a share deal, an investor will take over all assets, rights and liabilities in the target company. Share deals are more popular in Germany as there is less documentation required and the target company may continue its business operations as before.
Mergers in Germany
The German Transformation Act (Umwandlungsgesetz – UmwG) is the main regulatory framework regarding mergers. A German company may be restructured by merger, demerger, transfer of assets for cash or change of legal form according to the Transformation Act. No matter the type of reorganization, an agreement between parties must be drafted first. Secondly, a report with complete information about the reorganization must be submitted with the owners. Based on the report the resolution for reorganization will be adopted. Once the merger is completed the German Commercial Register must be notified about the transaction.
Our German lawyers will offer clients legal assistance in merger and acquisition transactions.