Structure and process, legal regulation and consents


How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

The vast majority of acquisitions of privately owned companies in Germany are structured as share deals because a share deal structure is usually far more straightforward and less complex than an asset deal. Details of the share deal structure vary depending on whether the target company is structured as a limited liability company (GmbH), as an unlisted stock corporation (AG) or as a limited partnership with a limited liability company as sole general partner (GmbH & Co KG), a frequently used legal form for entities in particular in the famous German Mittelstand (mid-sized manufacturers). A share deal provides the buyer with the certainty that it acquires basically everything that constitutes the business it intends to acquire. In an asset deal scenario, this is much more complex because there are generally no provisions on a transfer of a business as a whole under Germany law. To the contrary, the business to be transferred by means of an asset deal needs to be identified very carefully asset by asset. A transfer by operation of law applies only with respect to related employment agreements under the EU Transfer of Undertakings (Protection of Employment) (TUPE) regime.

Auction processes are frequent for mid- and large-cap acquisitions. They are usually very well structured by the investment banks involved and follow international market standards. On the other hand, when looking at one-on-one negotiations on the acquisition of one of the numerous family-owned Mittelstand companies, the transaction processes may deviate from international standards to some extent. In such transactions, the psychological element of convincing a family to sell a business that often was founded by its ancestors is always very important. An international buyer needs to learn that these sellers are usually not only interested in achieving the best overall package of purchase price and favourable terms of the purchase agreement. Instead, they demand that their business is transferred to a reliable owner with a clear perspective for future growth. Therefore, it is always valuable to seek German legal advice, as a German counsel will also function as a kind of translator between the interests of his or her international client and the German entrepreneur.

Legal regulation

Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

There is no specific law regulating private acquisitions and disposals in Germany. Instead, the general provisions of German civil law on the purchase of goods apply in addition to the corporate laws that apply depending on the legal form of the target entity and other provisions applicable depending on the business the target operates in. As most of the applicable provisions of German civil law are not mandatory, the parties are free to tailor the purchase agreement in accordance with the result of their negotiations. As a result, German-style purchase agreements follow the Anglo-American market standards to a large extent, at least in an international context.

Regarding the governing law, against the background of the applicable ‘two step approach’ under German civil law, one has to distinguish between the purchase agreement governing the sale of the shares or assets and the transfer agreement to be executed upon completion. While the parties may choose a law of their choice to govern the former, the latter must be governed by German law.

Legal title

What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

Under a share purchase agreement, a buyer acquires the ownership over the shares as well as the membership in the target company and, indirectly, over the assets and liabilities constituting the business conducted by the target company. In an asset deal, the buyer acquires direct title to the assets.

The rights and obligations resulting from the acquisition of the legal title are indeed prescribed by law as regards third parties.

Apart from certain measures under German transformation law, there is generally no automatic transfer of shares, a business or assets by operation of law.

Regarding legal and beneficial title, there is no distinction under German law in setting aside trustee relationships. However, parties are free to negotiate that the transfer of the shares is effected with a retroactive economic effect, although the legal ownership will be transferred later and only upon completion of the transaction contemplated by the purchase agreement.

Multiple sellers

Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

Generally, under German law, every shareholder needs to agree to sell his or her shares if the buyer wants to acquire 100 per cent of the shares. Moreover, there is no means to force a shareholder to sell his or her shares other than a squeeze out, which is, however, applicable with regard to stock corporations only. An exception to this principle applies only in cases where the articles of association or a shareholders’ agreement provide for drag-along rights for the majority of the shareholders. While this is the case for most joint ventures or start-up companies, the articles of association of old family-owned companies that have been inherited by the second or third generation following the founder usually lack such provisions.

Exclusion of assets or liabilities

Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

There is no specific provision regulating the acquisition or disposal of a business as a whole in Germany. Therefore, the reference object of an asset deal is not the business itself, but every single asset and liability constituting the business. The general principle is that the parties are free to negotiate which assets and liabilities shall form part of the transaction and which shall remain with the seller. The two most important exceptions to this principle are the transfer of employment agreements and the transfer of other agreements. While the latter requires in any event the consent of the counterparty without which the transfer may not be effected, the transfer of the employment relationships to the buyer occurs by operation of law unless the transferring employees object to the transfer.


Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

Under the German Foreign Trade and Payments Act and the pertaining ordinance, foreign investments of formerly 25 per cent, now 10 per cent or more of the voting rights in German businesses active in the defence or encryption sectors require prior approval by the Federal Ministry for Economic Affairs and Energy (BMWi). In addition, the BMWi has the power to review, veto or stipulate conditions for acquisitions (direct or indirect ones) of 25 per cent or more of the voting rights in any Germany business by a non-EU and non-European Free Trade Association (EFTA) investor if the ‘public order and security’ of Germany is affected. Upon application, the BMWi may issue a compliance certificate, ideally at an early stage of the transaction. Recent amendments of the Foreign Trade and Payments Ordinance in July 2017 and December 2018 have extended the BMWi’s review deadlines considerably, so that, as a result, the BMWi may decide to review an investment as late as three months after gaining knowledge of the publication of the decision to issue the takeover offer or of the publication of assumption of control. In addition, the recent legislative reforms have also introduced a duty to notify investments in certain sensitive civilian sectors (especially in critical infrastructure, for example in the sectors energy, water, banking, insurance, transport, traffic, health or food) to the BMWi and have reduced the threshold for the BMWi’s foreign investment control powers in relation to such sensitive civilian sectors to 10 per cent of the voting rights. Besides the described legislative changes, administrative practice of the BMWi is showing a growing governmental willingness to interfere in foreign investments in Germany, particularly in the area of critical infrastructures and security-related technologies. In the summer of 2018 this willingness was evidenced by two cases in private M&A, namely by the federal government’s resolution to prohibit the acquisition of the German machine tool manufacturer for automotive, aviation, aerospace and nuclear industries Leifeld Metal Spinning by a Chinese investor and by the acquisition of a 20 per cent stake in the power transmission system operator 50Hertz by the state-owned development bank KfW in order to pre-empt an investment by State Grid Corporation of China. The legislative amendments and the tightened administrative practice are resulting in increasing numbers of applications for foreign investment compliance certificates and have slowed down many cross-border transactions.

Except for antitrust reasons and foreign investment control as well as supervision of banks, insurance, aviation and media companies, government agencies cannot influence or restrict the completion of business combinations based upon legal considerations.

Are any other third-party consents commonly required?

For a share deal, there are usually no third-party consents other than from the shareholders required. As to whether a shareholder’s consent is required depends on the articles of association of the seller. They frequently provide for restrictions on the sale of shares in subsidiaries, in larger groups setting out a threshold so that not each and every transaction requires a shareholder’s consent. When it comes to an asset deal, basically the same applies. In addition, the consent of the relevant counterparties is required if agreements shall be transferred together with the assets constituting the business. A general exception from the above applies to agreements under which the seller undertakes to transfer its entire or almost its entire assets. Entering into such agreements always requires an affirmative shareholders’ resolution.

Regulatory filings

Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

Apart from merger control clearance, no registration or regulatory filing has to be made to acquire shares in German limited liability companies validly. However, in German market practice, the buyer usually has to bear the fees of the notarisation, which in most cases totals up to a higher five-figure amount.