Public-law disposal restrictions applicable to company sales in the eastern states of Germany are of particular importance. The transfer and utilisation of land and buildings are subject to their own local regulations. The purchase of land and buildings and the registering and sale of leasehold rights in the eastern states require approval in accordance with the Land Transfer Regulation (GVO). This approval requirement is designed to protect restitution claims submitted by former property owners in accordance with the German Property Act (VermG), whereby an investment priority notices issued under =A7 11, para. 1 of the German Investment Priority Act (InVorG) replace the approval. The commitment transaction, i.e. the conclusion of a binding contract, is basically subject to approval; approval under =A7 2, paras. 1 and 2 of the Land Transfer Regulation has to be submitted for transferring ownership of the property in question in the land register. This approval may only be issued to applicants if no restitution claims have been submitted or exist during the approval period or if the seller has already become the freehold or leasehold owner to the exclusion of any repossession claims. Approval is also not required if the restitution beneficiary has been re-entered as the owner in the land registry in accordance with =A7 1, para. 2 of the Land Transfer Regulation. If a sale of property subject to approval forms part of a contract for the purchase and sale of a company, the whole contract should be concluded on the suspensive condition of receipt of the approval in accordance with the Land Transfer Regulation.

Difficulties under the German Property Act (VermG)) may also be experienced with a company purchase in the eastern states if the former owner has registered compensation claims. The regulations in the German Business Restitution Ordinance (UR=FCV) should also be observed with every purchase of a company in the eastern states. There are also special rulings with the purchase of companies from the Treuhandanstalt (THA the privatisation agency of the German government) or from its legal successor, the "Federal Institution for Special Unification Assets in Berlin" (BVS) and acquisitions of former Treuhandanstalt enterprises. Contracts with the Treuhandanstalt normally include conditions which have to be observed in the event of a sale of the company by the new buyer. It is urgently recommended that expert dvise should be obtained in view of the fact that restitution laws in the eastern states of Germany are exceedingly complex.

For further information please contact Dr Erich Michel, Wessing Berenberg-Gossler Zimmermann Lange, Freiherr-Vom-Stein-Strasse 24-26, Frankfurt am Maim 60323, Frankfurt, Germany- Tel: +496 997 1300, Fax: +496 997 130100.

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