Germany: The Purchase and Sale of Companies in Germany - Purchase Contract, Asset

Last Updated: 4 December 1997
When specifying the object of sale, a differentiation should be made between assets which are to be included in the balance sheet and those which are not and the intangible assets of the company are also a matter of importance. In the case of companies which prepare individual financial statements, the basis for specifying the assets, rights and obligations to be transferred is initially the balance sheet and the asset register. At the same time, care should however be taken to ensure that only tangible assets are included in the balance sheet and that intangible assets are excluded. This means that certain substantial assets which are to be transferred to the buyer as part of the sale of the company may not be included, or do not have to be included, in the balance sheet. Assets which are not to be shown in the balance sheet particularly include assets held by the seller on the strength of hiring, renting or leading agreements and, in addition, consignment goods or trade debtors originating for a third party account. In view of the fact that the buyer cannot become the owner or legal owner of such assets, other agreements which frequently have to include third parties have to be reached on these as part of the overall asset deal. It is also very important that agreements have to be made on so-called low-cost equipment assets which are not normally included in the balance sheet or which are only included at a notional value as they are written off in full in the year of acquisition. The intangible assets of the company being sold should also be specified in detail. These include, in particular, the specific know-how, customer data files, supplier data files, proprietary rights, copyrights, business documents, etc., acquired by the company being sold. The aforesaid listing is by no means complete and for this reason, it is recommended that it should be established which intangible assets are in existence in each individual case and which are to be transferred.

With regard to the conveyance and transfer of the specified assets of the company being sold, there is the additional problem that the assets in question have normally changed in the event of a deviation between the contract date and transfer date. These changes can be included in the contract by means of an agreement on a joint inventory count by the seller and buyer on the transfer date so that the buyer suffers no disadvantage as a result.

A special situation arises under =A7 25, para. 1, clause 2 of the German Commercial Code (HGB) if the buyer purchases a (sole-trader) company with the right to continue the business. In this case, all amounts due from the individual debtors from trading operations are transferred to the purchaser (buyer). Any other arrangement agreed by the parties is only valid if it is registered in the trade and commercial registry and has been announced or if the amounts due are notified to the third parties by the seller or buyer (=A7 25, para. 3 of the German Commercial Code). In this case, a reimbursement obligation of the buyer can be agreed in the contract for the purchase of the company which commits the buyer to remit any debtor payments received to the seller.

In addition to the assumption of the seller's assets and rights by the buyer, the buyer may also assume liabilities of the seller or enter into contracts or any other legal agreements. If such an agreement forms part of the contract, it must be specified beyond any shadow of doubt in the contract which liabilities of the seller are to be taken over by the buyer and which contractual commitments of the seller are being taken over by the buyer and to whom. With such a contract clause, it is recommended that each of the liabilities should be specified in detail. If the buyer enters into contracts or any other legal agreements of the seller, it is advisable to attach all the relevant contracts and legal agreements to the main contract in order to avoid any dispute on the substance and scope of the agreement. If the buyer is to enter into any contracts or legal agreements, or if liabilities of the company are to be assumed, it should be borne in mind that any agreement on the assumption of debt always requires the consent of the creditor concerned in accordance with =A7 415 of the German Civil Code. If necessary, it should also be checked whether the transfer of contractual rights is excluded by assignment prohibitions.

It is equally important to specify in detail which liabilities the buyer is not assuming. If necessary, the contract can include a generally negative differentiation to the extent that only the contractually agreed commitments, liabilities or any other legal agreements will be assumed by the buyer. If liabilities are assumed by the buyer, attention should again be paid to =A7 25 of the German Commercial Code. If the buyer acquires a company and a right to continue the business which had previously been conducted as a sole trader, the buyer is, by law, liable for all liabilities relating to the company in accordance with =A7 25, para. 1, clause 1 of the German Commercial Code. This ruling applies in the above-mentioned regulation under =A7 25, para. 1, clause 2 of the German Commercial Code which likewise legally specifies the transfers of amounts due from debtors in such a case.

Extreme care should be taken when specifying the assets to be covered by the contract if difficulties are to be avoided with the execution of the contract at a later stage.

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.

You may also wish to read through related Wessing Berenberg-Gossler Zimmermann Lange. You can view the entire archive via the Internet on Business Monitor Online (, or via your online provider by entering "Wessing Berenberg-Gossler Zimmermann Lange" and "Business Monitor" as a free text search.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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