Germany: The Purchase and Sale of Companies in Germany - 4.2.2.5.2 Purchase Contract, Ass

Last Updated: 4 December 1997
In most cases, a company is purchased with the aim of continuing its operations. =A7 1 of the Industrial Code (GewO) permits anyone including foreigners to commence a trading activity unless restrictions apply by virtue of the Industrial Code itself or other federal laws. This principle applies to natural persons and legal entities alike. If a license is required by the trader by virtue of the law, this is called a "concession". As far as these concessions are concerned, a differentiation should be made between a personal concession and a plant-related concession. Personal concessions are required if the commencement of a trade depends on certain personal prerequisites of the entrepreneur. Asset or plant-related concessions have to be obtained if the law specifies certain assets or plant items to be used for exercising the trade. For example, personal and plant-related concessions are required for the production, transport and storage of fissionable material, for restaurants, passenger conveyance or airline companies, for the extraction of natural resources and for operating hospitals and similar institutions. Only a personal concession is necessary for executing short distance road haulage operations, for security companies, banking and insurance companies and broker, property developer and building project management activities, etc.. When opening and operating handicraft businesses, special attention should be paid to =A7 7 of the German Handicrafts Code which requires the personal prerequisite of the "specialist's qualifying examination" from the entrepreneur. The aforesaid list should by no means be regarded as exhaustive and it should always be checked in each individual case whether and to what extent licenses and concessions are necessary.

If the exercise of a trade is tied to the personal concession of the entrepreneur or operator, a buyer may only the trade if he himself has been granted such a concession. If the exercise of the trade is dependent on an asset-related plant concession and if this license has been received at the time of sale, the continuation of the plant by the buyer and the commencement of trading activities by the buyer does not require any further approval under public law. If both types of concessions are required for exercising the trade, the buyer must at all events acquire the personal concession from the responsible authorities. Upon the conclusion of the contract, care should be taken to ensure that the contract will remain valid if the buyer is not granted the necessary personal concession unless contractual agreements have been made by the parties in this respect.

Certification in accordance with the so-called "DIN ISO" guidelines is becoming increasingly important; brief comments on these guidelines are as follows:

The ISO 9000 is a short-hand reference to a series of 5 international quality assurance standards issued in 1987 by the International Organization for Standardization (ISO) located in Geneva, Switzerland. The purpose of the ISO 9000 series is to provide guidelines for the selection and use of quality assurance systems that can be used for a company's internal management purposes (ISO 9004) and external quality assurance purposes (ISO 9001, 9002 and 9003). As used in connection with the ISO 9000 series, quality is defined as a fitness for purpose and safe in use. Although the ISO 9000 standards do not serve as quality guarantees on products, they do provide helpful guidelines to manufacturers seeking to implement quality assurance systems. Compliance with ISO 9000 may be important to ensure the free circulation of goods within the EC and to limit product liability.

Short summary of the ISO 9000 series:

  • ISO 9000 serves as the guideline on the use for the other four ISO 9000 standards.
  • ISO 9001 is the most comprehensive ISO 9000 standard which includes all of the quality assurances and requirements found in ISO 9002 and ISO 9003. The standard represents as model for quality assurance systems for the design, development, production, installation, servicing and supply of products and services.
  • ISO 9002 serves as a model for quality assurance and the production and installation of products and is particularly useful to a company complying with the published specification or a customer's specification for its product.
  • ISO 9003 is a model for quality management and contains a system for the final and special testing of products.
  • ISO 9004 serves as a guideline for developing and applying internal quality management and assurance systems with the ISO 9000 series. A company that implements the quality management practises in ISO 9004 should be able to satisfy the requirements of ISO 9001 through ISO 9003.

Compliance with the ISO 9000 series is voluntary. The manufacturer may choose to "self-certify" or register its compliance with the ISO 9000 standards. If a manufacturer self-certifies its compliance with the ISO 9000 standards, it will simply note on packaging and / or promotional literature which of these quality standards have been met. However, following the self-certification route rather than the registration route is obviously of less value to a manufacturer from a marketing and credibility standpoint.

A business may choose to seek ISO 9000 registration. The business registered under ISO 9000 may adopt a symbol used by the assessment body. Such registration itself is not transferable to the purchaser in case of acquiring all or most of the assets of the enterprise in question. However, if the complete business including assets and staff is acquired, the registration will follow the transferred business.

Practise shows that the administration fees for registration under the ISO 9000 standard cost approx. DM 30,000.--. The registration has to be renewed every 2 or 3 years. Costs for examination, qualification and certification under ISO 9000 standards amount to approx. DM 70,000.

In case that stock is acquired, all permissions, including marketing-permit and manufacturing-permit and certifications under ISO 9000 standards would stay with the company and would not have to be obtained or renewed by the acquirer.

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 (http://www.businessmonitor.co.uk), 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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