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

Last Updated: 4 December 1997
The purchase of the whole or the major part of a company or business has to be disclosed under =A7 23 of the German Restrictive Practices Act. The buyer has to be an entrepreneur according to the wording of the law. The purchase of a company by a non-entrepreneur does not constitute a merger. =A7 23, para. 1, clause 10 of the German Restrictive Practices Act stipulates an exception if a natural person has a majority holding in another company, however. If this natural person acquires another company by means of a purchase, the prerequisites of =A7 23, para. 1 of the German Restrictive Practices Act are met and the purchase is subject to disclosure to the Federal Cartel Office.

The law initially refers to the purchase of all the assets of a company. The purchase of a company always meets the merger prerequisite of the Restrictive Practices Act therefore and its application is only excluded if none of the prerequisites of =A7 23, para 1 of the Restrictive Practices Act are met by the purchase of the company. These prerequisites are a 20 % market share, sales of DM 500 million or 10,000 employees. However, a merger may also be rejected in accordance with =A7 1 of the Restrictive Practices Act even if the prerequisites of =A7 23, para. 1 of the Restrictive Practices Act are not met as discussed in further detail below.

Not only the purchase of all the assets of a company is subject to the disclosure obligation, however; the purchase of "a major part of the assets" is sufficient. Major difficulties are experienced in actual practice with regard to the manner in which this is to be interpreted. It can, for example, be assumed that the purchase of a patent or know-how is not to be regarded as a major asset. Neither does a purchase fall within the scope of the law if no operating parts of the company are to be transferred. It is certain that the purchase of a trademark is also not to be regarded as a major asset. It can be said that a major part of the assets can be assumed if the asset mass acquired clearly presents itself to outside world as an organisational unit.

The merger control only intervenes, however, if the purchase of a major part of the assets or the asset acquisition itself change the market position of the buyer. The merger must exert at least a noticeable effect on the market position. Based on this definition, even the purchase of a relatively insignificant asset can have a noticeable effect on the market position.

The acquisition of shares is also subject to disclosure in addition to the purchase of a company or a major part of its assets. This is stipulated in =A7 23, para. 2, no. 2 of the German Restrictive Practices Act. However, the prerequisites of the aforesaid regulation are only met if a company purchases shares in another company and if these shares themselves together with shares already acquired

  • account for at least 25 % of the voting capital of the other company, or
  • reach at least 50 % of the voting capital of the other company, or
  • account for a majority holding of more than 50 % in the voting capital.

The legal form of the company is irrelevant. For example, shares in a joint stock company, i.e. a public company (AG) or private limited company (GmbH), or a private company or partnership such as an unlimited partnership (oHG), a limited partnership (KG), a limited partnership with a GmbH as a general partner (GmbH & Co. KG) or a civil law partnership (BGB-Gesellschaft) may trigger off the legal consequence of =A7 23, para. 2, no. 2 of the Restrictive Practices Act. In view of the fact that the principal of unanimity applies in an unlimited partnership and each partner is therefore able to block a decision made by the partnership, any acquisition of an interest in an unlimited partnership however small may meet the merger prerequisite. This problem with the acquisition of interests in an unlimited partnership was eliminated in 1980 by the 4th amendment of the Restrictive Practices Act. however. Regardless of the unanimity principle in unlimited partnerships, any acquisition of interests is based on the capital with voting rights, as is the case with joint stock companies. If the acquisition of an interest in an unlimited partnership is less than 25 % of the voting capital, a merger prerequisite only exists if a partner is granted a legal position equivalent to a partner with 25 % of the voting capital.

=A7 23, para. 4 of the Restrictive Practices Act stipulates the persons or governing bodies who have a disclosure obligation to the Federal Cartel Office if the aforesaid prerequisite is met. In the case of legal entities, these are the governing bodies designated according to the law or the Articles of Association and in the case of unlimited partnerships, the unlimited partners, the general partners of limited partnerships, or sole proprietors. The disclosure obligation with an acquisition of shares or assets is also extended to the seller. Disclosures to the Federal Cartel Authority may be made for the parties involved by one of the parties or by a representative. Such disclosures to be made to the Federal Cartel Authority have to be submitted immediately after the merger.

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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