Civil law partnerships (GbR), unlimited partnerships (OHG) and limited partnerships (KG) are possible as private partnerships in which an interest can be acquired by way of a share deal.

If a civil law partnership (GbR) is being sold, the sale requires the consent of all partners unless otherwise agreed in the Articles of Association. The contractual partnership structure of the GbR must always be subjected to careful scrutiny in view of the diversity of formative possibilities and the effects which could arise therefrom. The seller continues to be fully liable for partnership debts incurred prior to the transfer of shares but he is able to claim the 5-year limitation period in accordance with =A7 159, para. 1 of the German Commercial Code (HGB). The seller is entitled to demand exemption from any subsequent liability if this has been contractually agreed with the buyer. In order to limit any subsequent liability of the seller, it is recommended that the contract partners of the GbR should be informed of the partner change immediately. As the new partner, the buyer is liable for the partnership debts incurred up to his/its entry, limited to the assets of the partnership. He/it is fully liable with his/its whole estate for liabilities incurred thereafter, however.

Civil law also has to be applied if the acquisition of a company prior to the registration of a partnership or joint stock company is involved and as long as such company conducts no business. If the buyer acquires an interest in a new partnership or joint stock company, he/it should take care at the contract drafting stage that participations with limited liability are not acquired prior to the registration of the partnership or company in the commercial and trade registry in order to avoid being subject to unlimited liability under civil-law partnership law. If the buyer acquires interests in a holding company which originates from an operational split and is normally not yet registered as a limited partnership in the commercial and trade registry, he/it must take care to ensure that the holding company has not become a civil-law partnership on account of the discontinuation of trading activities and that he/it is not exposed to liability risks under civil partnership law.

Shares in an unlimited partnership (OHG) and a limited partnership (KG) may also be transferred. The name of the company may basically be continued unchanged. This even applies if all the partners are changed. A limitation in this respect only originates from =A7 24, para. 2 of the German Commercial Code.

If the name of the company also includes the name of the seller, the approval of the seller is required; if the partner whose name is used by the partnership dies, the approval of all his heirs is required.

When an interest is acquired, the personal rights of the seller associated with the partner rights are not transferred. These include management rights, majority voting rights, dismissal and appointment rights for governing bodies of the company and possibly shares entitled to interim profits, etc. In view of the fact that these rights basically lapse on the transfer of the holding to the buyer, it should be clarified in each individual case whether another arrangement is desired by the parties.

When an interest is acquired, the treatment of the accounts of the partners involved in the acquisition should also be regulated. In the absence of an appropriate contractual agreement, these accounts pass to the buyer in cases of doubt. It is therefore essential that clear contractual agreements are made on whether and to what extent credit or debit balances on the individual partner accounts are to be transferred to the buyer. This does not apply to the capital account, however, as the settlement of this account has to be included in the contract if partner accounts are to be attributed to the seller in the form of an agreement.

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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