The acquisition of interests in joint stock companies is also effected by a transfer of shares in the case of a public liability company (AG). The following comments mainly refer to the transfer of shares in a private limited company, however (GmbH). With the transfer of shares in a private limited company (GmbH), these are included in a notarial sale and transfer agreement at their respective nominal values. If several shares are involved, they many not be combined into one amount as each share is legally independent in itself. What is important with the purchase of a share is an exact designation of the share classification in order to be able to establish whether and to what extent the individual capital contributions have been made. Shareholders are only liable for outstanding or repaid capital contributions up to the nominal amount of the shares. It should also be ensured that the seller is able to submit a "family tree" for the shares to be sold. This family tree is a full and complete documentation of the chain of all transfer transactions up to the last buyer and is extremely important in view of the fact that shares in a private limited company cannot be acquired based on a bona fide purchase.

Shares may also be purchased on suspensive conditions in just the same was as shares which are to be issued in the future can be purchased on the issue date subject to condition precedent. If the division a share accompanies the sale of an existing share, this requires the consent of the company, whereby the statutory requirements with regard to the form and contents also have to be observed. According to the German Companies Act (GmbHG) (=A7 35, para. 2, clause 3 and =A7 36, para. 1), a person is only regarded as a buyer who reports the purchase and proof of the transfer of shares to at least one Director. This reporting obligation is particularly important if the GmbH has an external Director who was not involved in the contract negotiations and who had no knowledge of the transfer. In order to ensure that there are no difficulties with the reporting obligation, it is advisable to notify the purchase and transfer of shares to the Director who was involved in the contract negotiations. If the transfer is not reported, the seller will retain his/its shareholder rights and is therefore still entitled to exercise these rights in dealings with the company.

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.