The above-mentioned restrictions under family and guardianship law apply to the purchase of shares and also to asset deals. The aforesaid inheritance regulations apply likewise. There are additional company law restrictions with regard to the purchase of shares, however. These restrictions may particularly apply in the following cases:

With the purchase of shares, care should be taken to establish whether any coshareholders have been granted priority or pre-emption rights on the shares to be sold. Such rights normally have precedence and, unless the pre-emption beneficiaries have relinquished their right, may be exercised in such a way that any purchase of shares by a third party can be avoided. In addition, there are various other approval rights. In the case of participations in private partnerships, the above-mentioned approval requirement by all the other partners applies unless otherwise agreed in the Articles of Association. In the case of a private limited company (GmbH), any sale is basically not subject to approval unless otherwise agreed in the Articles of Association which is normally the case. In the case of a public limited company (AG), the transfer of registered shares may be dependent on the approval of the company by virtue of its Articles of Association.

If a buyer does not purchase all the shares in a company, it should be examined whether any company law changes have occurred which affect the continued validity of the participation rights sold. Such changes may arise if the shareholding relationship was terminated by the seller or by other shareholders, if the prerequisites for the recall of a sold share apply in accordance with =A7 34 of the German Companies Act (GmbHG), if the prerequisites for the exclusion of the selling shareholder or other shareholders apply or if the dissolution of the company has commenced or is to be expected. If the buyer does not purchase all the shares in the company, he/it will not be in a position to change the Articles of Association as he/it sees fit; in such cases, it should therefore be examined what legal rights are attributable to the acquired participation based on the Articles of Association and which company law restrictions apply to the said participation.

A shareholding which is the subject matter of a purchase may also be subject to third party rights. Possible third party rights are pledges, transfers by way of security or any other trustee agreements. as well as usufructuary rights, silent partnerships or subholdings. In view of the fact that a bone fide purchase of shares is not possible, the sale of a share which is encumbered with third party rights is either invalid or its passes to the buyer together with the third party rights. It is therefore recommended that the legal position with third parties with regard to the share should be terminated prior to the date of sale or the beneficiary to these rights on the seller's side should be involved in the conclusion of the contract.

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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