Article 3 of the master contract is concerned with the specification of the purchase price and the modalities with regard to the payment thereof. The existing provisions are also extremely detailed here. In the present case, it was elected to agree upon an advance payment combined with the obligation to determine the final purchase price after the relevant financial statements have been prepared and submitted.

This purchase price model is admissible under German law but is unusual insofar as the asset purchase agreement only relates to individual assets. The preparation of financial statements on the relevant date is recommended, however, and is also in line with German practice if a whole undertaking is sold and transferred by way of an asset purchase agreement.

The provision under 3.2 (b) concerning the involvement of an independent expert in the event of differences of opinion between the parties on the relevant financial statements is not only admissible under German law but is also recommended if the preparation of the relevant financial statements is necessary in view of the aforesaid comments. In German practice, such financial statements are normally prepared by experts who are either appointed by the responsible Chamber of Industry and Commerce, the President of the responsible Appeal Court, the Chamber of German Public Accountants in D=FCsseldorf of the Institute of German Public Accountants ("IDW"). If the preparation of financial statements is necessary, it is also customary in Germany for the asset purchase agreement to specify who should appoint an expert in the event of differences of agreement between the parties concerning the preparation of financial statements.

At this juncture, reference is again made to the risks emanating from =A7 419 of the German Commercial Code (BGB). The following comments are made in view of the major importance of this regulation in German practice with regard to the purchase and sale of companies: if the buyer acquires the ownership of 80 % or more of the total assets of the seller in a purchase and sale agreement, all the liabilities of the seller pass to the buyer when the assets are transferred. The buyer therefore has to be careful that the assets to be acquired represent less than 80 % of the total assets of the seller if possible.

In order to be sufficiently certain in this respect, the buyer is sell advised to appoint a qualified German accountant to carry out an audit in order to determine the ratio of the assets to be taken over in comparison with the total estate of the seller. Particular importance in this respect is to be attributed to the valuation of the assets remaining with the seller.

If the buyer acquires more than 80 % of the total assets of the seller for entrepreneurial reasons, it has to be examined in collaboration with lawyers and accountants what personal liabilities the seller has. The buyer must be sufficiently certain on this prior to the conclusion of the asset purchase agreement in order to avoid unmanageable and incalculable risks.

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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