Germany: Bona Fide Transfers Of GmbH Shares Under The MoMiG

Last Updated: 13 October 2008
Article by Marc O. Peisert

In the context of the transfer of interests in a German limited liability company, a bona fide purchase of the shares from a seller owning such interests was not possible. In contrast to the purchase of real property or movable goods, the purchaser's good-faith belief in the ownership of the would-be seller was not protected. The purchaser therefore could not obtain ownership rights over the shares. Although the purchaser in an M&A transaction typically receives broad warranties that at least cover financial damages, these seldom compensate for the full commercial damages of a failed transaction.

The MoMiG now provides for a bona fide purchase of shares in a GmbH; this means that the effective acquisition of shares from a nonowner will be possible in the future. The good faith required to make such a bona fide purchase will now be based on the shareholder information contained in the shareholder list that has to be submitted to the commercial register. This shareholder list had previously served as an information source for the shareholdings in the GmbH, but due to the lax provisions on submitting such a document, it was inadequate as a basis for a finding of good faith. In order to increase the reliability of the shareholder list, the MoMiG has now tightened the provisions requiring its submission. Notaries that are involved in transactions made by notarial deed in which the shareholders change (such as the transfer of shares via notarial deed) now have the obligation to submit the shareholder list to the commercial register. In addition, the liability of the managing directors, who must submit the shareholder list in all other cases, is exposed in the case of nonsubmittal

Despite these safeguarding measures, the reliability of the shareholder list is limited. The accuracy of the shareholdings according to the shareholder list is not examined by the commercial register. Also, if the transfer is subject to a condition precedent (such as approval by the competition authorities), the notary recording the conditional transfer is not obligated to keep informed about whether the condition has been satisfied, nor to submit the shareholder list at that time; this continues to be the obligation of the managing director of the company. Further, the legislature decided against requiring notarial certification of the signature of the managing director submitting the application; therefore, it is possible that falsified shareholder lists will be submitted. Due to these loopholes, the legislature decided that the list should not have a full and immediate impact on the finding of good faith and instead introduced a step-by-step system.

Time Limitations

The intensity of the protections provided by the MoMiG is determined by how long the shareholder list was inaccurate at the time of the transfer. The shareholder list can be inaccurate for two reasons: it can be inaccurate at the outset, such as when the submitted list is inconsistent with the actual shareholdings of the company, or it can become inaccurate later, if the shareholdings change without submission of a new list.

If the list was inaccurate for a period of more than three years at the time of transfer, the purchaser is required only to demonstrate good faith. "Good faith" means that the purchaser may not have had knowledge of the inaccuracy of the shareholder list or was not grossly negligent in lacking such knowledge. If the shareholder list was inaccurate for a period of less than three years, in addition to the good faith of the purchaser, the inaccuracy of the list must be able to be imputed to the true owner of the shares. This is the case, for instance, when the true owner affirms the inaccuracy of the shareholder list or, despite knowledge to the contrary, does not object to the inaccuracy of the shareholder list.

Independent of the length of time that the shareholder list is inaccurate, the purchaser cannot obtain the shares from the person not authorized to sell them if an objection as to the inaccuracy of the list is entered with the commercial register. Such entry is possible either with the consent of the person authorized to sell the shares according to the shareholder list or on the basis of an interim judicial order. If an objection is incorrectly entered, it remains possible to purchase the shares from the actual owner set forth in the shareholder list. However, in such a case, due to the fact that no bona fide transfer will be possible, the purported ownership should be verified with the utmost diligence.

Limits on Bona Fide Transfers

The scope of the good-faith protection is limited. First, good faith applies only in the case of shares that actually exist; there is no good-faith creation of a nonexistent share. Further, good-faith protection does not extend to existing encumbrances such as pledges or easements; a bona fide purchase extinguishing prior liens as under the law of real property based on the land register is therefore not possible. Good faith is also not sufficient to override provisions restricting transferability that may be found in the company's articles of association—in this context, the consent of the shareholder remains necessary.

A further disadvantage for the purchaser in the future is in the case of transfers subject to a condition precedent. Here, subsequent disposals of the shares vis-ŕ-vis the first purchaser had been invalid (Section 161, paragraph 1, of the German Civil Code). According to Section 161, paragraph 3, of the German Civil Code, the provisions relating to good faith will now apply so that in the case of a subsequent transfer during the time that the condition precedent has not yet been satisfied, the second good-faith purchaser can obtain ownership of the shares. A corresponding protective mechanism, as under real property law, in the form of priority notice in the commercial register to safeguard the first purchaser's claim has not been created by the legislature. Alone, the registration of an objection by mutual consent could be of assistance here; however, the shareholder list is not inaccurate until the condition is satisfied so that the objection would, in fact, be unfounded in substance. It remains to be seen how this gap is closed in practice; it is possible that the legislature will propose further amendments.

Effects on Due Diligence and Contractual Documentation

For the M&A practitioner, the question arises as to the practical effects of the new rules in carrying out M&A transactions. In the context of M&A due diligence, one is faced with a dilemma: on the one hand, the length of time that the list is inaccurate determines the level of protection afforded to the purchaser, so that in theory, a positive determination of the point in time at which the shareholder list became inaccurate is necessary. At the same time, however, the positive determination of the inaccuracy would destroy good faith. Too much knowledge can therefore be harmful. This means, in practice, that if a shareholder list is more than three years old, transfers of shares prior to that time can be disregarded, although it will still be necessary to ascertain whether there have been any subsequent transfers of shares.

A related practical question is whether failing to conduct any due diligence whatsoever is to be considered grossly negligent per se, with the consequence that no bona fide transfer is possible. The question has to be answered in the negative, since the purpose of the good-faith transfer would otherwise be defeated—an innocent purchaser is exactly the one who should be protected here. However, due to the loopholes discussed previously, there is a danger that the transfer would fail on the grounds identified above, in which the protections of good faith do not apply (nonexisting shares, restrictions on transferability). To this extent, the liability of the management of the purchaser is still possible, due to the lack or insufficiency of due diligence.

While the new rules apply to companies that are incorporated after the effective date of the new law, the law provides for a transitional period for existing companies so that the full protections of good faith apply, at the earliest, three years after the reform takes effect. In order to avoid complications, companies with interests in GmbHs should utilize this transitional period to ensure that they are registered as shareholders in the respective shareholder list; in addition, in the subsequent period, regular checks of the shareholder list should be made for compliance reasons.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions