The Purchase and Sale of Companies in Germany - 5.Asset Purchase Agreement - Int

As already mentioned in Section 2, care should be taken in this connection to ensure that the "abstraction principle" applies under the law of the Federal Republic of Germany. In the contractual part of an asset purchase agreement, the parties must therefore undertake to purchase and sell the individual asset items (hereinafter referred to as "Assets"). An in rem agreement also has to be reached in addition to the contractual obligation for the sale and transfer and the purchase and payment of the compensation. The buyer has to formally express his agreement with the transfer of the ownership of the asset(s) specifically or implied. The in rem transfer of the asset(s) can then take place.

In the case of moveable assets, the in rem act of the transfer of ownership is normally carried out by a physical transfer of possession. The transfer of ownership may also be carried out by means of an assignment of a repossession claim against a third party, however ("constructive possession").

In the case of immovable assets, e.g. land and buildings, the transfer of ownership is made by means of a declaration and acceptance of conveyance in front of a German notary and also by the entry of the new owner in the land registry of the Land Registry Office of the responsible court in question. Physical transfer is replaced by updating the ownership in the land registry.

If land and buildings are transferred in an asset deal under German law, a notarial form is required for the whole asset purchase agreement, as already mentioned in the introduction. The buyer and seller have to sign a contractual agreement and also the conveyance referred to above, both in front of a German notary. The notary arranges the ownership transfer in the land registry if all the statutory prerequisites are met.

It is not absolutely essential that the buyer and seller personally appear before the notary. They may also be represented.

The buyer and seller are not natural persons but legal entities in a large number of asset purchase agreements, however. Legal entities are represented by a natural person who has been granted powers of authority for the legal entity by a shareholders' meeting.

As mentioned at the beginning of this paper, the most common form of a legal entity in the Federal Republic of Germany is a limited liability company ("GmbH"). Such a company is normally represented by a director if one director has been appointed by a shareholders' meeting. If one or more directors are appointed, the company is normally represented by two directors jointly or by one director together with a "Procurist" [holder of a registered commercial power of attorney].

The acting notary in front of whom a real estate purchase agreement is concluded regularly examines the powers of attorney of the natural persons appearing for the legal entity whom they are representing. If the powers of attorney are submitted to the notary, he confirms that the natural persons appearing before him are authorised to represent the buyer or seller. Proof of the powers of representation is normally provided by the submission of a extract from the trade and commercial registry which should normally have been issued not more than two months previously. The extract from the trade and commercial registry shows who is entitled to represent the legal entity and to what extent. If a director appears with exclusive powers of representation for a GmbH, the acting notary will normally confirm the representation authority of the director appearing for the GmbH which he is representing, this by means of a personal inspection of the trade and commercial registry or on the strength of a certified extract of the trade and commercial registry.

If the natural person appearing represents the legal entity by virtue of a separate power of attorney, the acting notary will confirm the representation authority of the natural person appearance by inspecting the original or a copy of the power of attorney.

The power of attorney also has to be in a notarial form if real estate is being sold. The signature of the issuer of the power of attorney has to be certified by a German notary and an appropriate attestation certificate has to be attached. If the original is not attached to the power of attorney certified by the notary, then at least a copy must be attached which has been certified by the notary.

If a power of attorney to be issued in a notarial form is granted outside the Federal Republic of Germany, the acting notary is only able to accept a foreign notarial power of attorney on two conditions, namely:

• that the signature of the issuer of the power of attorney is certified by a foreign notary. The certification of the foreign notary must then bear an apostille in accordance with the 1956 Hague Convention, or
• that the signature of the issuer of the power of attorney is affixed abroad in front of a responsible consular official of a diplomatic service of the Federal Republic of Germany. If the signature certification is carried out by a consular official of the German diplomatic service, the above-mentioned apostille in accordance with the 1956 Hague Convention may be dispensed with.

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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