Business formation: Corporate mergers or sale of a business

If you want to start a business in Germany, you must comply with certain regulations and guidelines. Here you will find information on your rights and obligations, in particular regarding business mergers or the sale of a company.

Mergers

Under corporate merger, as well Mergers and acquisitions, the complete integration of previously economically and legally independent institutions is understood. The execution of the merger is in the Sections 2 to 122l of the Transformation Act (UmwG). The law distinguishes two types of corporate mergers:

• merger by acquisition, which is understood as the transfer of the entire assets to already existing legal entities.
• Merger by formation of a new company, hereinafter this is understood to mean the transfer by 2 or more assets to new legal entities.

Basically, a distinction is made between:

• horizontal mergers, meaning the companies are competing with each other,
• vertical mergers, in this case the companies involved have a supplier-customer relationship with each other and
• conglomerate mergers, and the companies involved are neither in competition with one another nor in a supplier-customer relationship.

Furthermore, a distinction can be made between national and international mergers.

merger control

Mergers between companies are subject, under certain conditions, to merger control by the national antitrust authority, the Federal Cartel Office, compare this with Section 39 Act against Restraints of Competition (GWB). A Duty of inspection exists if the participating companies jointly generate a worldwide turnover of more than 500 million EUR and at least 2 participating companies each generate significant turnover in Germany – one company amounting to more than 25 million EUR and another company amounting to more than 5 million EUR. The Federal Cartel Office must fundamentally prohibit the conversion if a dominant market position could be established or strengthened (Section 36, Paragraph 1 of the German Competition Act (GWB))).

The mergers are subject to a prohibition of enforcement, meaning they may only be executed after approval has been granted.

Notification of concentrations

You can notify mergers by post, fax, or electronically to the Federal Cartel Office.

Registration by mail:

• Bundeskartellamt, Kaiser-Friedrich-Str. 16, 53113 Bonn

Registration by fax:

• Fax number 0228 9499-400

Electronic registration – 3 possible ways:

• by email with a qualified electronic signature to the email address fusionskontrolle@bundeskartellamt.bund.de
• by De-Mail to the De-Mail address fusionskontrolle@bundeskartellamt.de-mail.de
• via the special electronic authority mailbox (beBPo).

Registrations by simple email, on the other hand, do not meet the legal requirements and do not trigger any deadlines.

The Federal Cartel Office confirms receipt of the complete notification a few days later on its website. After that, the Test method. In the so-called first phase did the authority initially 1 month time, in order to assess whether the project needs to be examined in more detail or whether it can be cleared. If there are indications of competition issues that cannot be resolved within the preliminary investigation proceedings, a formal main test procedure initiated. This main testing procedure is referred to as second phase designated and can a total of 4 months from registration last.

Cooperation with other competition authorities

The Federal Cartel Office works closely with the European Commission and is particularly involved in the review procedures for potentially problematic cases. In cases where a merger project is examined under merger control law by the competition authorities of several countries, processing takes place within the framework of international networks, such as the European Competition Authorities (ECA) Network and the International Competition Network (ICN) , is cooperating.

Sectoral rules for mergers and acquisitions

In Germany, the antitrust approach is pursued, similar competition problems regardless of the sector, in which they appear or are suspected, by similar regulations to oppose. At the same time, this complies with the constitutional requirements of freedom from discrimination and proportionality of state intervention administration. In principle, the assessment made in the context of the last amendment to the GWB continues to apply, according to which the GWB, with its general, cross-sector regulations has proven effective in practice. The general rule in Section 19(4) no. 4 of the German Competition Act (GWB) has counteracted a further sectoralization of antitrust law.

Merger rules by company type

In the fusion process, a series of Special features to keep in mind, the depending on the legal form of the companies are.

• At Partnerships after Section 43 of the Transformation Act fundamentally, the consent of all partners is required. If the partnership agreement provides for a majority decision, this must, pursuant to Section 43 (2) sentences 1 and 2 of the German Transformation Act (UmwG), be made by at least a qualified majority of three quarters of the votes cast. If a commercial partnership merges into a corporation, the liability as a former partner generally ends at the latest upon the expiration of 5 years after the merger pursuant to Section 45 of the Transformation Act.
• During a Limited liability company, like a GmbH, the merger resolution pursuant to Section 50 of the Transformation Act (UmwG) to be passed by at least a three-quarters majority. According to Section 51 of the Transformation Act (UmwG) in the special cases mentioned therein, all shareholders must mandatory consent. If the GmbH is involved as the acquiring legal entity, according to Section 46 of the Transformation Act 
• to determine their respective (new) shares in the merger agreement for all shareholders. Further special procedural rules apply in the event that the merger cannot be carried out without a capital increase of the acquiring GmbH. The rules are in the Sections 53 et seq. of the Transformation Act contain.
• Comparable regulations can be found in the event of participation of a Corporation. Therefore, according to Section 65, paragraph 1, sentence 1 of the Transformation Act at least a three-quarters majority of the share capital represented at the time of the vote is required. Sections 66, 68 and 69 of the Transformation Act (UmwG) contain provisions regarding merger involving capital increase.

In addition, for corporations, there is according to Sections 122a et seq. of the Transformation Act the possibility of a cross-border merger.

Special features also apply for Credit institutions, such as commercial banks: A planned merger must be reported immediately to the Federal Financial Supervisory Authority (BaFin) and the to report to the Deutsche Bundesbank (Section 24 (2) of the German Banking Act).

Necessary documentation of a corporate merger

Before a merger can be completed, a series of documents must be drafted, which include the following:

• The merger requires the conclusion of a notarized Merger agreement in advance (§ 4, par. 1, no. 1, Section 6 UmwG). What information this must contain can be found in the Section 5 of the Transformation Act can be taken. The contract is in accordance with Section 9 Transformation Act to be examined by one or more expert examiners. This is carried out by independent auditors within the meaning of Sections 319 hereinafter referred to as the German Commercial Code (HGB).
• The merger agreement only becomes effective through the respective and equally notarized resolution of approval, which the shareholders must adopt at a general meeting (Section 13 (1), (3) sentence 1 of the Transformation Act)).
• In accordance with § 8 UmwG do the respective governing bodies of the participating legal entities also have a merger report to submit.
• In the event of a merger with a cooperative, it is also required pursuant to Section 81 UmwG one Examination report to obtain. Since a merger involves multiple legal entities and their respective shareholders' meetings, it is generally advisable to also Powers of attorney to prepare. This makes it possible to avoid involving the executive boards of all companies in the notarization. The powers of attorney must be notarized.
• Furthermore, for the registration, the Final balance of the transferring entity. This must not be older than 8 months at the time of registration. 

Once all documents are available, the Registration first in the commercial register of the transferring entity. However, it only becomes effective upon registration at the acquiring entity. The transferring entity subsequently ceases to exist.

The competent competition authority

In Germany, the Federal Cartel Office, based in Bonn, is solely responsible for the review of mergers. (§§ 35 et seq. GWBHowever, the GWB does not apply to the extent that the European Commission, pursuant to the EC – Merger Control Regulation is exclusively responsible.

• Transformation Act
• Act against Restraints of Competition
• Commercial Code
• Regulation (EC) No 139/2004 of the Council of 20 January 2004 on the control of concentrations between undertakings (the "EC Merger Regulation", Text with EEA relevance)

Federal Cartel Office:

• merger control
• "The Bundeskartellamt in Bonn" brochure
• Decision database of all published decisions and case reports in the fields of antitrust law, abuse of dominance, merger control, and public procurement law

This support service assists you in exercising your rights and fulfilling your obligations within the European Single Market.

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