GERMANY Law and Practice Contributed by: Leif Gösta Gerling, Matthias Krämer, Anna Reuber and Jiabao Gerling-Li, LPA
2024/2811) further refines disclosure rules to bal - ance market integrity with capital market access, particularly for smaller issuers. Non-compliance with these regulations can result in substantial fines and reputational damage. Other Sector-Specific Notifications Certain regulated industries may require additional fil - ings or licences, particularly: • banking and financial services; • insurance; and • energy and utilities. These obligations typically apply prior to or shortly after establishing the JV and must be assessed on a case-by-case basis. 5.3 Conditions Precedent, Material Adverse Change and Force Majeure In Germany, JV agreements typically include condi - tions precedent (CPs) that must be satisfied before the transaction is closed. These CPs commonly cover regulatory approvals, particularly antitrust clearance under the GWB or notifications to sector-specific authorities if the JV operates in regulated industries. Another frequent CP is corporate approvals, such as board or shareholder resolutions, confirming the par - ties’ internal authorisation to enter into the JV (agree - ment). Financial CPs, including proof of funding or payment of capital contributions, are also standard. Due diligence findings can serve as a CP, with the parties reserving the right to terminate if material risks or liabilities are identified. German JV agreements also often address Material Adverse Change (MAC) clauses, allowing a party to withdraw or renegotiate terms if a significant nega - tive event occurs between signing and closing that fundamentally affects the JV’s business or value. A MAC typically encompasses events such as substan - tial financial deterioration, loss of key customers or licences, or significant litigation, but must be narrowly defined to avoid disputes over its applicability and permissibility. Courts in Germany tend to interpret MAC clauses strictly, emphasising that routine busi - ness fluctuations do not justify termination.
Force majeure events (ie, unforeseeable and uncon - trollable events like natural disasters, war, pandemics or government actions) are usually included in German JV agreements as reasons to suspend obligations, extend deadlines or adjust performance requirements. Force majeure provisions typically specify notice obli - gations, mitigation duties and the consequences if the event persists, such as termination rights or the rene - gotiation of terms. In practice, CPs and MAC and force majeure clauses are critical for balancing risk allocation and providing flexibility in the period between signing and closing. The parties usually negotiate MAC and force majeure clauses carefully, linking them to CPs, financial expo - sure and governance arrangements, ensuring clarity on rights and remedies in extraordinary circumstanc - es. 5.4 Legal Formation and Capital Requirements The way a JV is established in Germany depends largely on the specific legal form chosen for the JV, with different forms having different requirements regarding the presence, absence and scope of mini - mum capital requirements, for example, as well as organisational issues such as the existence and com - position of mandatorily required corporate bodies. However, for all JVs, it must first be examined whether the establishment of a JV is the right form of co-oper - ation for the prospective parties. If so, the essential framework conditions must be clarified – ie, legal form, ownership structure (often preceded by heated discussions about the value of the individual contribu - tions) and spheres of influence and areas of responsi - bility of the JV parties. At this stage, it is important to work with experienced advisers who can outline the legally possible frame - work and identify options for structuring the JV in line with the individual ideas and expectations of the JV parties. This often leads to “good solutions” for the contractual structure and/or corporate governance underlying the JV. Generally, it is advisable to precede the establish - ment of a JV with the conclusion of an LOI or MOU in
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