GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
9. Defensive Measures 9.1 Hostile Tender Offers
to the potential market implications of such a resolu - tion. 9.4 Directors’ Duties The management board of the target company is obliged to act in the best interest of the company at all times. The interests of the company are not neces - sarily identical to the interests of the shareholders, but encompass and combine the interests of the share - holders, the employees and the creditors. In addition, the defensive measures must be in line with the provi - sions of German stock corporation law. 9.5 Directors’ Ability to “Just Say No” See 9.3 Common Defensive Measures . In private M&A transactions, disputes between the bidder and the target company often involve termina - tion or break-up fee clauses, a breach of warranties or the due date of variable purchase price payments. However, published court decisions are extremely rare. There are two main reasons for this: • many German M&A contracts contain arbitration clauses, and arbitral awards are usually not pub - lished; and • disputes before state courts are often settled ami - cably. 10. Litigation 10.1 Frequency of Litigation In public M&A transactions, minority shareholders pri - marily challenge the amount of compensation after certain corporate taking-private transactions subse - quent to the takeover, such as the conclusion of domi - nation (or profit pooling) agreements, squeeze-out or delisting resolutions. These proceedings are public. 10.2 Stage of Deal
A public offer does not require the consent of the man - agement of the target company. Hostile takeovers are therefore permissible, but they are still extremely rare in Germany. 9.2 Directors’ Use of Defensive Measures Following the announcement of a takeover bid, the management board may not frustrate a bid under the German Takeover Act (and the EU Directive on Takeo - ver Bids). German law requires listed stock corporations to dis - close all defensive mechanisms in the management report. Based on this information, the supervisory board is required to make a statement on these mech - anisms in its statement to the annual general meeting. 9.3 Common Defensive Measures If a target opposes an approach by a bidder, it is pos - sible to exclude access to due diligence or to issue a negative reasoned statement to the offer, subject always to the corporate benefit test. However, the management board of the target com - pany is prohibited from otherwise actively preventing the success of the offer. Actions in the ordinary course of management of a prudent manager (ie, without a specific defensive focus) remain possible. The man - agement board may also search for alternative offers from other bidders – so-called white knights. Defensive measures may also be taken by the man - agement board in exceptional cases, with the con - sent of the supervisory board. Details of permissible defence measures are highly debated and need to be evaluated in each particular case. In theory, the management board can also propose to the general meeting that anticipatory resolutions be adopted that entitle the management board to take certain defensive actions that are otherwise within the competence of the general meeting (such as capital measures) in case of a hostile approach. However, this authorisation has not proven relevant in practice due
See 10.1 Frequency of Litigation . 10.3 “Broken-Deal” Disputes
Broken-deal disputes regularly involve the applica - tion of MAC clauses or the allocation of antitrust risk. MAC provisions are traditionally relatively uncommon
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