GERMANY LAW AND PRACTICE Contributed by: Daniel Möritz, Jan Bonhage, Hendrik Bockenheimer, Carl-Philipp Eberlein, Markus Ernst, Matthias Rothkopf, Christoph Wilken and Alexander Rang, Hengeler Mueller
3.2 Regulation of Domestic M&A Transactions In addition to FDI clearance, pursuant to the German Foreign Trade Act ( Außenwirtschaftsgesetz , or AWG), the most relevant regulatory approval that may be required for the consummation of a domestic M&A transaction is merger clearance (see 6. Antitrust/ Competition ) and – since October 2023 – a foreign subsidies clearance for major concentrations. In addi - tion, special clearances may be required for compa - nies active in the financial services or insurance indus - try (see 8.1 Other Regimes ). For public M&A transactions, the German Securities Acquisition and Takeover Act provides a specific regu - latory framework for tender offers. The most promi - nent cornerstones are: • the obligation to make an offer for any and all shares as soon as a shareholder reaches the threshold of 30% of all voting rights in a listed company or makes an offer to acquire 30% or more of all voting rights; and • the so-called “best price rule”, which requires the bidder to offer all shareholders the highest price that the bidder, or a party related to the bidder, has paid for any share in the target company in con - nection with the tender offer. 4. Corporate Governance and Disclosure/Reporting 4.1 Corporate Governance Framework Public Companies Publicly listed entities in Germany typically have the legal form of: • a German stock corporation; • a European stock corporation (Societas Europaea, or SE) with a seat in Germany; or • a German partnership limited by shares. German stock corporations A German stock corporation has a two-tier board with a management and a supervisory board. Members of the management board are appointed by the supervi - sory board and members of the supervisory board are elected by the shareholders. If the company or – sub -
ject to certain requirements – its subsidiaries employ more than 500 employees in Germany on a regular basis, one-third of the members of the supervisory board (or half, if there are more than 2,000 employees)
must be elected by employees. European stock corporations
An SE with a seat in Germany can have either a one- tier or a two-tier board. The rules on co-determination of employees are subject to negotiations between representatives of the employees and management. If no co-determination rules apply at the time of the formation of the SE, it is – as a practical matter – often possible to preserve the status quo without co-deter - A German partnership limited by shares has a very different governance structure, with a general partner who manages the company through its management body. This governance allows for a separation of own - ership and control and is therefore sometimes chosen by listed family businesses. Private Companies German limited liability companies The most frequent legal form of private companies in Germany is a German limited liability company. The governance set-up is simpler and more flexible than a German stock corporation and therefore lends itself better to being used as a subsidiary in a corporate group or acquisition structure, particularly for a foreign investor who is less experienced in German corporate law. Partnerships mination for the future in an SE structure. German partnerships limited by shares German companies can also be organised as partner - ships, including as limited partnerships with a German limited liability company as a general partner. Partner - ships are sometimes used by foreign investors for tax reasons and are typically treated as transparent for income tax purposes. 4.2 Relationship Between Companies and Minority Investors The rights of minority investors depend on the legal form of the company.
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