GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
6.10 Squeeze-Out Mechanisms German law provides for three types of squeeze- out mechanisms, which (only) apply to stock corporations. Squeeze-Outs Under Company Law The most general squeeze-out mechanism under German law allows any shareholder with a participation rate of at least 95% of a stock cor - poration’s share capital to force the remaining shareholders to sell their shares. A squeeze-out under company law can but does not necessar - ily have to take place as a follow-up to a public takeover offer. From a legal perspective, it is not relevant how the majority shareholder’s share package was built. The implementation of a squeeze-out under company law requires a shareholders’ resolu - tion. If minority shareholders challenge such res - olution, the registration of the squeeze-out can temporarily be blocked. However, it is possible to obtain the registration in an accelerated court procedure ( Freigabeverfahren ), which usually takes three to six months. Minority shareholders must be paid a purchase price that is based on a fair market valuation of the company, although disputes about the amount to be paid by the majority shareholder do not block the execution of the squeeze-out but are subject to a specific procedure ( Spruchverfahren ). Squeeze-Outs Under Takeover Law If a bidder holds at least 95% of the shares in a stock corporation following a public takeover offer, it is also possible to buy out the remain - ing shareholders by way of a squeeze-out under takeover law. This type of squeeze-out mecha - nism is initiated by filing an application with the Regional Court of Frankfurt am Main. The court will review whether the preconditions of a squeeze-out under takeover law are met. The
bidder must pay adequate compensation. Even if the public takeover offer stipulates considera - tion in shares, such compensation may be paid in cash. If the previous takeover offer was accepted by shareholders with an (aggregated) participa - tion rate of at least 90% of the share capital, the consideration offered in the takeover offer is deemed to be adequate. However, it is debated whether such presumption can be overturned by minority shareholders and, due to the related uncertainties, the takeover-related squeeze-out The German Transformation Act ( Umwand- lungsgesetz ) provides for a third option to buy out minority shareholders of a stock corporation. This type of squeeze-out is similar to a squeeze- out under company law but lowers the threshold of shares the majority shareholder must hold to 90% of the share capital. However, the squeeze-out must occur in the context of an upstream merger with another stock corporation, partnership limited by shares or SE. The majority shareholder is required to adopt the resolution initiating the squeeze-out within three months from the conclusion of the merger agreement, and the merger agreement must already contain the prospect of the future squeeze-out. The effectiveness of the squeeze- out in this case depends on the effectiveness of the merger. Delisting In addition to the above-mentioned squeeze- out variants, another way to acquire the shares of minority shareholders would be a delisting of the target company. The Stock Exchange Act requires an offer to the remaining sharehold - has very little practical relevance. Squeeze-Outs Under Merger Law
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