GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
8.4 Independent Outside Advice Although the German Takeover Act (for public offers) or general corporate law does not strictly require the management board or the supervi - sory board to seek external advice, the business judgement rule will only apply if their decisions are based on appropriate information (see 8.3 Business Judgement Rule ). In public takeover situations, the boards of the target company are obliged to issue a reasoned opinion, which requires an in-depth assessment of the offer document (see 5.5 Definitive Agreements ). The boards of the target company should take particular care to assess the appropriateness of the consideration and, at least if a listed target or a seller with minority shareholders is concerned, regularly obtain a fairness opinion on the com - pany’s fair value. Apart from that, outside advice is usually required in the context of due diligence (see 5.3 Scope of Due Diligence ). 8.5 Conflicts of Interest Conflicts of interest of board members can affect takeover situations for a variety of reasons. It is not uncommon for board members to also hold a board position in another company; in a takeo - ver situation, the interests of both companies can be conflicting. Furthermore, board mem - bers can be shareholders of the target compa - ny themselves and may therefore be inclined to support or oppose the transaction for personal financial reasons. A further reason for potential conflicts of interest of board members can arise if the bidder seeks to incentivise board members by granting or promising cash payments or non-cash benefits to them. In a public offer scenario, these poten - tial conflicts of interest are directly addressed in the German Takeover Act.
According to the Takeover Act, the bidder and persons acting in concert with the bidder are prohibited from granting or promising unjustified cash payments or other unjustified non-cash benefits to members of the management board or supervisory board of the target company in connection with the takeover offer. By contrast, shareholders are generally allowed to pursue their own interests in a takeover situ - ation. A public offer does not require the consent of the management 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 Takeover Bids). German law requires listed stock corporations to disclose all defensive mechanisms in the man - agement report. Based on this information, the supervisory board is required to make a state - ment on these mechanisms in its statement to the annual general meeting. 9.3 Common Defensive Measures If a target opposes an approach by a bidder, it is possible to exclude access to due diligence or to issue a negative reasoned statement to the offer, subject always to the corporate benefit test. 9. Defensive Measures 9.1 Hostile Tender Offers
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