GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
10. Litigation 10.1 Frequency of Litigation
However, the management board of the target company is prohibited from otherwise actively preventing the success of the offer. What remains possible are actions in the ordinary course of management of a prudent manager (ie, without a specific defensive focus). The management board may also search for alternative offers by other bidders – so-called white knights. Defensive measures may also be taken by the management board in exceptional cases, with the consent of the supervisory board. Details of permissible defence measures are highly debat - ed and need to be evaluated in each particular case. In theory, the management board can also pro - pose to the general meeting that anticipatory resolutions be adopted that entitle the manage - ment 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 prac - tice due to the potential market implications of such a resolution. 9.4 Directors’ Duties The management board of the target company is obliged to act in the best interest of the com - pany at all times. The interests of the company are not necessarily identical to the interests of the shareholders, but encompass and combine the interests of the shareholders, the employ - ees and the creditors. In addition, the defensive measures must be in line with the provisions 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 termination or break-up fee clauses, a breach of warranties or the due date of variable purchase price payments. However, published court decisions are extreme - ly rare. There are two main reasons for this: • many German M&A contracts contain arbitra - tion clauses, so arbitral awards are usually not published; and • disputes before state courts are often settled amicably. In public M&A transactions, minority sharehold - ers primarily challenge the amount of compen - sation after certain corporate taking-private transactions subsequent to the takeover, such as the conclusion of domination (or profit pool - ing) agreements, squeeze-out or delisting reso - lutions. These proceedings are public. 10.2 Stage of Deal Broken-deal disputes regularly involve the appli - cation of MAC clauses or the allocation of anti - trust risk. MAC provisions are traditionally rela - tively uncommon in German M&A transactions, but are regularly seen in the US context. Related disputes are generally non-public for the reasons set forth above, with some notable exceptions, such as the Fresenius/Akorn case. See 10.1 Frequency of Litigation . 10.3 “Broken-Deal” Disputes
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