Notarial certification is not required for every company acquisition, but may be mandatory under certain conditions. What does the legal situation look like in detail? What role do the type of transaction and the legal form of the company play? And what tasks does the notary perform in a company acquisition? To answer these questions, we first look at the various types of mergers & acquisitions transactions and then explain the notary’s duties.
In some cases, you can save the costs of a notary in a company acquisition. Tax and legal advice, however, is always necessary. Rely on an experienced partner for tax law, employment law, and commercial and corporate law. We ensure that your business transactions proceed in your interest and that all legal aspects are carefully considered.
Notarial Certification Requirement
In principle, there are no formal legal requirements for a company acquisition in Germany. Notarial certification is therefore not automatically mandatory. However, the type of transaction may give rise to a certification requirement.
For this purpose, we distinguish between the Share Deal and the Asset Deal. While in an Asset Deal individual assets are transferred, the Share Deal refers to company shares.
A) Share Deal
In a Share Deal, notarial certification is required when the target company is a GmbH or UG. The background is the in rem assignment pursuant to § 15 para. 3 GmbHG and the contractual obligation pursuant to § 15 para. 4 GmbHG. Both require notarial certification of the purchase agreement. This also applies to options, purchase offers and similar dispositions.
These must also be notarially certified in order to be legally valid. According to the Federal Court of Justice, this is intended to make trading in GmbH shares more difficult. In addition, certification facilitates proof of share transfers.
Aspects
- Type of deal: Share Deal involving a GmbH or UG
- Notarial certification requirement: Pursuant to § 15 para. 3 & 4 GmbHG
- Protection against hasty decisions: The notary advises both parties on the legal consequences and risks, preventing rash and uninformed decisions.
- Facilitation of evidence: By virtue of the notarial seal, all agreements are considered clarified. A subsequent appeal to ambiguities becomes moot.
- Costs and time involved: Time-consuming and costly, but legally required
- Entry in the commercial register: The required entry in the commercial register can only be made by a notary. Necessary for changes such as change of management, change of legal form, change of registered office, change of shareholders and amendment of the shareholders’ agreement.
B) Asset Deal
A certification requirement may also exist in an Asset Deal – if a property located on German soil is part of the transaction. Pursuant to § 311b BGB, the transfer of real property must be notarially certified.
This also applies, incidentally, if a GmbH together with its associated real property is transferred. The conveyance declaration in the land register can only be made by a notary. In addition, notarial certification is required if, in the context of the Asset Deal, shares in a GmbH or UG are to be disposed of pursuant to § 15 GmbHG.
A general certification requirement does not exist for an Asset Deal if the assets to be transferred are expressly and exhaustively listed in the purchase agreement.
However, a Catch-All clause, which broadly transfers all of the seller’s active assets, makes notarial certification mandatory pursuant to § 311b para. 3 BGB. Broadly in this context means that the entire assets of the seller are transferred. The background is a warning function of the certification requirement. In this way, the seller is protected against a reckless disposal of his assets.
Aspects
- Type of deal: Asset Deal
- Notarial certification requirement: Not unambiguously prescribed by law
- Necessity of notary involvement: Not mandatory, often waived to save costs
- Exceptions to notary involvement: When individual tangible or intangible assets are sold, e.g. machinery, equipment or customer and supplier contracts.
- Risks in the absence of notary involvement: The entire legal transaction may potentially be invalid without a notary (Catch-All clause). The seller could reclaim the transferred items, but would then also have to repay the purchase price.
B) AG, KG, OHG AND GBR
Shares in a stock corporation (AG) and interests in a GbR, KG, OHG, cooperative or association can be transferred in Germany without notarial certification. If real estate and land are involved, a notary must be consulted pursuant to § 311b BGB.
Tasks of the Notary
The conclusion of a contract in the context of a mergers & acquisitions transaction is also referred to as signing. Through a notary, the signing becomes a regulated process. The notary reviews the contract from an independent perspective and ensures that all statutory regulations are complied with. To this end, the notary coordinates with the contracting parties.
On the day of signing, it must be ensured that the participating persons are genuine and have the right to conclude the contract. Under the Anti-Money Laundering Act, the notary must verify whether there are further parties with an economic interest behind the contracting parties.
For German companies, the notary finds all relevant information in the commercial register. For foreign companies, proving identity may take more time. Corresponding documents must be apostilled in order to be considered legally valid. Certified translations may also be required in some circumstances.
Who bears the notary costs in a company sale?
As a rule, the buyer bears the notary costs and may accordingly choose the notary. The notary fees are essentially based on the transaction value. The approximate costs can be displayed using the fee calculator. Normally, a fee rate of 2.0 is applied.
The maximum amount for the transaction value is currently 60 million euros. This results in 53,170.00 euros (plus VAT) in notary costs. If the maximum amount is not reached, certification in a foreign language can lead to an increase in the transaction value by 30%. The agreement of a non-merely declaratory choice-of-law clause also causes an increase in the transaction value by 30%.
Documentary Completeness in Company Acquisitions and Side Agreements
In addition to the purchase price and a clear definition of the subject matter of the purchase, the notarial deed must contain all agreements that are inextricably linked to the purchase agreement. These include, among others, warranties that are to be provided on the basis of a due diligence review prior to the completion of the transaction. Whether ancillary agreements beyond this require notarial certification depends on their respective content.
A) Company Valuation
Company valuation can be based, for example, on the earnings value, the net asset value or a comparison with similar companies. A frequent cause of subsequent disputes here is the Earn-Out clause. In this arrangement, part of the purchase price is tied to the future performance of the company. Including this in the notarial deed is advisable.
B) Financing Commitments
Since the purchase agreement is generally not made conditional on a financing commitment from a specific institution, financing commitments from third parties (Equity Commitment Letters) do not need to be notarially certified.
C) W&I Insurance
A warranty and indemnity (W&I) insurance taken out by the buyer also normally does not require notarial certification. Otherwise, the invalidity of the insurance contract would affect the validity of the purchase agreement.
D) Regulatory Matters
Antitrust approvals, rules of the Foreign Trade and Payments Act and other regulatory provisions may become relevant prior to the closing of a company acquisition and may in some cases require notarial certification.
Company Purchase Agreement and Shareholder Consent
The consent of the shareholders or the shareholders’ meeting is usually decisive for the validity of a company purchase agreement.
- GbR: The consent of all shareholders is required if the disposal is not regulated in the articles of association and exceeds the externally recognisable purpose of the company.
- GmbH: The approval of the shareholders’ meeting is required if the disposal of the company qualifies as an extraordinary transaction.
- AG or KGaA: The approval of the general meeting must be obtained if the sale brings about a fundamental structural change or if the company can no longer be operated without it.
- OHG or KG: The sale of material assets requires the consent of the shareholders. In the case of an extraordinary transaction, the consent of all limited partners is additionally required.
Fazit: The Notary – A Key Pillar in Company Sales
Notarial certification in a company acquisition costs time and money. When significant resources have already been invested in tax and legal advice, one would rather avoid these additional costs. But often this is not possible, as notarial certification is mandatory in many cases.
And even when the notary can be engaged voluntarily, one should not forgo this option. Notarial advice is provided from an independent perspective and gives additional assurance that the contractual documents drawn up by lawyers are watertight.
Get Professional Advice from Reef Legal
Common practice in company acquisitions is to negotiate the purchase agreement with the assistance of lawyers and tax advisors. Only in this way can it be ensured that all legal and tax aspects are correctly reflected. The next step is a visit to the notary, who additionally reviews the details of the contract.
At Reef Legal, we guide you expertly from the planning of your M&A transaction through to the signing of the contract. Whether buyer or seller – we represent your interests and develop a tailored solution.
