Maximilian Koch Mergers, Acquisitions and Divestitures Law Blog on Lawyers.com

The German parliament adopted an amendment to the Foreign Trade Act in early 2009. How does this legislation affect cross-border transactions in Germany?

Monday, February 15, 2010 by Maximilian Koch

The thirteenth Act amending the German Foreign Trade and Payments Act as well as the Foreign Trade and Payments Regulation of 18^th April 2009 entered into force some months ago on 24^th April 2009. Quite often, foreign investors ask us if these new rules pose problems to investing in Germany. We think that normal foreign investors need not fear the new rules.

The amendment to Trade and Payments Act enables the German Federal Ministry of Economics and Technology to examine the acquisition of a stake in a German company through non-EU or non-EFTA purchasers leading to a voting power of at least 25 % and, only if necessary, to prohibit such acquisition in order to safeguard the public order and security of the Federal Republic of Germany; this requires a genuine and sufficiently serious threat, affecting one of the fundamental interests of society.

The Federal Ministry of Economics and Technology may examine the investment ex officio within three months after conclusion of the contract or after publication of the decision to make a public tender offer or with the publication of having obtained the control over the company. After receiving the complete documentation, the Federal Ministry of Economics and Technology has two months time to issue orders or to prohibit the acquisition provided that (i) such measures are necessary to safeguard the public policy or public security of the Federal Republic of Germany and provided that (ii) the prior consent from the Federal Government to such measures has been obtained.

Therefore, the hurdles for the Federal Ministry of Economics and Technology to issue orders or even to prohibit a transaction are high. Furthermore, there is no requirement for foreign investors to inform the Federal Ministry of Economics and Technology proactively about such transactions. Hence, it should be expected that the danger of deal obstruction remains a mere theoretical possibility in most cases.

And if complete transaction safety is needed in the individual case, the purchaser can apply for a certificate of non-objection to the acquisition if the purchase raises no concerns regarding the public policy or public security of the Federal Republic of Germany. The certificate of non-objection shall be deemed to have been issued if the Federal Ministry of Economics and Technology does not open a formal examination procedure within one month after receipt of the application. The time issue should not be overestimated. In most cases of major transactions a merger control clearance has to be obtained before the merger may be consummated. However, the merger control clearing takes its time as well.

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Dipl-Kfm Dr Maximilian Koch

Rechtsanwalt

M�tze Korsch

Rechtsanwaltsgesellschaft mbH

Trinkausstra�e 7

D-40213 D�sseldorf

Germany

Tel.: +49 (0) 211 882929

Fax: +49 (0) 211 882926

E-Mail: koch@mkrg.com

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