Mergers of companies or selling a business
Source: Serviceportal Rheinland-PfalzCompany mergers
A company merger, also known as a business combination or amalgamation, is the complete integration of previously economically and legally independent institutions. The implementation of the merger is regulated in Sections 2 to 122l of the German ReorganizationAct ( UmwG). The law distinguishes between two types of company mergers:
- Merger by absorption, which refers to the transfer of all assets to existing legal entities.
- Merger by formation of a new company, which refers to the transfer of two or more assets to new legal entities.
A basic distinction is made between
- horizontal mergers, i.e. the companies are in competition with each other,
- vertical mergers, in which case the companies involved have a supplier or customer relationship with each other, and
- conglomerate mergers, in which the companies involved are neither in competition with each other nor in a supplier or customer relationship.
A distinction can also be made between national and international mergers.
Merger control
Under certain conditions, mergers between companies are subject to merger control by the national antitrust authority, the Federal Cartel Office, see Section 39 of the German Act against Restraints of Competition(GWB). There is an obligation to monitormergers if the companies involved together generate a worldwide turnover of more than EUR 500 million and at least 2 of the companies involved each generate significant turnover in Germany - one company more than EUR 25 million and another company more than EUR 5 million. The Federal Cartel Office must generally prohibit the conversion if a dominant market position could arise or be strengthened ( Section 36 (1) ARC).
Mergers are subject to a prohibition on implementationduring the entire review procedure by the Federal Cartel Office, i.e. they may only be implemented once clearance has been granted.
Notification of mergers
Mergers can be notified to the Bundeskartellamt by post, fax or electronically.
Notification by post:
- Bundeskartellamt, Kaiser-Friedrich-Str. 16, 53113 Bonn
Registration by fax:
- Fax number 0228 9499-400
Electronic registration - 3 possible ways:
- by e-mail with qualified electronic signature to the e-mail address fusionskontrolle@bundeskartellamt.bund.de
- by De-Mail to the De-Mail address fusionskontrolle@bundeskartellamt.de-mail.de
- via the special electronic public authority mailbox (beBPo).
Notifications by simple e-mail, on the other hand, do not meet the legal requirements and do not trigger a time limit.
The Bundeskartellamt confirms receipt of the complete notification a few days later on its website. The examination procedurethen begins. In the so-called first phase, the authority initially has one monthto assess whether the project needs to be examined more closely or whether it can be cleared. If there are indications of competition problems that cannot be resolved within the preliminary examination procedure, a formal main examination procedureis initiated. This main examination procedure is referred to as the second phaseand can last a total of 4 months from the date of notification.
Cooperation with other competition authorities
The Bundeskartellamt cooperates closely with the European Commission and is particularly closely involved in the review procedures for potentially problematic cases. In cases in which a merger project is being examined by the competition authorities of several countries under merger control law, close cooperation takes place within the framework of international networks, such as the network of European Competition Authorities (ECA)and the International Competition Network (ICN) .
Sectoral rules for mergers and acquisitions
In Germany, the antitrust law approach is to counter similar competition problemsthrough similar regulations, regardless of the sectorin which they occur or are suspected. This also complies with the constitutional requirements of non-discrimination and proportionality of state intervention. In principle, the assessment made as part of the last amendment to the ARC continues to apply, according to which the ARC with its general, cross-sectoral provisionshas proven itself in practice. The general provision in Section 19 (4) No. 4 ARC counteracts a further sectoralization of antitrust law.
Merger rules by type of company
A number of special featuresmust be observed in the merger procedure, depending on the legal form of the companies.
- In the case of partnerships, Section 43 I UmwGgenerally requires the consent of all shareholders. If the articles of association provide for a majority decision, this must be made with at least a qualified majority of three quarters of the votes cast in accordance with Section 43 II 1, 2 UmwG. If a commercial partnership is merged into a corporation, liability as a former shareholder generally ends no later than 5 years after the merger in accordance with Section 45 UmwG.
- In the case of a limited liabilitycompany, such as a GmbH, the resolution on the merger must be passed with at least a three-quarters majority in accordance with § 50 I UmwG. According to § 51 I UmwG, in the special cases mentioned there, all shareholders must give their consent. If the GmbH is involved as the acquiring legal entity, pursuant to Section 46 UmwG
- their respective (new) shares must be determined for all shareholders in the merger agreement. Further special procedural regulations apply in the event that the merger cannot be carried out without a capital increase by the acquiring GmbH. The provisions are contained in sections 53 et seq. of the UmwG.
- Comparable regulations can be found in the case of the participation of a stock corporation. 65 I 1 UmwGrequires at least a three-quarter majority of the share capital represented at the time of the resolution. Sections 66, 68 and 69 UmwG contain provisions relating to mergers with a capital increase.
In addition, corporations have the option of a cross-border merger in accordance with sections 122a et seq. of the UmwG.
Special provisionsalso apply to credit institutions, such as joint stock banks: a planned merger must be reported immediately to the Federal Financial Supervisory Authority (BaFin)and the German Central Bank (Section 24 II KWG).
Necessary documentation for a company merger
Before a merger can be completed, a number of documents must be drafted, including the following:
- The merger requires the conclusion of a notarized merger agreement (§§ 4 I 1, 6 UmwG). The information that this must contain can be found in § 5 UmwG. In accordance with § 9 UmwG, the agreement must be audited by one or more expert auditors. This is carried out by independent auditors within the meaning of §§ 319et seq. of the German Commercial Code (HGB).
- The merger agreement only becomes effective through the respective resolution of approval, which must also be notarized and adopted by the shareholders at a general meeting (§ 13 I, III 1 UmwG).
- In accordance with § 8 UmwG, the respective representative bodies of the legal entities involved must also submit a merger report.
- In the case of a merger with a cooperative, an audit reportmust also be obtained in accordance with § 81 UmwG. As several legal entities and their respective shareholders' meetings are involved in a merger, it is generally advisable to also prepare powers of attorney. This avoids the involvement of the management of all companies in the notarization. The powers of attorney must be notarized.
- Furthermore, the closing balance sheetof the transferring legal entity is required for the registration. This must not be older than 8 months at the time of registration.
If all documents are available, the entryis first made in the commercial registerof the transferring legal entity. However, it only becomes effective upon entry in the register of the acquiring legal entity. The transferring legal entity subsequently ceases to exist.
The competent competition authority
In Germany, the Federal Cartel Office based in Bonn is exclusively responsible for examining mergers ( Section 35 et seq. of the ARC). However, the ARC does not apply if the European Commission has exclusive jurisdiction under the EC Merger Regulation .