Dear business partners,

We are pleased to send you the first issue of Deal Points, Oppenhoff & Partner's newsletter on M&A and private equity matters. In this first issue, we report on news on the Transparency Register, developments in W&I insurance and the legal concept of group entry control. We take a detailed look into developments in Foreign Direct Investment control. You will also find information on recent court decisions and get to know our new Frankfurt partner and notary, Anne Vins-Niethammer.

We are particularly pleased to have been nominated as M&A Firm of the Year at this year's JUVE Awards, which will be presented in Frankfurt on 24 October. We would also like to draw your attention to the upcoming German Corporate M&A Congress on 12 and 13 November in Munich (click here for registration). We will moderate a panel on the widespread use of W&I insurance in corporate transactions. We are of course also happy to simply meet there!

We hope you enjoy reading it
Oppenhoff & Partner


1. Current M&A topics


1.1 "Group entry control" [Konzerneingangskontrolle] - Restriction of share transfers or necessary minority protection?

The charm of a participation in a corporation such as a limited liability company undoubtedly lies in the free transferability of its shares, unless restricted by the articles of association.

Now, however, this free transferability has been seriously called into question by the legal concept of the so-called "group entry control" [Konzerneingangskontrolle], which is particularly discussed among legal scholars. This discussion, which is particularly related to a certain ruling of the Federal Court of Justice, has recently received some attention due to a prominent case. In an unpublished decision in the injunction proceedings, the Regional Court of Cologne prohibited a minority shareholder from transferring its share in the company to another shareholder - who had previously held a 50% share - and thus enabling the latter to acquire a majority interest in the company. Another minority shareholder had taken action against this transfer by way of an injunction with reference to the so-called "group entry control" [Konzerneingangskontrolle] because of an alleged breach of the duty of loyalty of the shareholders among each other. A minority shareholder could not be expected to accept that a transfer of shares among shareholders and the resulting majorities would create the possibility of entering a corporate group. This agreement was made despite the fact that in this case the articles of association contained a requirement for approval by the shareholders' meeting of any share transfer with a simple majority, but also expressly provided that the affected shareholders could participate. A rather detailed joint venture agreement between the shareholders had expired.

The Higher Regional Court of Cologne has stated in this case that it did not follow this opinion, in particular if the shareholders had previously thought about possible majority shifts and corresponding regulations had been found. Insofar as these regulations do not prevent a majority acquisition, it is not up to the courts to prevent this for the benefit of the "remaining" minority shareholders.

This case clearly shows that in shareholder agreements or joint venture agreements it is necessary to deal openly with the issue of changing majorities - also after the expiration of regulations which are not contained in the articles of association. Otherwise, there is a risk of having to defend oneself in court against allegations of alleged breaches of loyalty in the event of a transfer to obtain a majority. The Federal Court of Justice cannot have meant this with its judgment; minority protection - especially among merchants - can also be effected differently. Investors with a view to a later majority acquisition or PE funds should closely observe the discussion on this important issue and react accordingly.

Christof Gaudig is Partner in the Corporate / M&A group and represents clients in complex shareholder disputes (



1.2 News on the Transparency Register - Implementation of the 5th EU Anti-Money Laundering Directive

Since 31 July 2019, the government draft for the implementation of the 5th EU Anti-Money Laundering Directive has been available, which includes some amendments to the Transparency Register (§§ 18 et seqq. German Anti-Money Laundering Act [Geldwäschegesetz, GwG]).

Since 2017, corporations and registered partnerships have generally had to notify their beneficial owners to the then newly established Transparency Register. These are individuals (not legal entities) who hold or indirectly control more than 25% of the share capital and/or voting rights or who exercise control in a comparable manner. Special regulations apply to foundations. If no beneficial owner can be identified, the legal representatives, managing partners or partners of the association are deemed to be the beneficial owners. Up to now, other than certain authorities or persons subject to special money laundering obligations, only persons with a particular interest can consult the Transparency Register.

The draft bill now provides for a number of changes:

  • In particular, the Transparency Register will be publicly accessible in future, irrespective of any particular interest. It will therefore become a public register. However, access may still be restricted in case of interests that merit particular protection, such as the risk of certain criminal offences against the beneficial owner or for minors.
  • In future, the nationality of the beneficial owner must also be reported to the Transparency Register.
  • The circle of beneficial owners of a foundation is being extended. If a legal entity or partnership is a member of the executive board or a beneficiary of the foundation, the individuals who control such entity or partnership will now also be deemed to be beneficial owners.
  • Finally, the due diligence obligations of those who are under a particular obligation to carry out anti-money laundering checks (e.g. financial service providers, auditors, tax consultants, lawyers, real estate agents, traders in goods) will be extended. In future, they will have to obtain proof of registration or an extract from the Transparency Register at the beginning of a business relationship. Additionally, they are required to notify the Transparency Register of any discrepancies or deviations they notice.

The amendments to the law are to come into force on 1 January 2020. The extended notification obligations will then have to be fulfilled without undue delay. Companies that do not hear from their shareholders in this respect this will have to actively enquire with them in the future. Therefore, affected companies should take early precautions to implement the changes in good time. As far as the subsequent registration of citizenship is concerned, this fundamentally applies to all beneficial owners. In addition, all foundations under private law should check whether they have to submit supplementary notifications. Those with particular obligations under anti-money laundering law should also adapt their processes to the additional due diligence obligations in good time.

Dr Günter Seulen advises national and international companies and corporate groups on stock corporation and capital market law, corporate and group restructuring as well as on issues of directors' liability and compliance structure (



1.3 W&I Insurance: Underwriting 4.0

The scope and depth of coverage under Warranty & Indemnity (W&I) policies has increased significantly in recent years. The expansion of cover has substantially increased the importance of the buy-side due diligence. Some specific characteristics of this "Underwriting 4.0" are summarized below.

The combination of a seller-friendly market environment and competitive pressure among W&I insurance providers has led to a steady increase in the scope of cover of W&I policies. While a significant deductible was a matter of course two years ago, it has now largely or completely disappeared in real estate transactions and increasingly also in M&A ("tipping to nil"). A catalogue of operational warranties negotiated between the contracting parties but not backed up by any liability of the seller, will be insured. This corresponds to the assumed liability going beyond the SPA by not taking into account agreed knowledge qualifiers (“knowledge scraper”) as well as the willingness to also include indirect or consequential damages in the scope of cover. "US style policies" with further liability extensions - in particular restrictions with regard to risks which are deemed to be known - further increase the scope of cover.

W&I policies cover unknown risks, while known issues are excluded from cover. Thorough due diligence is therefore a prerequisite for a speedy and successful underwriting process. If the insurer cannot rely on the seller's fundamental self-interest to disclose breaches of warranties on its own initiative due to a lack of liability on the part of the seller, the primary factor to distinguish between known and unknown risks is the buyer’s due diligence.

All warranties in the sales contract must therefore be supported by a detailed review. This is the only way to ensure that only unknown (and in a due diligence not recognizable) risks are covered. This limitation to unknown risks is a core concept of W&I insurance. It is therefore necessary to examine all issues relevant to warranties within the scope of due diligence, and accordingly to define the scope of the desired warranties already during the ongoing examination, because only on the basis of the expected warranty catalogue is it possible to set up a corresponding and targeted due diligence. The materiality thresholds for the due diligence must also correspond to the threshold values that will later be required for the warranties: If, for example, a warranty is required for certain contracts with a minimum volume of EUR 50,000, the due diligence must start at that value and cannot be limited to contracts with a higher volume.

As a result of the spread of W&I insurance, the previous trend towards increasingly limited "red flag" or "helicopter" due diligence reviews has been reversed: As the prerequisite for comprehensive coverage is a correspondingly extensive due diligence, the scope of the review has re-expanded considerably. However, the scope of reporting must be viewed separately from the question of the scope of the review, and can be limited to specifically important matters. However, it is essential that the reporting clearly shows that the issues covered by the warranties have been examined in sufficient depth. In this respect, a detailed description of the scope of the due diligence is imperative.

Till Liebau provides comprehensive advice on M&A and private equity transactions ( Together with Dr. Gunnar Knorr (tax) and Dr. Markus Rasner (M&A/private equity), he forms a market-leading team for the advice to W&I insurers.




2. In Detail


Foreign Direct Investment control in Germany

Since the global financial crisis in 2009, the German economy has been growing uninterruptedly, partially with strong growth rates. Although research institutes predict a slight decline for the third quarter of 2019, 2019 is also following this trend as a whole. This alone is a good enough reason for foreign companies to invest in Germany.

An EU Commission report from 2017 shows that foreign investments in undertakings of strategic importance in sectors such as petrochemicals, electronics, pharmaceuticals, electricity generation and supply or insurance are steadily increasing in the EU. More and more investors are funds and private equity companies from the USA, Switzerland or the Cayman Islands, but also financially strong individuals from Switzerland, Russia, China, the USA and Norway. Chinese (often state-owned) enterprises are also increasingly becoming interested in investing in Europe [1] and especially in Germany (the acquisition of Kuka by the Chinese high-tech group Midea can be cited here as a prominent example).


1. Sector-independent investment control

In order to protect sensitive industrial sectors and public security, Germany has conducted cross-sector investment screenings (Foreign Investment Control -FIC-) since 2009, in addition to screenings in the defence sector (so-called sector-specific investment screenings). These empower the German Federal Ministry of Economics and Technology [Bundesministerium für Wirtschaft, BMWi] to restrict or in certain cases even prohibit the direct or indirect acquisition of domestic enterprises or interests in such companies by investors outside the European Union. In this respect, Sections 55 et seq. of the German Foreign Trade and Payments Ordinance [Außenwirtschaftsverordnung, AWV] is based on the European guidelines on the freedom of establishment and capital movements. If a non-EU entity, i.e. an undertaking or person not resident in the European Union or a Member State of the European Free Trade Association, acquires a voting interest in a German undertaking that exceeds a certain minimum threshold, the BMWi can examine whether this endangers public order or security in the Federal Republic of Germany.

According to Section 55 AWV, public order or security may especially be endangered if the German undertaking operates in the field of so-called critical infrastructure  i.e. in one of the sectors energy, information technology and telecommunications, transport and traffic, health, water, nutrition as well as finance and insurance. Also if the German undertaking manufactures certain IT products, provides IT services for such critical infrastructures or contributes to the formation of public opinion in the media industry, it can be assumed that such a threat exists.

In order to enable the BMWi to start control proceedings, the acquirer generally has to achieve at least 25% of the voting rights in the German undertaking as a result of the transaction. In the case of an undertaking which operates in the field of security and defence or in the field of the critical infrastructure mentioned above, however, it is sufficient if the non-EU party obtains at least 10% of the voting rights as a result of the transaction. This reduced threshold was introduced in December 2018.

In addition to the cross-sector screening, the AWV also provides for a so-called sector-specific screening if at least 10% of the voting rights are acquired in an enterprise operating in the security-sensitive sector (e.g. defence equipment), irrespective of whether the acquirer is domiciled inside or outside the EU.

The BMWi may decide at its own discretion whether to start control proceedings. It has two months to do so if the acquirer applies for a clearance certificate. After the two months have lapsed, the transaction is deemed to have been cleared. If the BMWi gains knowledge of the transaction from other sources, it may initiate the control proceedings within three months. The control procedure itself takes a maximum of four months after receipt of the complete documents – in all events according to Section 59 AWV. If the transaction is considered "sensitive", the acquirer and the BMWi typically enter into negotiations on the terms of the acquisition with a view to concluding a public-law contract. The commencement of the contract negotiations suspends the expiry of the four-month period.

The statutory provisions also enable the Ministry to prohibit an acquisition completely.


2. Practical experience

Although the BMWi has not yet formally prohibited any transaction, there have been a number of recent cases in which foreign investors have withdrawn their bids due to far-reaching conditions or concerns expressed by the BMWi (e.g. the planned acquisition of the special machinery company Leifeld Metal Spinning by a Chinese investor) [2].

In 2018, the Federal Republic of Germany itself even bought 20% of 50Hertz Transmission GmbH, a German transmission grid operator, through the state-owned German Development Bank KFW [Kreditanstalt für Wiederaufbau] in order to avoid a participation by the Chinese state-owned State Grid Corporation of China (SGCC). The Federal Government justified this with a strong interest in protecting critical energy infrastructures [3].

On the whole it can be said that the importance of investment control has risen enormously over the last 10 years. This is due not only to the lowering of the threshold from 25% to 10% for critical infrastructure investments, but also to the increasing awareness of the investors. It is for good reason that they shy away from a 5-year period of uncertainty after acquisition - for this is how long the BMWi can still subject a transaction to the control procedure. In many cases it therefore certainly is advisable to take a proactive approach to investment control and to involve the BMWi at an early stage, for example by submitting an application for a clearance certificate. This will frequently enable the topic of investment screenings to be set aside again after a relatively short time.

Sometimes, however, investment control proceedings take even longer. Especially in cases where the Ministry has yet to investigate facts concerning products and customers, or if other Ministries involved in the proceedings (such as the Federal Foreign Office [Auswärtiges Amt] or the Ministry of Defence [Verteidigungsministerium] wish to safeguard their own substantial interests or express fundamental concerns, the duration of the proceedings may be extended to 12 months or more. Negotiations on the conclusion of a public-law contract on the terms of the acquisition can also take considerable time. In these situations, it is particularly important that buyers and sellers work towards a common goal, for although the acquirer is in charge of the procedure, in many cases it relies upon the seller’s support  for example in the procurement of documents on business development, products, customers and markets.


3. Outlook

On 19 March 2019, the EU Foreign Direct Investment (FDI) Regulation (EU Regulation 2019/452 establishing a framework for the screening of foreign direct investment into the Union) was adopted, which aims to improve cooperation between the EU Member States in the area of investment screenings. It applies from 11 October 2020 onwards.

According to this, it will remain up to Member States to decide whether to open control proceedings in the light of public order and security. However, other states are to be able to participate actively in the screening procedures and it will be possible for information concerning the security of other states to be exchanged more easily.

For the first time, the Regulation provides for a cooperation procedure under which each Member State can inform a screening State if it considers an investment to be a threat to its own public order and security. The Member State concerned renders an opinion on the matter, which the screening State must take into due account in its screening decision. The regular duration of this cooperation procedure is up to 35 days, which may, under certain circumstances, extend the duration of investment screenings in Germany even further.

Each Member State will then also be required to submit to the EU Commission an annual report for the previous calendar year containing aggregated information on foreign direct investments made in its sovereign territory.

The FDI Regulation now covers critical technologies and dual-use goods, including artificial intelligence, robotics, semiconductors, cyber security, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies, as factors to be considered when assessing potential threats to public order or security. This means that there will also be a strong focus on newly emerging technologies here.

Practical experience shows that investment screenings are increasingly being conducted in Germany. It remains to be seen whether this trend will change as a result of the FDI Regulation.



[1] Commission Staff Working Document on Foreign Direct Investment in the EU of 13 September 2017,

[2] Dammann de Chapto/Bruggemann: Current Developments in Investment Control Law - The Leifeld Case and Public Security (NZKart 2018, 412).

[3] Joint press release by the Federal Ministry of Economics and Energy and the Federal Ministry of Finance dated 27 July 2018, KfW temporarily acquires a stake in the German transmission grid operator 50Hertz on behalf of the Federal Government:, (last access 15 October 2019).


Stephan Müller heads the firm’s public law practice group and advises on export control law, sanctions and compliance with a focus on the areas anti-corruption, money laundering and internal investigations (




3. Latest judgements


3.1 Shareholder Liability in case of a Merger of two Limited Liability Companies

With its decision of November 6th, 2018 (II ZR 199/17) the second civil division of the Federal Supreme Court ruled on the liability of the shareholders of the participating companies in the merger of two limited liability companies if the acquiring entity faces insolvency as a result of the merger.

Following the merger of one limited liability company into another during which the share capital of the acquiring entity had been increased, the acquiring entity faced financial difficulties as the transferring legal had been factually insolvent at the time of the merger (at the merger cut-off date as well as at the time of the conclusion of the merger contract). Hence, the liquidator of the acquiring entity pursued claims against the shareholder of the transferring legal entity due to difference liability [Differenzhaftung] and against the shareholders of the acquiring entity due to alleged economically destructive actions [existenzvernichtender Eingriff].

If the value of a contribution in kind is lower than the value of the nominal amount of the share subscribed to, the shareholder has to make a cash contribution in the amount of the differential amount (so-called differential liability). In the case at hand, the court dismissed such differential liability as, in case of a merger, the transferring legal entity itself rather than its shareholders is obligated to provide the contribution in kind. This is the case irrespective of the fact that a shareholders’ resolution approving the merger is required to make the merger effective.

However, the court concluded that the actions of the shareholders of the acquiring entity constituted an existentially annihilating interference pursuant to Sec. 826 of the German Civil Code, as the limited liability company was deprived of the assets required to settle its liabilities by its shareholders in an immoral manner and, through this, insolvency had been caused. The deprivation of assets, which is required to constitute such economically destructive actions, did not necessarily require the outflow of assets, but could also be caused by the increase of liabilities if, hereby, the liability mass available to the creditors is purposefully reduced for non-business purposes. The required “immorality” was assumed as the shareholders had enforced their interest in a liquidation of the transferring entity without winding-up at the expense of the restricted assets of the acquiring entity (and eventually at the expense of the creditors) and had thereby caused the insolvency of the acquiring entity.

In this judgement, the Federal Supreme Court has made it clear that its case law with regard to Stock Companies, where it has also denied such differential liability, also applies to limited liability companies. Therefore, while this decision provides for some legal certainty by denying differential liability in case of a merger, it also illustrates the necessity of very carefully considering the economic impact on the acquiring legal entity before a merger. This is especially relevant when the merger’s purpose is to restructure. It also seems possible that, following this decision, the commercial registers will become stricter when it comes to impairment testing of non-cash contributions and will more frequently request appropriate proof. If the merger in question is time-sensitive, a very careful preparation and coordination with the commercial register is essential.

Luise Hauschild is a Junior-Partner in the Cologne office of Oppenhoff & Partner (



3.2 Non-competition clause for the minority shareholder of a limited liability company (“GmbH”)

The Higher Regional Court Stuttgart ruled in a judgment dated March 7, 2019 (Case No. 14 U 26/16) that non-competition clauses for minority shareholders of a German limited liability company ("GmbH") may be lawful if the respective minority shareholders can exert a significant influence on the management of the company - e.g. by being granted special rights.

The two defendants were minority shareholders of the plaintiff, a limited liability company. In addition, they were employed by the plaintiff as team leaders and authorized signatories. The plaintiff's articles of association contained non-compete clauses for all shareholders. In November 2014, the two defendants terminated their employment contracts and started to work for a competitor founded by their wives. Subsequently, several of the plaintiff’s customers switched to the competitor. In December 2014, the two defendants also terminated their shareholder status with effect as of December 31, 2015. Thereafter, the plaintiff brought a claim against the defendants claiming that they had to refrain from competing until they were no longer shareholders of the company and that they should pay damages. The Regional Court of Stuttgart dismissed the claim in its entirety. The plaintiff appealed against the judgement to the Higher Regional Court of Stuttgart.

The court initially clarified that non-compete clauses for shareholders of a limited liability company can generally be stipulated in the articles of association. However, non-compete clauses are only permitted to a limited extent, as they generally affect the constitutionally protected freedom of the shareholders to exercise their profession. Whether a non-compete clause in the articles of association is within these limits needs to be assessed on the basis of a case-by-case balancing of interests. In the opinion of the court, preventing a shareholder from undermining or even destroying the company from inside is in general a legitimate interest of the company. Otherwise, there is a risk that the shareholder could eliminate an effective competitor in favour of their own competitive activity. After the withdrawal of the respective shareholder, the general interest of the company, however, cannot justify the prohibition of competition anymore. The criterion for the potential threat for the interests of the company arising from the shareholder status is the internal position of the shareholder, through which they can exert a decisive influence on the business of the company. In the present case, however, the defendants, either individually or jointly, had neither a majority holding nor any special rights which would have allowed them to exercise a significant influence over the management of the company. The information and inspection right under Section 51a of the German Limited Liability Company Act (GmbHG) is not sufficient for such a decisive influence, because this right could be refused in the event of a risk of abuse. Due to the defendants’ minor shareholding in the plaintiff and the lack of special participation rights in the articles of association, the defendants’ position was reduced to a purely asset-related participation in the company upon leaving the company as executive employees. However, such participation was without significant influence on the company.

Against the background of the decision, particular attention must be paid in practice to the formulation of non-compete clauses when minority shareholders are involved. As a rule, a prohibition is only effective if the minority shareholders can exert a significant influence on the company. In addition, it should always be examined on a case-by-case basis whether a customer protection clause is not equally suitable as a milder means to reach an identical effect.

Marcel Markovic is an Associate in the Frankfurt office of Oppenhoff & Partner (




4. Oppenhoff Faces

Partner & notary Anne Vins-Niethammer

Name: Anne Vins-Niethammer, LL.M.

Lawyer since: November 2006

Notary since: September 2019

Expertise: As a notary I offer the entire range of notarial services with a special focus on corporate law and real estate law. As a lawyer, I mainly advise in corporate law and M&A.

Collaboration: Above all with my notary colleague Rainer Jacob, with whom I joined Oppenhoff at the beginning of September 2019, and our notary clerks, who are essential for a well-functioning notary's office. I have been working with them for over 10 years. At Oppenhoff & Partner numerous interfaces to my new colleagues in the areas of corporate law/M&A and real estate law have already arisen. In particular in the areas of intra-group restructuring and classic corporate housekeeping, we have already been able to provide supplementary services to the classic consulting services.

Highlight: For a large notary client, we had to convert 16 German private limited companies [Gesellschaft mit beschränkter Haftung, GmbH] into German limited partnerships [Kommanditgesellschaft, KG] within a very short time (between 2 - 4 weeks), 4 KGs into GmbHs and (by way of a cross-border change of legal form, which was unchartered territory at the time) 4 Dutch private limited companies [besloten vennootschap, BV] into GmbHs with a subsequent change of legal form into KGs. Due to the short time available and the coordination effort with the various commercial registers and the responsible judicial officers and judges, the timely completion of this restructuring was an exciting challenge and one that that is not encountered every day.

Out of office: In my spare time, I enjoy being with my family, like to travel and spend a lot of time in the mountains hiking or skiing.

Web profile: Anne Vins-Niethammer



5. Deal News