|Dr Wolfgang Grobecker||Dr Eva Nase|
Today, publicly-listed stock corporations in Germany are faced with a complex set of statutory reporting and transparency duties, the fulfillment of which is often a cumbersome and costly task. Therefore, owners of public corporations continue to consider take-private measures.
There are a variety of take-private transactions in Germany, such as de-listings, statutory mergers with and into a non-listed entity, or squeeze-outs. In summer 2011, the German legislator passed the Third Amendment Act to the German Transformation Act (Drittes Gesetz zur Änderung des Umwandlungsgesetzes). An important part of the amendment enacts a new form of squeeze-out in Germany, the so-called merger-specific squeeze-out, which provides for the third alternative in order to take a German publicly-listed company private:
General corporate squeeze-out
The main shareholder can use the general corporate squeeze-out procedure provided that he owns at least 95% of a stock corporation's registered share capital in order to acquire the remaining shares in the company. A corporate squeeze-out requires, among other things, a shareholders' resolution and a fair market valuation of the company in order to determine the cash compensation to be offered to the existing minority shareholders. In order to become effective, the squeeze-out needs to be registered with the commercial register, the main shareholder thereby acquiring the remaining shares. If a minority shareholder (who holds at least a nominal amount of €1,000 ($1200) in the target) challenges the squeeze-out resolution, the registration is blocked. However, the German Stock Corporation Act provides for a fast track proceeding (Freigabeverfahren) to overcome the adverse effect of the challenges, which after legislative streamlining now typically lasts between three and six months. The fair market valuation is subject to a judicial review in an appraisal proceeding following registration of the squeeze-out.
The required percentage of the shareholding necessary in order to effect a squeeze-out was lowered from 95% to 90% of the stated share capital, provided that the squeeze-out is carried out in the context of an upstream merger with another stock corporation, partnership limited by shares, or SE. The resolution by the majority shareholder on the squeeze-out must be adopted within three months after the conclusion of the merger agreement (which has to contain the prospect of a future merger specific squeeze-out). The squeeze-out enters into force only following registration of the merger with the commercial register. This requirement should prevent misuse of the now lowered percentage of shareholding of 90%. A further shareholders' resolution approving the merger is not necessary. Apart from these points, the merger-specific squeeze-out follows the rules of the general corporate squeeze-out.
The takeover-related squeeze-out allows a bidder holding at least 95% of the target's voting shares to purchase the remaining shares within three months from the end of the acceptance period of a takeover-offer by filing an application to the Regional Court in Frankfurt. The squeeze-out becomes effective once the court decision becomes final (rechtskräftig).
If the public takeover bid was accepted by less than 90% of the registered share capital subject to the offer, the squeeze-out consideration is not specified by law and, due to lack of case law, its proper determination and adequacy is uncertain. If the acceptance quota is 90% or more, the offer price of the takeover is deemed to also be the adequate compensation in the squeeze-out. Based on decisions of the exclusively competent courts in Frankfurt, however, it is not entirely clear whether this presumption is rebuttable. Thus, the takeover-related squeeze-out is only a rarely used option in practice.
Dr Wolfgang Grobecker and Dr Eva Nase