The new draft on the
German takeover law
Dirk Roger Rissel, LL.M.
* * *
The reigning coalition of Social Democrats and Green
Party has published a draft on March 12, 2001 which shall provide the legal
framework for takeovers in Germany. The law shall enter into force on January
1, 2002. For the time being, takeovers in Germany are not governed by law.
There is just a voluntary takeover code. However, only few listed companies
have submitted to the code.
The new draft differs in various aspects from the
previous draft which was published on June 29, 2000 on the subject matter. The
following is a summary of the main differences:
1. Extended scope of
The scope of application of the new takeover law has
been considerably extended. According to § 1 of the draft not only takeovers
and offers for takeovers fall within the scope of the law, but all public
tender offers for the puchase of shares of a domestic stock corporation
(inländische Aktiengesellschaft) or a limited corporation by shares
(Kommanditgesellschaft auf Aktien), even if these offers are not attempting to
gain control of the company.
Thus the law applies also to those tender offers which
attempt to purchase a shareholding below the threshold of control (30 % of the
voting rights) and to tender offers which – departing from an existing
situation of control of the company - attempt a consolidation of the
Furthermore, also tender offers fall within the scope
of the law which do not relate to shares, but to securities which permit the
holder to purchase stock (convertible bond, warrant)
(§ 1 and § 2 sec. 2 of the draft).
The draft now covers public tender offers for the
purchase of securities (öffentliche Angebote zum Erwerb von Wertpapieren) and
voluntary tender offers (freiwillige Übernahmeangebote) and mandatory offers
Besides the general rules (allgemeine Vorschriften)
and the provisions relating to the competence of the Federal Supervisory
Office (Zuständigkeit des Bundesaufsichtsamtes für den Wertpapierhandel) in
section 1 and 2, the draft contains in its third section general rules which
apply to every public tender such as requirements for the tender offer paper,
the tender documentation (§ 11), the liabilty for an incorrect tender
documentation (§ 12), provisions relating to a change of the tender offer (§
21) and provisions relating to the obligation of the board of management of
the target corporation to make a statement on the tender offer (§ 27). These
provisions shall ensure rapid and transparent tender proceedings.
Section 4 contains special requirements for takeover
bids which aim at the control of the Company. According to § 34 of the draft
such takeover bids are not only governed by the provisions of section 3, but
also by those of section 4. With respect to the valuable consideration
(Gegenleistung) certain minimum requirements are stipulated in § 31 of the
draft in connection with § 3 of the decree. According to § 32 of the draft the
bidder is not allowed to make an offer which applies just to a part of the
shares of the target corporation. In case of takeover bids the board of
management and the supervisory board of the target corporation have certain
duties (§ 33). The board of management and the supervisory board may not do
anything that could impede the success of the tender offer. The issuance of
stock and the acquisition of the target company´s own shares, for example, is
forbidden. However, the target corporation may court other potential acquirers
(“white knights”) in the hope that a tender offer, perhaps a more favorable
one, will be made by them (§ 33 sec. 3 of the draft).
Section 5 of the draft governs mandatory offers.
According to § 39 of the draft such takeover bids are not only governed by the
provisions of section 5, but also by those of section 3 and 4.
2. Easier calling of the
Under the new draft it is now easier to call a
shareholders meeting, in order to decide on defense measures. Besides the
regulations which were already included in the first draft of June 29, 2000,
the Company is now free to choose the place where the shareholders meeting
shall take place. It does not have to be the principal place of business of
There is no more requirement in the new draft to call
the shareholders meeting within two weeks after publication of the tender
offer, in order to cause the extended time limit for acceptance of the tender
offer. Therefore the extended time limit also applies e.g. if the calling of
the shareholders meeting only occurs three or four weeks after publication of
the tender offer.
Finally, in case of calling of a shareholders meeting,
the time limit for accepting the tender offer has been extended from two
months to ten weeks (§ 16 sec. 3 of the draft).
3. Modifications relating to
the valuable consideration
The provisions relating to tender offers and mandatory
offers have been modified as follows:
For the sake of actuality, the period of reference for
determining the valuable consideration has been reduced from six to three
months (§ 31 sec. 1 and 3 of the draft).
A detailed regulation concerning the value of the
valuable consideration is now stipulated in section 1 of the decree.
In case the bidder has acquired shares of the target
company prior to a takeover, he is obliged to offer to the other shareholders
at a subsequent tender offer or mandatory offer at least 85 % of the highest
price paid by him. In case the bidder has purchased shares on the stock market,
he has to offer the highest amount. A discount is not possible (§ 4 of the
4. Modifications relating to
the stipulated time limits
Some time limits have been modified:
The period of time in which the tender offer statement
has to be filed with the Federal Supervisory Office after publication of the
tender has been extended from two to four weeks (§ 14 sec. 1). The period of
time was extended to better handle difficulties that have arisen with
In accordance with the European takeover directive the
maximum time limit for accepting the tender offer has been extended from six
to ten weeks (§ 16 sec. 1).
5. Statement of the board of
management of the target corporation on the tender offer: obligation to attach
the statement of the employees´ representation
If there is a statement of the employees´
representation, the board of management of the target corporation (which is
obliged to make a statement on each tender offer) is henceforth explicitly
obliged to attach the statement of the employees´ representation to its own
statement (§ 27 sec. 2).
6. Reduction of the members
of the advisory council
The number of the members of the council which shall
advise the Federal Supervisory Office in connection with public tender offers
has been reduced from 21 to 15, in order to ensure the councils´ ability of
work (§ 5 of the draft).
7. Detailed regulation in a
For a better clarity and legibility of the law
detailed regulation concerning additional statements which have to be included
in the tender offer statement and concerning the determination of the valuable
consideration are stipulated in a decree (Rechtsverordnung).
update: march 2001