Exercise caution if notarisation abroad seems cheaper!
In a judgment of 22 January 2016, Charlottenburg local court (AG) (99 AR 9466/15) has ruled that a German GmbH formed by a Swiss notary from Bern canton cannot be registered on the commercial register.
AG Charlottenburg based its decision primarily on the fact that the notarisation procedure applicable in Bern canton differed so much from German standards that the equivalent of the notarisation could not be assumed, so that notarisation did not meet the formal requirements of section 2 (2) sentence 1 of the German Limited Liability Company Act (GmbHG).
Background: Notarisation in Switzerland
The fees charged by German notaries are based on the value of the matter. If this is very high, the costs of notarisation can quickly reach significant figures. By contrast, with Swiss notaries the fee is in principle freely negotiable. For decades, therefore, many lawyers and their clients have been going to Switzerland with transactions for which German law requires notarisation, in particular the assignment of shares in the context of mergers and acquisitions. The debate about whether and under what conditions notarisation in Switzerland is effective has been going on for just as long. The ruling handed down in this case by AG Charlottenburg draws attention once again to the fact that it can be very risky to have transactions under German laws notarised in Switzerland.
Why notarisation in Switzerland may be ineffective
Notarisation by a Swiss notary only meets the requirements of section 2 GmbHG if
- for the notarization, the notary is obliged to observe procedural laws that conform to the elementary principles of German notarisation legislation, and
- in qualification and position the notary exercises a role corresponding to the activity of a German notary.
Since the regulations for notaries that apply in Bern canton do not require the annexes to a deed to be read aloud at all, and the deed only to the extent that it contains declarations of intent, AG Charlottenburg was persuaded that the local notarisation procedure applicable in Bern differed considerably from German standards. AG Charlottenburg emphasized that it was not relevant whether the Swiss notary met the higher German notarisation standard in the specific case, for example by reading aloud the entire deed together with its annexes. The issue of the effectiveness under German law was governed solely by what specific notarisation procedure the foreign notary had to observe.
What the ruling means for German transactions
Our view is that the ruling can also be applied generally to the notarisation of other transactions, such as the assignment of shares in a German GmbH in Switzerland. It is generally recognised for the notarisation abroad of an assignment of shares in a business that this can only be effective if both of the above criteria are met.
To that extent it can be assumed that AG Charlottenburg would ultimately not recognise any Swiss notarisation that did not provide for the mandatory reading out of the deed, even in cases in which the Swiss notary went beyond his obligations and actually read out the deed together with its annexes.
Conditions under which a Swiss notary can notarise German transactions
In consequence, transactions for which German law requires notarisation should only be notarised in Switzerland if both the above criteria are reliably met on the basis of the legal system applicable at the relevant place of notarisation in Switzerland. In particular, notarisation by a Swiss notary can only be effective under German formal requirements if the notary is obliged to read out the entire deed, together with its annexes, which under German law must also be read out.
_
The author: Attorney Dr. Thomas Lotz is a partner in the law firm TRACC LEGAL in Munich. Dr. Lotz has been advising companies on mergers and acquisitions and on issues of corporate law relating to the restructuring and reorganisation of businesses for 25 years. He can be contacted for personal consultations on +49-(0)89-95 44 302-89 and by email at lotz@tracc-legal.de