GbR as GmbH partner: What you need to know when registering

In Germany, if a civil law partnership, or GbR, becomes a shareholder in a limited company, or GmbH, not only is this GbR to be added to the list of shareholders, but so too must all partners of the GbR itself. That was the decision reached by Hamm Higher Regional Court (OLG) in its judgment of 24 May 2016 (27 W 27/16). Continue reading

Debate about “hard” and “soft” balance sheet guarantees: Recommendations for the drafting of contracts

Latest verdict gives important indicators for buyers and sellers

In addition to other undertakings, corporate acquisition agreements often also contain warranties given by the seller concerning the accuracy of the annual financial statements of the business being sold. In practice, however, there are frequent disputes concerning these balance sheet guarantees, as they are known: Under what circumstances is the guarantee considered breached? What are the consequences of a breach of the guarantee? Continue reading

Shareholder loans with qualified subordination

A seller, who sells a company along with shareholder loans against that company, might be liable for a period of four years in cases where the buyer collects interest or repayments on the acquired loan from the company, the company then becomes insolvent and the insolvency manager successfully rescinds these payments. This is suggested by a still little known judgment of March 2015. Continue reading

Rescission of an intercompany agreement only at the end of the financial year

The incorrect organisation of a transaction process can lead to high losses and risks, both on buyer and seller side, if the rescission of an intercompany agreement does not become effective at the agreed time. This can result in inadvertent liability on part of the seller and to financial losses suffered by the buyer. A judgment of this year confirms that an intercompany agreement with a dependent GmbH [Limited Liability Company] can be terminated only at the end of a financial year or of the otherwise contractually stipulated accounting period. Continue reading

New Act on Prevention of Late Payments: Is Your Liquidity Endangered?

What decision-makers and purchasing agents need to know about the new German Act on Prevention of Late Payments.

On 29 July 2014, a new Act on Prevention of Late Payments in business transactions took effect in Germany. For companies this means above all: They cannot agree terms of payment at their own discretion anymore. Those ignoring the new rules or not complying with them run the risk of invalidity of their own term of payment clauses. In this case, extremely short terms of payment may result, possibly endangering a company’s liquidity or even – in extreme cases – its corporate existence. Experience gathered in the first few months after commencement of the Act shows a persistent information and implementation backlog. Below we provide an overview of things to pay attention to and tips on how you can ensure that your agreements are legally watertight. Continue reading