When it comes to business transactions, the importance of a well-drafted share purchase agreement cannot be overstated. In Germany, the share purchase agreement is governed by the German Civil Code (Bürgerliches Gesetzbuch or BGB), as well as other relevant statutes and regulations. In this article, we will explore the key features of share purchase agreements under German law.
What is a Share Purchase Agreement?
A share purchase agreement is a legal contract between a buyer and a seller that lays out the terms and conditions of the transfer of shares in a company. The agreement typically includes provisions related to the purchase price, payment terms, warranties and representations, conditions precedent, and post-closing obligations.
In Germany, share purchase agreements are subject to the German Civil Code, specifically Sections 433 through 630. Additionally, the requirements of the German Stock Corporation Act (Aktiengesetz or AktG) must be considered for share purchases in stock corporations (Aktiengesellschaften).
Key Features of Share Purchase Agreements under German Law
1. Purchase Price and Payment Terms
The purchase price is the amount paid by the buyer to the seller for the shares. Under German law, the purchase price must be determined objectively, meaning that it should reflect the fair market value of the shares. The payment terms, including the timing and method of payment, must also be clearly outlined in the agreement.
2. Warranties and Representations
Warranties and representations are statements made by the seller about the company being sold. These statements can include financial information, ownership of assets, and compliance with laws and regulations. Under German law, sellers are required to disclose all material risks to the buyer. If any warranties or representations are found to be untrue, the seller may be liable for damages.
3. Conditions Precedent
Conditions precedent are events or actions that must occur before the transaction can be completed. These may include obtaining regulatory approvals, securing financing, or satisfying other legal requirements. The share purchase agreement should specify the conditions precedent and the consequences if they are not met.
4. Post-Closing Obligations
Post-closing obligations are obligations that the parties must fulfill after the share purchase is completed. These may include transferring ownership of assets, retaining employees, or complying with ongoing regulatory requirements. The agreement should clearly outline the post-closing obligations and the consequences for failing to fulfill them.
Conclusion
A well-drafted share purchase agreement is essential for any business transaction involving the sale of shares. Under German law, share purchase agreements must adhere to the requirements of the German Civil Code and, in the case of stock corporations, the German Stock Corporation Act. Buyers and sellers should work with experienced legal counsel to ensure that their agreement reflects their intentions and protects their interests.