Case Study: Acquisition of German Company by Overseas Investor

The overseas investor is an import and export company and a member of a state owned group with business activities in machinery and equipment production.

The investor intended to take control of distribution channels for solar energy products in Germany by acquiring shares in a German Ltd. trading company. As a result of its business experiences and contacts with the German market, the investor detected the suitable German target by itself.

The target imports overseas solar energy products to offer for sale on the European market. It is a medium sized limited company with two shareholders A and B (each 50%) who are directors as well. The target is a long-term client of Sonnenberg Law Firm. They asked Sonnenberg Law Firm for legal advice and to run their project.

After consultation the parties agreed that the investor shall

<!--[if !supportLists]-->- provide some hundreds of thousands of Euros for loans and to increase the registered capital

<!--[if !supportLists]-->- become the majority shareholder by taking over the complete 50% shareholding of shareholder A and 1% of shareholder B, and director A would become an employee

<!--[if !supportLists]-->- have control over the company and agreed actions with managing director B

<!--[if !supportLists]-->- <!--[endif]-->become the exclusive supplier of the company

Sonnenberg Law Firm drafted the loan agreement, articles of association, shareholders’ resolution and employment contracts in accordance with the investor’s controlling interest and with the legal regulations.

The investor and shareholder A agreed on sale conditions which were optimized for security and tax purposes. Then shareholder B and the investor resolved to increase the registered capital to some hundreds of thousands of Euros and both shareholders took over the increase according to their share. The investor granted shareholder B a loan so that he could pay his share. Director A was re-employed under certain conditions that guarantee a stable position and allow him to benefit from the company’s success.

One month after consultation the articles of association and shareholders’ resolution were notarized and the registration was applied for.

The next important step was tax planning by the preparation of transfer pricing documentation since the German company was supplied of a considerable quantity by the related foreign company.