Stricter Rules Governing The Participation Of Non-EU Investors In German Companies

Author:Dr. Kai Bandilla, Bodo Dehne and Michael Vetter
Profession:Heuking Kuhn Luer Wojtek
 
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The German Federal Government has amended the Foreign Trade and Payments Ordinance to increase the barriers for M&A transactions involving non-EU investors. Parallel to this, the European Commission presented a draft Regulation in September, aimed at creating a European legal framework for vetting foreign investments.

Overview

Since the middle of July, stricter rules have been in force for M&A transactions involving investors based outside the EU and EFTA member states. The rules apply to both direct and indirect shareholdings, if at least 25% of the voting rights in a German company are acquired as a result. More particularly, the German Federal Government has

introduced a catalogue of particularly security-relevant economic areas, established compulsory reporting for investments in these economic areas, extended and in part broadened the periods of the vetting process, and those related to applications for a clearance certificate, tightened the presumption concerning transactions for the purpose of evading the law. The tighter rules can be seen as the reaction to a series of spectacular acquisitions of German companies by Chinese investors. They are however applicable to all investors based outside the EU and EFTA member states.

The practical effects of the new rules on transactions are not to be underestimated. In many cases, the new compulsory reporting will create a significantly higher workload for investors and sellers. The importance of the clearance certificate in transactions will increase further. In addition, the parties will frequently have to allow for more time between signing and closing. This is likely to mean a further increase in the vetting intensity of the Federal Ministry for Economic Affairs and Energy, seen since the takeover of the robot manufacturer Kuka and the attempted takeover of the semiconductor producer Aixtron by Chinese investors. Parallel to this, the EU Commission is working on new, even farther-reaching investment controls at European level.

Catalogue of particularly security-relevant economic areas

On July 12, 2017, the German Federal Government tightened the existing rules controlling non-EU investments in Germany, through the 9th Amendment of the Foreign Trade and Payments Ordinance ("AWV"). On the one hand, it introduced a catalogue of particularly security-relevant economic areas in line with the French example. In the opinion of the German Federal Government, investments in these areas can constitute a threat to public order or security.  This concerns above all investments in companies operating so-called critical infrastructures. These include specific services and investment categories in the following economic areas:

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