(Interessensausgleich) and a social plan
(Sozialplan) before starting the alteration.
A social plan provides for a compensation
of the disadvantages suffered by the
employees. If both parties cannot agree on
the reconciliation of interests or the social
plan, either party can submit the matter
to a Conciliation Board (Einigungsstelle),
which shall attempt to reconcile the
parties and is authorized to draw up the
social plan.
The works council cannot prevent the
alteration and cannot force the employer
to agree to a specific reconciliation of
interests or a specific social plan, but it
can delay the process. Not every M&A
transaction requires the mentioned
procedure. However, if there are
major restructurings of the business in
connection with an M&A transaction, this
could be the case.
and a works council, it is obliged to have
an economic committee (Wirtschaftsauss-
chuss), which consists of employees as well.
The employer needs to inform the eco-
nomic committee about various economic
matters in advance, e.g., in case of the
purchase of a majority interest by a buyer.
can be required to establish a so-called
company has more than 500 employees.
Thus, the company needs to have a Super-
visory Board where one-third (in compa-
nies with more than 500 to 2,000 employ-
ees) or half (in companies with more than
2,000 employees) of the members are
employee representatives. The Super-
visory Board supervises the company's
management board.
Depending on the circumstances of
an M&A transaction, an approval by a
(possibly co-determined) Supervisory
Board could be required on the seller's/
buyer's side or in the target company.
Operation of Law
an undertaking or parts of it by way of
an Asset Deal, employees belonging to
the concerned undertaking or parts of it
are transferred to the buyer by operation
of law. The concerned employees have
to be informed prior to the transfer and
have a right to object to the transfer of
their employment relationship within one
month of receipt of a due notification. If
an employee objects, he or she remains an
employee of the seller.
Case of a Foreign Buyer
from outside the European Union (EU)
and the European Free Trade Association
Norway and Switzerland), the German
Ministry of Economic Affairs may
prohibit the acquisition if the investment
endangers public policy or the security
of the Federal Republic of Germany.
The government recently implemented
an obligation to notify the ministry
in case of acquisitions concerning
critical infrastructure. In other cases,
it is possible to proactively file an
application to the ministry in order to get
a confirmation that the acquisition does
not endanger the public policy or the
security of Germany.
In case of acquisitions by any foreign
buyer regarding companies which are
operating in particularly security sensitive
areas (manufacturers and developers of
military weapons and certain components
for tanks, as well as producers of certain
products with IT security functions), the
German Ministry of Economic Affairs must
be notified in advance. The ministry can
prohibit the acquisition if material security
interests of Germany are endangered.
In both cases, the criteria of an
acquisition is fulfilled if the buyer
acquires directly or indirectly more than
25 percent of the voting rights. Thus,
even the acquisition of a foreign company
with a German subsidiary can be subject
to the aforementioned examination
procedures and a prohibition by German
authorities. Recently, the German
Ministry of Economic Affairs has
reviewed some potential acquisitions of
German companies by Chinese investors,
for example.
the Early Involvement of a
Local Counsel
with complex issues in connection with
investments in Germany that might appear
as problems from a foreign perspective.
However, if experienced German M&A
lawyers are involved at an early stage,
they can plan your transaction in a secure
way and will, in most cases, be able to
avoid damaging impacts.