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person breaches its obligations under the Public Takeover Act, BaFin may impose sanctions, including fines of up to one million Euro.31

Any decisions made by BaFin may be challenged by way of an appeals procedure under administrative law. An appeals committee (Widerspruchsausschuss) will decide on objections against decisions of BaFin. These decisions of the appeals committee are subject to appeal (Beschwerde) to the Higher Regional Court (Oberlandesgericht) in Frankfurt am Main.32

4.6  Squeeze-out of Minority Stockholders

At the same time as the Public Takeover Act entered into force (January 2002), a new rule on the squeeze-out of minority stockholders was introduced. This rule has not, however, been incorporated into the Public Takeover Act, but has been implemented in theAktG. Therefore, it applies to all stock corporations whether publicly listed or not. In addition, a squeeze-out of minority stockholders does not require a public bid in advance.

However, when implementing the EU Takeover Directive, Germany has also introduced a new takeover-related squeeze-out procedure which will be briefly described in Sect. 4.6.3 below.

4.6.1  Overview

Secs. 327a–327f of theAktG provide for a procedure for the squeeze-out of minority stockholders in return for cash compensation in the event that a stockholder holds at least 95% of the target company’s share capital (‘principal stockholder’). The target company must be a stock corporation or a partnership limited by shares incorporated in Germany. The shares of the target company do not need to be listed on a stock exchange.

The principal stockholder must provide a written report to the general meeting of the stockholders explaining the requirements for the squeeze-out and the fairness of the cash compensation. Moreover, a fairness opinion regarding the proposed cash compensation is required from independent auditors who will be appointed by a court upon application of the principal stockholder. The amount of the cash compensation may be subject to court review in a specific proceeding pursuant to the Spruchverfahrensgesetz (Appraisal ProceedingsAct).

31  See Secs. 60, 61 Public TakeoverAct.

32  The Oberlandesgericht Frankfurt am Main has exclusive jurisdiction in this subject matter for the whole of Germany.

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4.6.2  Steps of the Squeeze-out Procedure

The squeeze-out procedure comprises the following steps:

•The principal stockholder determines the amount of cash compensation, which usually requires a valuation of the target by an independent auditor (such auditor to be appointed by the competent court upon application by the principal stockholder).

•Prior to the stockholders’ meeting which will decide on the squeeze-out, the principal stockholder must provide the management board of the target with a declaration from a bank stating that the bank guarantees the fulfilment of the principal stockholder’s obligation to pay the cash compensation to the minority stockholders.

•The principal stockholder must provide the stockholders’ meeting of the target company with a written report explaining the pre-conditions for the transfer of shares to the principal stockholder (such report also to be reviewed by the expert auditor). Moreover, it must explain and substantiate the appropriateness of the cash compensation.

•As from the time of convening the stockholders’ meeting, the following documents must be on display at the business premises of the target for inspection by the stockholders of the target company:

−Draft of the share transfer resolution;

−Annual accounts and management reports for the last three financial years;

−Above-mentioned report of the principal stockholder;

−Above-mentioned review by the expert auditor.

•Each stockholder must, upon request, be provided with a copy of the abovementioned documents without undue delay and free of charge.

•The resolution of the stockholders’ meeting requires a majority vote of at least three-quarters of the share capital represented at the passing of the resolution.

•The management board of the target company must apply for registration of the transfer resolution in the Commercial Register. Such application requires notarization.

•If no action to set aside the transfer resolution (Anfechtungsklage) has been filed within one month of the adoption of the resolution, the management board of the target company must notify the Commercial Register thereof in a so-called ‘negative declaration’ (Negativerklärung). Based on such declaration the transfer resolution will be entered into the Commercial Register and the stocks automatically transferred to the principal stockholder.

•Following the registration of the transfer resolution in the Commercial Register, the cash compensation must be paid to the minority stockholder by the principal stockholder.

A minority stockholder has the right to have the appropriateness of the cash compensation reviewed by a court in a specific appraisal proceeding (Spruchverfahren). Such procedure may also be initiated if the principal stockholder has not offered, or has not properly offered, any cash compensation and an action to set aside the transfer resolution based thereon has not been commenced within the avoidance period,

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has been withdrawn, or has been conclusively rejected. The application for such procedure may only be filed within three months of the registration of the transfer resolution in the Commercial Register.

4.6.3  The Takeover-Related Squeeze-out Procedure

as an Alternative

In addition to the general squeeze-out rules under theAktG described above, a new takeover-related squeeze-out procedure has been introduced implementing Art. 15 of the EU Takeover Directive.33 If, following its bid, a bidder holds at least 95% of the target company’s voting rights, the bidder will be able to acquire the remaining shares at a fair price. In order to achieve this, the bidder may apply for a squeeze-out of the minority stockholders in return for compensation within three months of the end of the period allowed for acceptance of the offer. In contrast to the squeeze-out procedure under the AktG, no stockholders’ resolution is necessary. The takeoverrelated squeeze-out becomes effective upon the court decision which will be binding on all remaining stockholders of the target company.

33  See Secs. 93 et seq. Public TakeoverAct.