Shares in a German limited liability company (GmbH) under German law can in principle be sold to abroad companies without further ado. In contrast to a share transfer to a domestic purchaser, there are a few additional legal aspects to consider. Otherwise, the execution of the share transfer may be significantly delayed or even fail. In this respect, particularly careful preparation is required. This article highlights some of the practically relevant aspects from the perspective of the German company law.
Proof of existence for the abroad company
The notarization of the transfer of GmbH business shares requires the identification of the purchaser. Accordingly, the notary has to ensure that a company that acquires shares in another company actually exists. If it is a domestic corporation, i.e. a company with its registered office in Germany, this is relatively unproblematic. In preparation of the notarization, the notary will draw a current extract from the commercial register of the acquiring company. Proof of existence is sometimes more complicated for abroad companies.
The existence of the abroad company can be proven by an extract from the register
Many legal systems have institutes that are comparable to the German commercial register. If the abroad company is entered in such a register and if this register is structurally comparable with the German commercial register then the existence of the foreign company can be proven by submitting an extract from the foreign register. The following points must be observed in practice:
1. Language of the register extract
The proof of the existence of the company must be presented to the notary in a language that he understands. This point is often unproblematic as long as an extract from an abroad commercial register is available in English. If the register extract is not available in English, a certified translation into German will be required.
2. Certification and legalization of the register extract
The conformity of the register excerpt with the contents of the register must be confirmed by a certification of the excerpt. There may be different responsible for this certification, depending on the legal system. In some countries, the commercial register certifies the extract. (For companies registered in the German commercial register, the respective local registry court issues certified excerpts from the register). If the certification is carried out by a foreign authority, it usually has to be legalized. If the state from which the document whose authenticity is to be proven is a party to the multilateral Hague Convention number 12, legalization can be carried out by means of an apostille. The 12th Hague Multilateral Convention is currently signed by around 120 countries. Canada, China, many countries from the Middle East and many African countries are not party to the convention. Documents from these countries cannot be legalized with an apostille. Germany has also made a reservation on some contracting countries, including India, Kosovo, Morocco, Tunisia and Uzbekistan. Accordingly, apostilles from these countries are not legally recognized by Germany.
Depending on the country and the competent authority, it can take some time to get an apostille. If legalization of documents with an apostille is required for the transfer of business shares, the apostille should be applied for within reasonable time before the transaction. Otherwise the completion of the transaction may be delayed significantly.
The existence of the abroad company cannot be proven by an excerpt from the register
In this case, the existence of the abroad company must be proven by other documents. In Anglo-American legal systems, this is typically a Certificate of Existence or a Certificate of Good Standing, which proves that the corresponding company exists and was founded and operated in accordance with the law of the place of incorporation.