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Squeeze Out Process Simplified
A recent decision of the Higher Regional Court of Hamburg provides new opportunities for a squeeze out in Germany. Formerly a squeeze out of minority shareholders out of a German stock corporation (AG), whether listed or not, was only possible for the majority shareholder if it held at least 95% of the share capital of the respective AG. Taxand Germany discusses the ruling and what it means for future squeeze out cases.
An EU-Directive implemented in Germany in July 2011 adopted an amendment to the German Reorganisation Act permitting a squeeze out in cases when the majority shareholder owns 90% of the shares (so called merger related squeeze out). In exchange for this significant reduction of the required shareholding quota, additional requirements were established and in order to take advantage of the reduced threshold for a merger related squeeze out.
Parties can only make use of these new provisions in the course of an upstream merger of the stock corporation into its majority shareholder. In addition, the majority shareholder needs to be an entity in the legal form of a German AG as well, while the 95% squeeze out is open to any majority shareholder, regardless of their legal form and nationality.
It is noteworthy that the Higher Regional Court of Hamburg has ruled that the change of legal form of the majority shareholder from a GmbH to an AG immediately prior to a merger and squeeze out, merely for the purpose of making use of the new squeeze out provisions, is permitted and does not constitute an abuse of rights. This decision provides for new opportunities for such holding companies and shareholders currently not organised in the form of an AG and therefore at present not being able to make use of the 90% squeeze out provisions.
Your Taxand contact for further queries is:
Dr. Volker Schulenburg
T. +49 40 18067 24687