Jones Day

The 17th amendment to the German Foreign Trade and Payment Ordinance ("AWV") adopted by the federal government on April 27, 2021, included—compared to the original draft—a number of changes relevant to M&A transactions with a nexus to Germany.

A draft 17th amendment to the AWV was published in late January 2021. While the 17th amendment as adopted is generally in line with this draft, there are a number of changes in German foreign direct investment ("FDI") control that companies envisaging transactions regarding German targets should be aware of:

The new rules expressly provide that the acquisition of additional shares exceeding any threshold providing the government with the right to start an ex officio investigation or leading to a notification requirement ("Triggering Events") may lead to new Triggering Events. In other words, in case a foreign buyer acquired 50% of the shares in a German target after having obtained a clearance in 2018 and wants now to acquire the remaining 50%, the second transaction constitutes a new Triggering Event. Only acquisitions increasing an existing share of 75% are not deemed to be Triggering Events.

Further, the 17th amendment introduces the concept of the acquisition of control into German FDI control. Agreements granting board seats, veto rights on important business decisions, access to information relevant for Germany’s security and public order supplementing the acquisition of shares in the German target may be deemed to constitute the acquisition of control and—as a consequence—Triggering Events.

No Triggering Event is deemed to exist in certain intra-group reorganizations. In case the buyer and the seller of the German target are controlled by the same ultimate parent entity and have their management in the same non-EU country, such restructuring does not constitute a Triggering Event. An additional exemption for intra-group restructuring is recognized by the German government, in case the buyer and the seller of the German target are both based in the EU and controlled by the same non-EU ultimate parent entity.

The new rules apply to transactions signed on or after May 1, 2021.

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