Before a Public Takeover Bid | Germany | Global Public M&A Guide

3. Before a Public Takeover Bid

[Last updated: 1 January 2025, unless otherwise noted]

3.1 Shareholding rights and powers

The table below provides an overview of the different rights and powers that are attached to different levels of shareholding within a German listed corporation:

Shareholding	Rights
One share	The right to attend and vote at general shareholders' meetings. The right to submit questions to the management board at general shareholders' meetings. The right to request the nullity of decisions of general shareholders' meetings for irregularities as to form, process or other reasons, subject to the shareholder having attended the meeting and having recorded an objection against the resolution, except where the deficiency relates to the calling of the meeting. The right to file/publish alternative suggestions with respect to a certain item on the agenda of the shareholders' meeting or with respect to the election of new supervisory board members.
The lower of 1% or shares representing EUR 100,000 of the share capital	The right to apply for a judicial decision to be authorized to assert claims for damages against members of the company's boards if no action has been taken prior to the expiration of a deadline and in case of suspicion of severe wrongdoing or breach of the law. The right to file an application with the court for a special audit of any matters relating to the formation of the stock corporation or the management of the stock corporation's business within the last 5 years if the shareholders' meeting has refused to appoint a special auditor. The right to apply for a special audit with the local court with regard to the suspicion of any material invalidity of items on the balance sheet.
The lower of 5% or, in some cases, shares representing EUR 500,000 of the share capital	The right to demand the management board to convene a general shareholders' meeting. The right to put additional items on the agenda of a general shareholders' meeting. The right to file an action to set aside the resolution on the appropriation of the net retained profits. The right to demand that the court shall appoint or remove a liquidator, if important reasons exist therefore.
The lower of 10% or shares representing EUR 1,000,000 of the share capital	The right to demand a separate vote with regard to the discharge of management. The right to demand that the court appoint special representatives to assert a claim for damages (particularly against members of the management or supervisory board). The right to demand that the court removes a member of the supervisory board for material cause. The right to veto waiver or settlement of claims against the founders or the board members or the controlling shareholder.
More than 25% (at a general shareholders' meeting)	The ability at a general shareholders' meeting to block: changes to the corporate purpose of the company; any other changes to the articles of association, mergers, de-mergers, capital increases, capital reductions and dissolution of the company; the authorization of the management board to increase the company's share capital without further shareholder approval (the so-called "authorized capital"); the authorization of the management board to enter into a domination and/or profit and loss pooling agreement (see 7.4 below); the disapplication of the subscription right of existing shareholders in case of share issues; and divestitures or outsourcing of substantial assets of the company if certain further criteria are met.
More than 50% (at a general shareholders' meeting)	The ability at a general shareholders' meeting to: appoint and dismiss members of the supervisory board; appoint and dismiss statutory auditors to approve the annual financial statements; resolve on the approval of the remuneration scheme submitted by the supervisory board; grant discharge from liability to the members of both the management and supervisory board; and take decisions for which no special majority is required.
More than 75% (at a general shareholders' meeting)	The possibility to approve the measures set out under 'More than 25% (at a general shareholders' meeting)' above.
90%	The possibility to force all other shareholders to transfer their shares through a merger squeeze-out (provided that the 90% shareholder is also a German stock corporation, see 7.1 below).
95%	The possibility to force all other shareholders to transfer their shares for cash compensation, a "squeeze-out" (see 7.1 below).

3.2 Restrictions and careful planning

German law contains a number of rules that already apply before a public takeover bid is announced. These rules impose restrictions and hurdles in relation to prior stake building by a Bidder, announcements of a potential takeover bid by a Bidder or a target company, and prior due diligence by a Bidder. The main restrictions and hurdles have been summarized below. Careful planning is therefore necessary if a Bidder or target company intends to start up a process that is to lead towards a public takeover bid.

3.3 Insider dealing and market abuse

Before, during and after a takeover bid, the normal rules regarding insider dealing and market abuse remain applicable. For further information on the rules on insider dealing and market abuse, see 6.3 below. The rules include, among other things, that manipulation of the target's stock price, e.g., by creating misleading rumors, is prohibited. In addition, the rules prohibiting insider trading may prevent a Bidder that has inside information regarding a target company from building a stake or launching a takeover bid. Certain exemptions apply under Article 9 of MAR, in particular for inside information obtained in the conduct of a public takeover, provided that such inside information is made public when the offer is launched.

3.4 Disclosure of shareholdings and financial instruments

The rules regarding the disclosure of shareholdings and transparency apply before, during and after a public takeover bid.

Pursuant to these rules, if a Bidder starts building up a stake in the target company, it will be obliged to announce its stake to the target company and BaFin if the attached voting rights have reached or crossed an applicable disclosure threshold. The relevant disclosure thresholds in Germany are 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%.

Similar rules apply to the holding of instruments relating to shares in target companies, including call and put options and cash-settled instruments, such as contracts for difference and to the combined holding of shares and instruments. For instruments and for the reporting of the combined holding of shares and instruments, the 3% threshold does not apply.

When determining whether a threshold has been reached or crossed, a Bidder must also take into account voting rights held by the parties with whom it acts in concert or may be deemed to act in concert (see 3.8 below), which includes affiliates. The parties could also include existing shareholders of the target company with whom the Bidder has entered into specific arrangements, such as pooling or call option agreements.

Additional disclosure obligations apply if the 10% threshold or a higher threshold is reached or crossed. Within 20 trading days, the shareholder must disclose the investment objective and the source of the funds used for the investment. This means that the shareholder must disclose:

whether the investment serves strategic goals or to generate trading profits;
whether there is intention to increase the number of voting rights over the next twelve months;
whether it is intended to take influence over the composition of the boards; and
whether it is intended to change the capital structure of the target company, in particular regarding equity and debt financing or the dividend policy.

In relation to the source of funds, the shareholder must disclose any debt financings in connection with acquiring the shares.

If intentions change, this must be reported as well. There are no sanctions for non-compliance with these disclosure obligations save for the target company publishing that it has received no timely disclosure and there is a risk that the shareholder could be found to have manipulated the market by failing to make the requisite disclosures.

3.5 Disclosures by target company

The target company must continue to comply with the general rules regarding disclosure and transparency. In particular, the target company must publish the disclosure of shareholdings and instruments received from investors within a maximum period of three trading days. The target company must also report its treasury shares if the shareholding reaches or crosses the thresholds of 5% and 10%. The target company must immediately announce all inside information. For further information on inside information, see 6.1 below. The facts surrounding the preparation of a public takeover bid in a "protracted process" may constitute inside information. If so, the target company must announce this. However, the management board of the target company can delay such announcement if it believes that a disclosure would not be in the best interest of the company. For instance, this could be the case if the target's management board believes that an early disclosure would prejudice the negotiations regarding a bid. However, a delay of the announcement is only permitted if the non-disclosure does not entail the risk that the public is misled and if the company can keep the relevant information confidential. Under the EU Listing Act this regime will change significantly effective on 5 June 2026 and issuers will no longer need to report intermediate steps in a protracted process, but only the "final event". Under a delegated act, ESMA shall define the "final" event that triggers the disclosure obligation.

3.6 Announcement of a public takeover bid

The offer procedure is generally started by the Bidder's announcement of its decision to launch a voluntary offer (for more detail, see 5.2 below).

3.7 Due Diligence

The German public takeover bid rules do not contain specific rules regarding the question of whether a prior due diligence can be organized, nor how such due diligence is to be organized. German stock corporation law provides a general obligation for the management of a stock corporation to keep information of the company confidential. Nevertheless, the concept of a (limited) prior due diligence or pre-acquisition review by a Bidder is generally accepted in the market and by BaFin as well, and appropriate mechanisms have been developed in practice to organize a due diligence or pre-acquisition review and to cope with potential market abuse and early disclosure concerns. These include the use of strict confidentiality procedures and data rooms and further restrictions under antitrust law, as applicable. One further consequence of a bidder having obtained inside information is that usually such inside information must be published before the offer document is published.

3.8 Acting in concert

For the purpose of the German takeover bid rules, persons "act in concert":

if they collaborate with the Bidder, the target company or with any other person on the basis of an express or silent, oral or written, agreement aimed at acquiring the control over the target company, frustrating the success of a takeover bid or maintaining the control over the target company; or
if they have entered into an agreement relating to the exercise in concert of their voting rights with a view to have a lasting common policy in respect of the target company.

Subsidiaries are deemed to act in concert with the parent company.

In view of the above rules and criteria, the target company could be one of the persons with whom a shareholder acts in concert or is deemed to act in concert. For example, this is the case where a target company is already controlled by a shareholder.

The concept of persons acting in concert is very broad, and in practice many issues can arise to determine whether persons act or do not act in concert. This is especially relevant in relation to mandatory takeover bids. However under a recent court case, it was clarified that a one-off coordination between shareholders in connection with a supervisory board election is not acting in concert, even if this has a lasting effect on the target company.

If one or more persons in a group of persons acting in concert acquire or jointly hold voting securities as a result of which the group in the aggregate would pass the 30% threshold, the members of the group will have a joint obligation to carry out a mandatory takeover bid, even though the individual group members do not pass the 30% threshold. However, it is worth noting that such aggregation for the purpose of the requirement of a mandatory takeover bid requires (a) a coordination on the exercise of voting rights in the target company or (b) acting with the goal of permanently and significantly changing the entrepreneurial direction of the target company.

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