í´ì¸ M&Aì ë²ì ìì - Sullivan & Cromwell
í´ì¸ M&Aì ë²ì ìì - Sullivan & Cromwell
í´ì¸ M&Aì ë²ì ìì - Sullivan & Cromwell
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Joint Aspects – Corporate Restrictions/Financing<br />
continued<br />
Corporate Restrictions/Financing<br />
- German stock corporations (AG) are restricted in their ability to provide shareholders<br />
and their affiliates with security over their assets (so-called financial assistance) in<br />
connection with a purchase of their shares, which limits the ability of bidders to grant<br />
security to banks.<br />
- Violations of the financial assistance rules may have serious consequences:<br />
▶ Criminal and other liability of directors (e.g., imprisonment, fine, and disqualification from<br />
serving as a director).<br />
▶ Liability of the target.<br />
▶ Invalidity of the financial assistance.<br />
- Despite financial assistance restrictions, debt push down possible so far and constitutes<br />
current practice in Germany, targets typically converted into a limited liability company<br />
(GmbH)<br />
- European AIFM Directive requires implementation of further restrictions leading to M&A<br />
financing by using assets or distributable reserves of the target will be more difficult<br />
(asset stripping and debt push-down). Under the new regime, for a period of two years<br />
following acquisition of control, the management will (subject to certain exceptions) not<br />
be allowed to facilitate any distributions (which includes dividends and interest on<br />
shares), capital reductions, share redemptions or purchases of own shares by<br />
"controlled" portfolio companies.<br />
137
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