March 17, 2010 - Germany

German District Court Challenges the Effectiveness of Notarizations of SPAs by Swiss Notaries – Change of Established Court Practice?
  by Dr. Martin Imhof

by Dr. Martin Imhof 


The District Court of Frankfurt has recently issued a crucial decision in which the court casted reasonable doubt on the effectiveness of the notarization of an assignment or a pledging of shares in a German limited liability company (GmbH) by a Swiss notary. Due to recent modifications of the German and the Swiss company law, the legally required comparability of notarizations of a German and a Swiss notary does, according to the court, not any longer exist. It is likely, that the decision of the District Court of Frankfurt constitutes the beginning of a new practice of the courts.


Pursuant to Sec. 15 Para 3 and 4 of the German Limited Liability Companies Act (GmbHG), the assignment of shares of a limited liability company and the underlying obligatory contract require notarization to become legally effective. These regulations have the purpose to impede the trade of shares and to create legal clarity.


Due to cost reasons, assignments of shares of limited liability companies were frequently notarized by Swiss notaries in the past. According to the jurisdiction of the Federal Court of Justice, the notarization of assignments of shares of limited liability companies in foreign countries is effective if the office of the foreign notary and the foreign notarization procedure are “equivalent” to German notarizations. So far the courts, particularly for Swiss notaries operating in the German-speaking Swiss cantons, have approved this kind of notarization abroad, although it required approval for each canton separately. The District Court of Frankfurt has explicitly approved this legislation once again. However, due to amendments to assignments of shares in the German and Swiss Limited Liability Company Acts, the District Court of Frankfurt has also questioned this equivalence for transactions as of 2008.


Pursuant to Swiss corporate law, a written transfer agreement, together with the shareholder meeting’s approval where a shareholder meeting is not excluded from the company’s statutes (Para 785, 786 OR), suffices for the assignment of shares of a limited liability company as of 1 January 2008. As a result of this amendment the requirements by the Swiss Code of Obligations no longer conform to the requirements for effectiveness under Sec. 15, Para 3, 4 of the German Limited Liability Company Act (GmbHG). Moreover, the German MoMiG (Act to Modernize the Law Governing Private Limited Companies and to Combat Abuses), which came into effect on 1 November 2008, strongly enhanced the significance of a limited liability company’s list of shareholders, which must be ratified, notarized and submitted to the Commercial Register by the collaborating notary after the notarization of amendments of share ownership ratio pursuant to Sec. 40 Para 2 of the German Limited Liability Company Act (GmbHG).


Against the background of differing substantive formalities for assignment agreements and additional official duties of German notaries, the District Court of Frankfurt expressed serious doubts about the effectiveness of notarizations of assignments of shares and pledges of a limited liability company (GmbH) by Swiss notaries. The District Court particularly refers to a Basel notary who due to not fulfilling Germany’s official competencies, did not meet the newly regulated obligations for a notary involved in the assignment of shares pursuant to Sec. 40 Para 2 Limited Liability Company Act (GmbHG). In the opinion of the District Court of Frankfurt an equivalence of notarizations in line with the notary form requirements of German law would no longer apply. A concluding assessment of the effectiveness of form was not given by the judges in the case as such an assessment had not been asked for.


In practice this means that legal certainty will only be established in this matter once a decision has been made by the Federal Court of Justice. Until then there is the risk that notarizations in Switzerland will be considered ineffective. Weighing the pros and cons, it seems not worth taking the risk of ineffectiveness of the assignment of shares just in order to save costs.


Dr. Martin Imhof

Heuking Kuhn Luer Wojtek, Dusseldorf

[email protected]