Buying a business in Germany
BUYING AND LEASING A PROPERTY OR BUSINESS IN GERMANY
In Germany, our skilled Negotiators have extensive experience of their local and national markets, as well as in-depth knowledge of current legislation and trends.
Firstly, no matter what business you're planning to buy, you should research it thoroughly, especially the location. Also, the price should be verified, preferably by an expert. In Germany, the cost of this valuation is usually borne by the party buying the property.
It is very important to have the building inspected, both from the technical as well as the structural point of view.
In addition, due diligence should include an examination of the most recent trading figures, the capital expenditure programme and all the contracts and agreements relating to the business.
DEED OF PURCHASE
When all these details have been checked, the financing needs to be secured. In Germany, the buyer is asked to present an “irrevocable acceptance of loan financing” by a reputable bank before signing a contract with a “Notary”. If the purchaser has the cash, he is asked to provide proof of the existing funds. Then the Notary compiles a “Deed of Purchase” (buying contract). This, and any accompanying papers, should be checked thoroughly. If you are not German-speaking it is advisable to have these papers translated professionally, even if that does cost extra money.
Then, the date for signing the Deed with the Notary is agreed – this is called the “Notary Date”. At the “Notary Date” meeting, everyone who is buying the business has to be present, and show his or her legal papers (valid passports). If a company is buying the business, everyone signing the buying contract needs to bring their legalisation papers from the company (ie - authorisation and an extract from the Chamber of Commerce entry showing the authorisation status) plus their passports. It is legal procedure that the Notary reads the Deed out loud. If either party does not understand German, then it will also be read by a qualified translator.
The terms of the buying contract can be very variable. This is why a contract needs to be checked by someone experienced selling and buying a business in Germany. There are many legal obligations but also legal details, which can be either an advantage or disadvantage to the purchaser.
It is the duty of the Notary to ensure that all parties understand what they are signing, and that any questions that come up are answered.
After agreeing and making any changes or additions, the Deed is signed by both parties and the Notary. This contract is irrevocable and, unlike any other normal purchase, it cannot be revoked during the following two weeks. What is agreed in the Deed is the purchase and all its conditions, such as the day of payment, the day of handover to the new owner, any necessary repairs or anything else to be undertaken by the seller, and any other requirements by either party. Then, the Notary will continue his duties by making any and all applications to the “Grundbuch” - the land title register. Without these applications no property transaction can be completed.
Also on the “Notary Date” the business agent’s commission has to be paid. This is up to 5% of the purchase price, plus VAT.
Between two and four weeks after the buying contract has been signed, the transfer tax on the business needs to be paid. This is 3.5% of the total value of the transaction stated in the contract. This tax must be paid quickly after being requested otherwise the tax office will not issue the “clearance certificate” - an important paper for transferring the ownership from the seller to the buyer. Without this paper the transfer cannot take place.
Meanwhile, the notary and registration fees have to be paid. These comprise about 2.0% to 2.5% of the purchase price of the business.
During the process of buying a business in Germany, prospective purchasers are advised to seek timely advice from appropriate professionals and specialists (eg accountants, solicitors, valuers, surveyors, business agents, business finance brokers, stocktakers, etc). Reading this section of the website in no way obviates the need to seek such advice or find out the latest information. Christie + Co accepts no responsibility or liability for any loses incurred in any business venture or other investment conducted by the reader whatsoever.