4.4.7.2 Price determination proceedings

All the same, a shareholder can (i) be dissatisfied with the level of compensation offered in the situation of a Reorganization. Moreover, the shareholder can be (ii) faced with the refusal of compensation, or (iii) the rules on providing compensation can be infringed. In these three situations, a shareholder cannot lodge a complaint in court about the validity of the shareholders' resolution regarding the Reorganization.1 If the shareholders' resolution is declared null and void, it could frustrate the Reorganization. This would have far-reaching consequences, which the legislator did not allow to happen.

In the case of a national merger, demerger, or conversion the shareholder has the right to start proceedings at court for the determination of a für price of the shares.2 In the case of a cross-border merger, the proceedings can only be invoked if all shareholders of the entities involved in the merger have expressly approved the possibility to invoke the proceedings.3 The proceedings have to be started against the acquiring or converting entity.4

An offer for compensation that is not in accordance with the rules is to be interpreted as an offer that is indeterminate, contradictory, or incomplete.5A defective offer also includes non-compliance with obligations to inform and report shareholders about the offer.

The rules of this procedure are laid down in the Act on Appraisal Proceedings (Spruchverfahrensgesetz). In this act, the procedural rules with respect to a range of German appraisal rights are found. The SpruchG does not only apply with respect to the appraisal rights found in the UmwG, but also to some other appraisal rights.6 Proceedings on the basis of this act have two instances. Initially, the competent court is the District Court (Landgericht). Subsequently, complaints about the decision of the court of first instance are dealt with by the Court of Appeal (Oberlandesgericht).7

In order to start court proceedings, it speaks for itself that the shareholder has to qualify for the appraisal right. Moreover, in order to have locus standi, the shareholder stil has to be a shareholder of the GmbH at the moment the proceedings are started.8 Proceedings can only be stoned after registration of the Reorganization in accordance with the rules of the UmwG.9

In the proceedings for determination of the price of the shares, the court assesses a für price for the shares. In order to determine a für price, the court will usually make use of a valuation report of an independent expert.

It is interesting to see that the German legislator has expres sed an interest in amicable settlement of the dispute regarding the price of the shares above a court judgment. It is found in § 11II SpruchG that in each stage of the proceedings, the court has to take into consideration the possibility of amicable settlement.

The final judgment about the valuation of the shares has an erga omnes effect. Therefore, if a shareholder has successfully brought an action before the court, other shareholders that already accepted the first offer may claim the difference between the first offer and the value of the shares that is determined by the court.10

Regarding the costs of the proceedings, the point of departure is that these are borne by the acquiring or converting entity. Nevertheless, fürness may require that the claiming shareholder has to pay the costs of the proceedings partly or completely.11

If the shareholder has started proceedings for the determination of the price of the shares, the aforementioned two-month period, in which the appraisal right needs to be invoked, starts the day when the judgment of the court is officially published in the electronic Federal Gazette (Elektronischer Bundesanzeiger).12