4.3.9.2 Valuation clauses creating a significant imbalance at the outset

The validity of valuation clauses is governed by the rule of § 138 I BGB. This section decrees that:

The Supreme Court held that the rule of § 138 I BGB only intervenes if the valuation mechanism contained in the articles of association is apparently unreasonable.2 This is the case when there is a significant imbalance between the compensation that results from the valuation clause, as laid down in the articles of association, and the full market value of the shares.3 The imbalance has to be so significant that the objective of the valuation clause, which is the continuation of the company and its business, cannot justify applying the valuation clause. If the content of the valuation clause is unfür (sittenwidrig), the valuation clause is null and void (nichtig). If the purpose of the valuation clause is unfür, the valuation clause may be nullified by the court (anfechtbar). In the situation that the valuation clause is null and void or nullified, the shares will be valued at their full market value, in the absence of an applicable valuation clause.4

The significant imbalance between the valuation based on a valuation clause and the full market value must already be present at the date the valuation clause was included in the articles of association. A significant imbalance arising at a later stage is irrelevant for the question whether the clause is to be declared null and void. A shareholder who wants to call on the voidance of a valuation clause has a term of three years to legally enforce this by means of court proceedings. The Supreme Court has ruled that by analogy of §§ 241 ff. AktG the right to call on the voidance of the valuation clause lapses after this term has ended. Therefore, when three years have passed since the articles of association including the valuation clause concerned have been registered with the trade register (Handelsregister) and the voidance has not been invoked, the valuation clause is valid.5

A valuation clause may determine that compensation has to be paid in several instalments instead of payment at once. According to the Supreme Court, the instalments of the compensation may be spread at maximum between five and seven years after the exit, though this depends on the circumstances of the case.6A valuation clause that results in payment of (part of) the compensation after this maximum period can be declared null and void. For instance, a clause that stipulates that the instalments will be paid after five, eight successively ten years is contrary to the public policy.7

It is worth mentioning that payment in instalments has the major disadvantage that the former shareholder is exposed to the risk that the company becomes insolvent. The former shareholder has no means to prevent the company from becoming insolvent.8