§ 16 Legal status following change in shareholders or extent of participation; purchase from non-authorised persons

a) General

The provision contained in paragraph 1 of section 16 of the German Limited Liability Companies Act (GmbHG A list of abbreviations is provided at the end of this section) came into effect as per 01.11.2008 in conjunction with the German Act to Modernise the Law on Limited Liability Companies and Combat Abuses (MoMiG) of 23.10.2008, BGBl I, 2026. This provision regulates who, subject to which conditions and with effect from when is to be deemed to be the owner of a share in relation to the company. Section 16 GmbHG is intended to improve transparency and combat abuses. Explanatory memo (RegBegr) BT-Drs. 354/07, 84

This provision is to be read in close connection with sec. 40 GmbHG which regulates the formalities applying to the list of shareholders. This is because all of the areas regulated in section 16 refer to the content of this list of shareholders which has to be recorded in the commercial register. That person who is entered in this list is deemed to be the owner of the respective share in relation to the company, regardless of whether that person is a shareholder under substantive law (para. 1). In addition to the shareholder previously entered, he is liable for arrears on obligations to pay capital contributions for the relevant share even if he is said to have not legally acquired it (para. 2). Third parties can acquire the relevant share (in good faith) from persons entered in the list of shareholders even if the transferor recorded in the list is not the owner of the share under substantive law.

Under the law applying hitherto (section 16 GmbHG old version), a distinction was also made between the formal status as shareholder and the status as shareholder under substantive law. This provision did not, however, rely on the entry in a list of shareholders for this distinction, but on the registration of the share transfer with the company. The list of shareholders which was also provided for and had to be filed with the commercial register under the old law had no relevance in this respect.

The new version of section 16 is worded in line with section 76 II German Stock Corporation Act (AktG). As under section 16 GmbHG, pursuant to section 76 II AktG a person is only deemed to be a shareholder in the relation to the company if that person is recorded as such in the register of shares.

By publishing the list of shareholders in the commercial register, the recommendations of the Financial Action Task Force on Money Laundering (FATF) and Directive 2006/60 EG of 26.10.2005 to prevent the use of the financial system for the purpose of money laundering and terrorist financing in the European Union are being implemented. RegE on the MoMiG of 25.07.2007, RegBegr. on section 16, BT-Drs. 16/6140, 89; in summary: Michalski/Ebbing, GmbHG, 2nd edition (2010), § 16 margin nos. 1 - 7; Baumbach/Hueck/Fastrich, GmbHG, 20th edition (2013), section 16 margin no. 1; MüKoGmbHG/Heidinger, 2nd edition (2015), § 16 margin nos. 1, 12, 14 and 15

Section 16 applies to every kind of change of shareholder, i.e., above all, to the sale of shares by legal transactions, but also to changes in shareholder status by virtue of inheritance, by means of enforcement proceedings, in cases of company reorganisation or accrual (Anwachsung). Michalski/Ebbing, GmbHG (footnote no. 3 above), section 16 margin no. 8 – 12; RegBegr. on MoMiG of 25.07.2007, RegBegr. on section 16, BT-Drs. 16/6140, 91; Lutter/Hommelhoff/Bayer, GmbHG, 18th edition (2012), section 16 margin no. 7; MüKoGmbHG/Heidinger (footnote no. 3 above), section 16 margin no. 90

The provisions of section 16 III GmbHG create for the first time the preconditions for a share in a GmbH to be purchased in good faith and are intended to considerably simplify the legal relations involving GmbH shares.

So as to gain an initial overview of the significance of section 16 GmbHG to legal relations and to its application with respect to the rule of law and since diverse interests are involved, namely at least those of the old shareholder, of the possible new shareholder and, above all, of the company, its management and also of the notaries and the commercial register, it is advisable to have a presentation from the perspective of the various stakeholders. The following examination will look into the provisions of section 16 I and II GmbHG first of all, then at the possibility of acquisition of a GmbH share in good faith pursuant to III.

b) Section 16 I and II GmbHG from the perspective of the company

The point of reference for the status of shareholder is solely the list of shareholders recorded in the commercial register. The inclusion of the entry of the new shareholder in the list of shareholders recorded in the commercial register is not the precondition for the effectiveness of the transferor of any other disposition. If the transfer is effective pursuant to section 15 GmbHG for example and also if it is otherwise effective (e.g. legal capacity of the parties), the transferee is the owner of the share even without being included in the list of shareholders and publication thereof in the commercial register and may dispose of this share. In relation to the company, however, the acquisition does not become effective until the transferee is included in the list of shareholders and this list is recorded in the commercial register. As far as drawing up the list and filing it with the commercial register are concerned, solely the managing directors are responsible for this and also domestic notaries in the event of their being involved in changes in the status of shareholders (cf. section 40). A new list of shareholders only has to be drawn up and filed in the event of changes in the persons who are shareholders or in the extent of their participating share. There is no change in the persons who are shareholders in the event of a change of members of an OHG (Offene Handelsgesellschaft), KG (Kommanditgesellschaft) or in a BGB external partnership (BGB-Außengesellschaft), or in the case of a transfer subject to a condition precedent (e.g. conditional upon payment of the purchase price or on approval of a merger by the German Cartel Office), as long as the condition has not been satisfied. BGH (German Supreme Court), ruling of 20.09.2011, II ZB 17/10, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=e944317a983e59b61512e3989a15ecec&nr=58010&pos=0&anz=1, NZG 2011, 1268; Baumbach/Hueck/Fastrich (footnote no. 3 above), section 16 margin no. 9 The court of registration only examines compliance with the formal condition of section 40 I and section 40 II, not the substantive correct nature of the list. BGH, ruling of 20.09.2011, II ZB 17/10, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=e944317a983e59b61512e3989a15ecec&nr=58010&pos=0&anz=1, NZG 2011, 1268 margin no. 10 The register can, however, reject the list if details are obviously erroneous or based on an obvious error. OLG (Court of Appeal) Munich, decision of 08.09.2009, 31 Wx 82/09, NJW 2010, 305 

The managing director and the notary act on the basis of a statutory obligation and they are not subject to instructions from the transferor or transferee or the meeting of shareholders when drawing up the list. However, in principle, managing directors only act upon the notification and respective evidence of a change in the group of shareholders. No special form is required. It is, however, necessary for the company to be convincingly notified of the transfer of the rights. Such evidence may not be waived in the articles of incorporation, nonetheless a stricter form, e.g. certification etc., may be prescribed therein. Scholz/Seibt, GmbHG, 11th edition (2012), section 16 margin no. 13 

List of shareholders: 

• This list must be drawn up by a person authorised to do so and
• be filed by a person authorised to do so (the respective managing director or a notary who is involved).
• Pursuant to section 40 I GmbHG, the list is amended by the managing director upon his being notified by and receiving evidence from a person authorised to do so.
• The list must include the precise content specified in section 40.

If the board of management establishes that an entry made in the list by the notary is incorrect, then the board of management may correct the list accordingly. BGH, judgment of 17.12.2013 – II ZR 21/12, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=f48682f6ce42c127ecdcfde3390e9bcf&nr=66543&pos=0&anz=1, ZIP 2014, 216 

A notary abroad is also authorised to file a list of shareholders, at least insofar as his legal position and the respective notarisation under the respective national law is comparable to that of a German notary public’s office (in this specific case in the canton of Basle city in Switzerland). BGH, ruling of 17.12.2013 – II ZB 6/13, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=4f1e5f6cf1dfb5f30db6ab5447e99923&nr=66653&pos=0&anz=1; ZIP 2014, 317; Seibt, EwiR 2014, 171 

The entries to be made in the list are: family name, first name, date of birth and place of residence of the person concerned and the nominal amounts of the shares and the sequential numbers of the allocated shares.

The duly compiled list of shareholders is to be imputed to the new shareholder, irrespective of who it is ultimately filed by, and complies with the publication requirements by being recorded in the commercial register. MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 41 

The new shareholder has a legal right to the list of shareholders being filed with the commercial register. MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 42 

The list of shareholders is only afforded no effectiveness if there is a general ground for excluding imputation to the person communicating it or of the person being entered therein, e.g. compulsion to conduct the act, representation without power of representation, forgery or lack of legal capacity. Baumbach/Hueck/Fastrich, (footnote no. 4 above), section 16 margin no. 12; Lutter/Hommelhoff/Bayer, (footnote no. 4 above), section 16 margin no. 13; MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 44

The precondition for the list of shareholders evolving all legal effects is its being recorded at the register. It is recorded in the register file determined for the respective register sheet (section 9 para. 1 Commercial Register Ordinance, HRV). The commercial register has no examination function but only a custodial function that also enables general cognisance. MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 82; RegBegr. BT-Drs. 16/6140, 38 It is solely the date on which the list is recorded that is decisive in determining the effectiveness of the list of shareholders pursuant to I and also III and – above all – for the delimitation of liability pursuant to II. Up until only a few years ago this decisive date was not evident in the commercial register, neither for the shareholders affected nor for the GmbH or for the relevant public. Scholz/Seibt, (footnote no. 8 above), section 40 margin no. 24; MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 83 The legislator must ensure that the date of recording is electronically combined with the list of shareholders by the court of registration in such a way as to ensure that the date is permanently secured and visible together with the list. The technical preconditions for including the date of the list in the commercial register have since been established.

Insofar as the ownership, the extent of the participation, the denomination of the shares and the personal data of the shareholder are included in the list of shareholders, then the irrefutable assumption of ownership applies once the list has been recorded in the commercial register. Lutter/Hommelhoff/Bayer, (footnote no. 4 above), section 16 margin no. 27; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 11 The company cannot claim that the list was incorrect if it is responsible for the errors in the list itself, for instance in the event of non-notification or if the list does not correspond to the notification. Conversely, the company cannot invoke the irrefutable assumption of the list published in the commercial register if the company has the notification and the evidence, but the managing director delays recording the details in the list of shareholders and filing the list. Lutter/Hommelhoff/Bayer, (footnote no. 4 above), section 16 margin no. 13; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 11 

aa) Legal situation in the relation of the shareholders to the company pending the recording of the new list in the commercial register

In the period of time before the recording in the commercial register of a list of shareholders incorporating changes, for instance following the acquisition of a share by a new shareholder or because of an inheritance or a reorganisation of the company, the shareholder who is recorded in the old list is deemed to be legitimised. That shareholder is deemed to be the shareholder in relation to the company together with all rights and obligations. The new shareholder, e.g. the transferee, cannot bring a claim to any shareholder rights before the list is recorded in the commercial register, in particular he cannot exercise his right to vote. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 14 He is notably also unable to dismiss the board of management or to appoint new managing directors. Before the list is recorded in the commercial register it is only the former shareholder, e.g. the transferor, who is liable for obligations from the shareholding in relation to the company. This also applies to obligations that fall due in the period of time between the sale and the recording of the new list in the commercial register.

bb) Legal situation after the new list is recorded in the commercial register

Once the new list has been recorded in the commercial register (see above with regard to the problems relating to the date as evidence of the list being recorded in the commercial register) only the new shareholder is authorised in relation to the company. The shareholder can require, in particular, payment of profit, provided that nothing to the contrary is agreed in the purchase contract with the previous shareholder. If the transfer of the share is ineffective, then the shareholder entered in the list nonetheless applies in relation to the company, something which is also binding for the court of registration. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 16

cc) Retroactive effect of the recording of the list of shareholders in the commercial register without delay (I sentence 2)

In accordance with sec. 16 I sentence 2 GmbHG, a transferee who is either not yet entered in the list or with respect to whom the list is not yet recorded in the commercial register should, immediately after the acquisition becomes legally effective, have the possibility of participating in shareholder resolutions to change the articles of association and, above all, also in appointing new managing directors. RegBegr. BT-Drs. 16/6140, 38 The retroactive effect only applies to legal acts of the transferee, i.e. of the shareholder, not also vice versa to legal acts of the company in relation to the transferor or to the transferee. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 46 

The retroactive effect only arises, however, if the list is recorded in the commercial register without undue delay after the legal act has been performed. In legal terms, without undue delay “unverzüglich” means that the recording may not be culpably delayed. It raises the question, however, of whose culpability is relevant in this case. There is consensus in that delays originating from the sphere of the commercial register are said to be non-prejudicial. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 47; Lutter/Hommelhoff/Bayer, (footnote no. 4 above), section 16 margin no. 37; of divergent opinion MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 144 As far as legal relations are concerned, the statutory regulation is at least unfortunate. According to the wording of the statute, legal acts by the transferee in respect of his relationship to the company are provisionally ineffective pending the new list being recorded in the commercial register. The measures only become effective when the list is recorded. This means that important measures concerning the management which are also relevant with respect to third parties, for example removing the old managing director and appointing a new one, are initially ineffective. The legal position actually signifies that the managing director holding the position hitherto, who can only be removed and dismissed in a provisionally ineffective manner, continues to be in office, but the new managing director does not yet hold office.

The effect which the legislator actually sought to achieve is for all measures which the transferee takes in relation to the company to be provisionally effective until that point in time when the list should actually be recorded in the commercial register. Although this completely reverses the wording of the statute, it is the only practicable solution. The measures are then provisionally effective in legal terms. This means that it would be the newly appointed managing director who would also be responsible for filing the registration and for executing measures that have been resolved and no longer the managing director who has been removed. This is why clarifying the date by which the new list has to be recorded in the commercial register is of immense importance. Apart from the fact that referring to culpability is unsatisfactory, fixed time limits are suggested for the term “without undue delay”, e.g. two weeks, MüKoBGB/Kramer, volume 1, 6th Edition (2012), section 121 BGB margin no. 6 or four weeks. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 47; Baumbach/Hueck/Fastrich, (footnote no. 3 above), § 16 margin no. 20 If the list has not been recorded in the commercial register within this time limit, then the old situation will continue to apply, i.e. as if the new shareholder had not become a shareholder after all and all (interim) resolutions and measures are ineffective.

So as to avoid being exposed to this legislative error, the parties to a share purchase and transfer agreement should, in any case, agree that the transferee may assert his rights in relation to the company with immediate effect, for instance by means of the transferor representing him or by the transferor complying with his instructions in a ballot. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 49; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 21 

dd) Liability of the transferor and the transferee in relation to the company pursuant to section 16 II

When the list is recorded in the commercial register, then the transferor withdraws from the company relationship with respect to the company and from the obligations still existing under the relationship, notably, for example, also from a non-competition clause. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 22 The transferor continues to be liable for all performance due prior to the registration being filed with and recorded in the commercial register. This can be of relevance, in particular in connection with questions relating to a failed increase in capital in kind or regarding additional contributions which are due.

Once the list is recorded in the commercial register, the transferee is liable for all contribution claims, but also for all types of differential liability (“Differenzhaftung”, liability for a shortfall in the value of a contribution in kind and the nominal value of the share subscribed to) and for additional contributions. The transferor and the transferee are liable as joint and several debtors in relation to the company. BGH, judgment of 04.03.1996, II ZR 89/95, BGHZ 132, 137 

A deviation from this statutory ruling can be agreed by the transferor and the transferee in a corresponding share purchase and transfer agreement. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 25 

c) Position of the shareholders

aa) Transferor (old shareholder)

Subject to a different agreement being reached between the transferor and the transferee, the old shareholder (transferor) is authorised and obliged in relation to the company pending the recording of the new list of shareholders identifying the transferee. The transferor must collaborate in drawing up a new list of shareholders. Above all the transferor shall refrain from influencing the notary (if a notary is involved in the transfer of the share) or the managing director in any way whatsoever to the effect that the list is not filed at all or filed belatedly. The consequence of any such collaboration between the old shareholder and the notary/managing director is that the old list of shareholders is ineffective or that the old shareholder cannot rely on this list.

bb) Transferee (new shareholder)

The new shareholder has a claim against the managing director or the notary, if a share transfer is involved, to have an amended list of shareholders prepared and immediately filed for recording in the commercial register. In the event of a violation against this statutory duty, the managing director is liable for damages pursuant to section 40 III GmbHG.

However, the new shareholder does have to notify the managing directors accordingly and to provide proof of the transfer of the share. The principle applies here too that any collusive collaboration between a new shareholder and the notary/managing director with regard to the submission of an incorrect list of shareholders has no effect. The list does not then acquire the effect of an irrefutable assumption ordered by law.

The managing director can instruct heirs to provide evidence of their inheritance right by submitting a respective certificate of inheritance.

In order for the list to become fully effective, the recording must be imputable to both the transferee and the transferor. MüKo GmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 62 

A difficult legal position arises for a transferee who acquires the share subject to a condition precedent (e.g. subject to payment of the purchase price or approval by the German Federal Cartel Office (Bundeskartellamt)). Until the condition precedent has been satisfied, the transferee may not be entered in the list of shareholders, so that he has to ensure that the notary is notified once the condition has been met. The transferee is subject to most legal uncertainty in those cases where a share is transferred subject to a condition precedent, as here it is possible for there to be certain manipulations with regard to the notification to the notary that the condition has been met, so that the notary cannot compile an amended list of shareholders and submit it to the commercial register for recording.

d) Position of the board of management

The board of management is afforded very great significance in the context of drawing up and submitting the list of shareholders. The managing director is not expected to examine complex legal situations; he does, however, have to examine the plausibility of any signatures he is not familiar with, denominations of the GmbH shares or the addresses of the parties involved.

The legislator clarifies the managing director’s strong commitment to his legal duties by making the managing director liable for damages if he violates such duties with regard to the list of shareholders section 40 III GmbHG.

The German Supreme Court (Bundesgerichtshof) has even imposed the duty on the managing director to submit a corrected list even if the original, but incorrect, list was compiled by the notary. BGH, judgment of 17.12.2013 – II ZR 21/2012, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=f48682f6ce42c127ecdcfde3390e9bcf&nr=66543&pos=0&anz=1, ZIP 2014, 216 

In order to make it as easy as possible for a managing director to comply with the requirements of sections 16 and 40 GmbHG, the company and the shareholders should be intent on having the list with a change in shareholders compiled by a notary in as many cases as possible, i.e. to have a notary collaborate in the transfer of shares wherever this is not required by law anyway, for instance in the case of a share transfer pursuant to section 15 GmbHG which still has to be in notarial form.

e) Effects on notaries

As far as the compilation of the list of shareholders by a notary is concerned, the notifications and the evidence of the transfer of the share by the new shareholder affected are not of decisive importance. The notary has to judge the legal position on the basis of his own competence. A possible error by the notary does not impair the effects of the list of shareholders. MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 64 

According to section 40 II sentence 2 GmbHG, the list must be furnished with notarial certification. The law thus documents that a list compiled by a notary has a higher guarantee of being correct and thus an increased effect of the ostensible existence of a legal situation (Rechtsscheinwirkung). MüKoGmbHG/Heidinger, (footnote no. 3 above), section 16 margin no. 64 

The notary can incur problems above all in the event of a share transfer subject to a condition precedent if the parties do not notify the notary that the condition has been met. Here the extent to which the notary then has duties to clarify the true facts and circumstances is disputed.

f) Effects on third parties

The following acts can have effects on third parties that are not to be under-estimated: measures by the (new) board of management in the state of abeyance between the sale of the share, appointment of the new board of management by the transferee and the failure to have the list of shareholders recorded in the commercial register. If the list is not recorded in the commercial register without undue delay pursuant to section 16 I, 2 sentence GmbHG, then the appointment of the new managing director is not effective and the company was not duly represented.

g) Acquisition in good faith pursuant to 16 III GmbHG

The innovation of section 16 GmbHG which probably has most significance in terms of legal relations, is the possibility of shares being purchased in good faith. Here too, it is the list of shareholders that is the point of reference for a purchase in good faith. Good faith is not, however, protected to the extent that the wording of the statute implies. Above all, good faith in the existence of the share and in its freedom from encumbrances is not protected. BGH, ruling of 20.09.2011, II ZB 17/10, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=e944317a983e59b61512e3989a15ecec&nr=58010&pos=0&anz=1,  NZG 2011, 1268, margin no. 19; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 26 Good faith in the existence or non-existence of limited rights in rem is not protected either, since rights such as these cannot be entered in the list of shareholders. Above all, there is no protection of good faith in the fact that the shareholder can freely dispose of the share without the consent of the company or of the remaining shareholders (so-called restriction on transferability “Vinkulierung”). Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 76; Rodewald, GmbHR 2009, 196, 197, Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 26 Furthermore it is not possible to purchase a share in good faith that has become part of assets involved in insolvency proceedings (section 81 I 1 German Insolvency Statute (InsO)).

aa) Basic preconditions for a purchase in good faith

The following conditions must be met for a purchase in good faith to be possible:

• The share must exist;
• The details of the owner or of the extent of his participation must have been entered incorrectly in the list of shareholders recorded in the commercial register;
• The acquisition of a share must have been performed by a legal transaction;
• There must be imputability to the authorised person or the three year period must have expired;
• There must be no objection;
• The transferee must have no knowledge or grossly negligent lack of knowledge of the transferor’s lack of authorisation.

bb) Existence and denomination of the share

Only a share that exists can be acquired. RegBegr. BR-Drs. 354/07, 88; Götze/Bressler, NZG 2007, 894, 897 

Good faith in the correct nature of the denomination is also protected. This means that if the share does actually exist, but the denomination of the share is incorrectly stated in the list, e.g. because the combination or division of shares has not been recorded, then it is possible to have acquisition in good faith of the share in its correct denomination. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 28 

cc) The list of shareholders is incorrect

A further requirement for acquisition in good faith is that an incorrect list of shareholders has to have been recorded in the commercial register. If the list is incomplete in any way, for instance if the signature of the managing director is missing, the details relating to the alleged owner cannot be identified or it is not possible to identify the share, then acquisition in good faith is not possible. In summary of this: Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 29 

A list of shareholders is incorrect if it does not comply with the legal position under substantive law. This applies above all if an acquisition is ineffective because of defective form, due to lack of approval by the company or the shareholders, insofar as this is a requirement of the company’s articles of association, or because it was effectively contested. Mayer, DnotZ 2008, 403, 417; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 29 According to BGHcase law, ruling of 20.09.2011, II ZB 17/10, http://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=e944317a983e59b61512e3989a15ecec&nr=58010&pos=0&anz=1, NZG 2011, 1268, margin no. 14, it is not possible to have acquisition in good faith in respect of a share that has been conditionally transferred. This problem is based on the following constellation: The shareholder who has been incorrectly recorded in the list transfers his share to a new shareholder subject to a condition precedent (subject to payment of the purchase price, approval by the cartel office). Before the condition has been met, the shareholder transfers the share again to another new shareholder. This new shareholder cannot acquire the share in good faith as the list of shareholders was not incorrect in the intervening period as long as the condition had not been met. The list of shareholders cannot capture a transfer of shares subject to a condition precedent. It is correct until the time when the condition has been met and then the new shareholder is entered in the new list. The result is unsatisfactory to a certain degree as the second transferee who actually acquires the full right, is in a poorer position than the first transferee who can acquire the share in good faith once the condition has been met.

dd) Acquisition by performance of a legal transaction

Unlike paragraphs I and II, paragraph III only applies to acquisition of shares by performance of a legal transaction, not to acquisition by inheritance, by merger or formation of a community of property. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 30

A further important precondition is for a so-called Verkehrsgeschäft, a legal transaction between two different parties, to have been conducted. This means that unrelated third parties have to be involved on both the transferor and the transferee side, as otherwise there is no need to protect good faith. Above all, cases of a so-called third party trust (fremdnützige Treuhand) or of a transfer to a company which is also controlled by the shareholder do not constitute a Verkehrsgeschäft. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 31

ee) Reasons for exclusion for a purchase in good faith

Lack of imputability of the incorrect nature of the list within the three year period

If the incorrect list of shareholders, identifying the non-authorised transferor as shareholder, has not yet been recorded in the commercial register for more than three years (see below with regard to calculating the three year period), then there is no acquisition in good faith if the incorrect nature of the list is not imputable to the actual but not recorded authorised person. If the incorrect nature of the list was in the area of risk of the authorised person, he must have the incorrect nature imputed to him and cannot intervene. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 105; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 33 The incorrect nature of the list is imputable to the person actually authorised above all if it is he himself who somehow contributed to the list being incorrect. However, there is no fundamental obligation to regularly monitor the list of shareholders recorded in the commercial register. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 35 The truly authorised party has to become active, however, if he obtains knowledge of the incorrect nature of the list of shareholders. If he fails to do anything, it is possible to have an acquisition in good faith from a transferor who is wrongly recorded. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 106 

ff) The list has been incorrect for more than 3 years

Notwithstanding who is responsible for the list being incorrect, acquisition in good faith is always possible if the list has already been incorrect for over three years. The point in time that is decisive in determining the beginning of the time period, i.e. for calculating the three year period, is the date on which the incorrect list of shareholders is recorded in the commercial register. If the list was correct initially and a change of ownership occurred later which was not documented, the latter point in time is the decisive time. If one incorrect list follows another incorrect list, then the first date is decisive on which an incorrect list was recorded in the commercial register. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 101; Lutter/Hommelhoff/Bayer, (footnote no. 4 above), section 16 margin no. 79; Mayer, DnotZ 2008, 403, 420; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16, margin no. 36 

gg) Objection

Acquisition in good faith is also prevented by an objection made by the authorised person as soon as he is allocated to the list. The objection is either entered with the consent of the person whose formal position the objection is addressed against (but in practice this is probably rarely the case). Scholz/Seibt, GmbHG, (footnote no. 8 above), section 16 margin no. 95; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 37 Something which occurs more frequently in practice is having an interim ordered issued by the court with jurisdiction, whereby the true legal position of the authorised person has to be made credible, but not the concrete jeopardy to his legal position (III 5).

hh) Knowledge of lack of authorisation and failure to know of lack of authorisation due to gross negligence and the authoritative point in time

Acquisition in good faith is ruled out if the transferee has knowledge of the fact that the transferor is not authorised to transfer the share.

Cases of a lack of knowledge as a consequence of gross negligence are more difficult: A transferee allegedly acting in good faith significantly fails to adhere to the duty of care required in business, he fails to heed something which should have been apparent to anyone under the given circumstances. Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 38 

In practice it is important to note, however, that the transferee is not obliged to conduct investigations without any specific grounds to do so. If, however, the transferee has concrete grounds to suspect a lack of authorisation, then he must obtain knowledge, otherwise he will be treated as having acted with gross negligence. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 86; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 38; Götze/Bressler, NZG 2007, 894, 898 

The decisive point in time applying to knowledge or failure to have knowledge due to gross negligence is the date of completion of the transfer of the right. Scholz/Seibt, (footnote no. 8 above), section 16 margin no. 87; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 38 The legal position is different, however, in the case of a condition precedent (e.g. if the transfer is subject to approval by the German Federal Cartel Office) which the parties cannot influence the satisfaction of. In this case the transferee may not be in bad faith at the time of the transfer, knowledge at a later date or failure to have knowledge through gross negligence then no longer have a detrimental effect. Götze/Bressler, NZG 2007, 894, 899; Mayer, DnotZ 2008, 403, 422; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 38 The situation is different, however, if the transferee can still influence the condition to be met, above all if he performs the condition by paying the purchase price himself. Then it is the date on which the condition is satisfied which is decisive with regard to knowledge or lack of knowledge due to gross negligence. Götze/Bressler, NZG 2007, 894, 899; Baumbach/Hueck/Fastrich, (footnote no. 3 above), section 16 margin no. 38 

ii) Transitional ruling relating to paragraph 3

Section 3 III Introductory Law to the German Limited Liability Companies Act (EGGmbHG) provides for a transitional ruling for a purchase in good faith: If the list of shareholders is incorrect with regard to a share prior to 01.11.2008, then if the incorrect nature is imputable to the person with substantive authorisation, section 16 GmbHG III shall only apply with effect from 01.05.2009. The authorised person therefore had six months’ time in which to adapt to the new regulation or to enforce his registration.

If the list of shareholders was incorrect when the Act became effective on 01.11.2008, and if the incorrect nature was not imputable to the truly authorised party, acquisition in good faith is only possible for transactions entered into after 01.11.2011. Such cases are now rather unlikely in practice.

h) Overall evaluation of the regulation of section 16 GmbHG from the perspective of legal relations

Section 16 GmbHG does not meet the high expectations of legal relations – especially as far as the possibility of a purchase in good faith of GmbH shares is concerned. This is primarily due to the fact that the point of reference is made to the list of shareholders as the basis for imputability. Such a list is manipulable despite all the provisions of statute and the liability imposed on the board of management to compensate for damage.

However, it is the deficits in connection with acquisition in good faith that are more severe, namely that good faith in the authority of the transferor to effect the transfer is not protected, so that, for example, the absence of the company’s or the shareholders’ approval can prevent the effectiveness of the transfer and that the transferee’s good faith in this is not protected. Furthermore, it is still not possible to acquire shares in good faith that do not even exist.

The provision embodied in section 16 I 2 GmbHG, which was actually intended to simplify the situation for a transferee whose name has not yet been entered in the list or with respect to whom the list has not yet been recorded in the commercial register, fails to achieve its purpose. This is because, if taken literally, it makes all the measures conducted by the new shareholder prior to the list being recorded in the commercial register provisionally ineffective. As illustrated above, the Act must be interpreted to the effect that the transferee can effectively conduct certain measures before being recorded, but if the list is not recorded in the commercial register, such acts then become ineffective.

In view of the difficulties of both the concept and also the structuring of the statutory regulation, it is hardly surprising that there have been numerous judicial decisions relating to the new provision, but above all an almost incalculable number of publications in legal literature dealing with the statutory ruling and its deficits and offering possible solutions.