Freeze-Out Transactions in Germany and the U.S.: A Comparative Analysis

By Christian A. Krebs

Abstract

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Suggested Citation: Christian A. Krebs, Freeze-Out Transactions in Germany and the U.S.: A Comparative Analysis, 13 German Law Journal 941-978 (2012), available at http://www.germanlawjournal.com/index.php?pageID=11&artID=1449

A.  Introduction

A freeze-out is a transaction in which a controlling shareholder forces out the minority shareholders and compensates them in cash or stock.   A successful freeze-out transaction marks the end of the exchange-traded life of a corporation—it is a “going private” transaction.  A freeze-out is therefore the counterpart to an initial public offering.  Whereas the latter leads to the public listing of a corporation and thus a multiplication of shareholders, the freeze-out transaction aims at reducing the number of shareholders of a corporation to one.

Freeze-out transactions are subject to a wealth of case law and scholarly discussion, both in the US legal system, and in Germany.  This does not come as a surprise.  The rules on freeze-outs need to resolve the diametrically opposed interests of the controlling shareholder  and minority shareholders.  The controlling shareholder, often after a tender offer, seeks to consummate her acquisition of the target corporation and to establish efficiency gains.  The minority shareholders are excluded from their share of the future earnings of the company and are concerned that they may not receive full compensation for their shares.  After all, if the compensation is ultimately set or at least influenced by the controlling shareholder, it is evident that a strong element of self-dealing is involved.  So the regulation of freeze-outs is caught in a zone of tension between the legitimate interest of the controlling shareholder to maximize the efficiency of her corporation, and the fears of minority shareholders of self-dealing by the controlling shareholder.

It is striking that the rules on freeze-outs differ significantly between the U.S.  and Germany.  The regulation of freeze-out transactions in Germany is fairly new and quite restrictive by comparison with U.S. standards.  This is remarkable, as the corporate and capital market laws of European and...

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By Pedro Caro de Sousa

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Suggested Citation: Pedro Caro de Sousa, Negative and Positive Integration in EU Economic Law: Between Strategic Denial and Cognitive Dissonance?, 13 German Law Journal 979-1012 (2012), available at http://www.germanlawjournal.com/index.php?pageID=11&artID=1450

A.  Introduction

It is a generally held assumption that the EU economic free movement rights  are tools in the creation of a European internal market; and that their main goal is the (negative) market integration of different national markets.  Yet these freedoms do not determine how market integration is to proceed, or which kind of integrated European market will emerge.  The resulting market may be more or less regulated, and the creation of the relevant regulatory rules may be allocated to a variety of sources.  These options are reflected in the different proposed tests used to determine whether a national measure prima facie infringes one of the market freedoms.   The proposed tests fall into two main categories—broad tests and narrow tests—and each type has its own implications for European integration.  Broad tests, usually associated with obstacle tests or even with economic due process clauses, tend to be seen as having three main outcomes.  One result of broad tests is centralization, implying that ultimate decisions concerning the legitimacy of national law rests with EU institutions, and particularly with the Court of Justice of the European Union (“the Court” or “CJEU”).  Another outcome of broad tests is the possible harmonization of national laws through the European political process by increasing the amount of national legislation susceptible to being harmonized under Articles 114 to 118 on the Treaty on the Functioning of the European Union  (“TFEU”).   A third consequence of broad tests is deregulation through the elimination of national rules creating obstacles to trade.   Alternatively, narrow approaches—usually associated with discrimination or typological tests—are usually coupled with regulatory pluralism via a greater degree of control of the harmonization competences of the EU, decentralization through the protection of a greater sphere of Member States’ autonomy, and economic agnosticism.   Views on the potential...

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Marriage, Same-Sex Partnership, and the German Constitution

By Anne Sanders

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Suggested Citation: Anne Sanders, Marriage, Same-Sex Partnership, and the German Constitution, 13 German Law Journal 911-940 (2012), available at http://www.germanlawjournal.com/index.php?pageID=11&artID=1448

A.  Introduction

Marriage today does not only involve private interests; it is also an important legal and political issue.  The question of what marriage means today and whether it should be open to same-sex unions is under debate all over the world.  In many countries, for example in Germany and the United States, such questions are not only debated in the political arena, but also in relation to constitutional law.  This Article will trace the development of how marriage has been understood in relation to German constitutional law and critically discuss the law’s approach to same-sex marriage.

The Federal Constitutional Court of Germany (Bundesverfassungsgericht, FCC) celebrated its 60th anniversary in September of 2011.  Since 1951, the court has not only had a considerable influence on administrative and criminal law, but on family law as well.  This might be surprising to a non-German reader as not all constitutions include rights concerning marriage and family as guaranteed human rights.  The Basic Law, however, protects these rights in Article 6.

This article begins by applying a descriptive approach.  First is an introduction to the history of Germany’s constitutional protection of marriage and the drafting of Article 6.  Next, this article introduces the reader to the German constitutional understanding of marriage as developed in the case law of the German Federal Constitutional Court.  After supplementing this with a brief discussion of the court’s approach to divorce, the article then stresses the importance of gender equality to the constitutional understanding of marriage and discusses the case law related to unmarried cohabitation and same-sex partnerships.

Next, this Article assumes a more critical approach in evaluating the reasons given by the FCC and academic commentators for denying same-sex partners Article 6 protection.  Building on the case law of the FCC, this...

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