Section 10 VbVG in an acquisition: succession after a merger, equivalent individual succession, fines and transaction review.
BRANDAUER Rechtsanwälte
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Every transaction is handled by a coordinated team of lawyers, legal staff and specialists. In company acquisition matters we look at structure, contract, tax and liability together.
A VbVG consequence can affect the successor of a business. Section 10 VbVG covers universal succession and treats an individual succession as equivalent in specific circumstances. For buyers and successor entities, the exact form of succession is therefore decisive.
The assessment must distinguish a transfer of all rights and liabilities, an equivalent individual succession and a division between several successors. Under section 10(1) VbVG, consequences already imposed on the predecessor also operate against the successor.
This article explains section 10 VbVG from the perspective of an acquisition and a merger. The broader article on corporate liability in M&A due diligence covers the prior review of investigations, compliance and indemnities.
Two questions structure the first review of transfer route, ownership and continuation.
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The first assessment must connect the transfer, predecessor and possible legal consequences.
Bring imposed consequences, procedural records and the successor’s activity into one chronology. The agreement should reflect the statutory allocation rather than hide it behind a generic risk clause.
Check whether substantially the same ownership exists and whether the business or activity is substantially continued. Both criteria belong in the transaction file with their supporting records.
Bring together transfer documents, Companies Register records, ownership structure, activity description and VbVG records. Only one chronology shows which succession applies and which consequences must be allocated.
Section 10(1) VbVG links the consequence to the transfer of the association’s rights and liabilities to another association by universal succession. The consequences provided for in the VbVG then affect the successor. Consequences imposed on the predecessor also operate against the successor.
For a transaction, the economic acquisition alone is therefore not enough. The file should identify the predecessor, successor, transfer route, relevant dates and VbVG records. A contractual clause cannot remove the statutory allocation between the state and the successor.
In a merger, the parties must assess whether the predecessor’s rights and liabilities pass to the acquiring entity by universal succession. That classification is the connecting point for section 10 VbVG. Merger documents, Companies Register records and the relevant VbVG file should therefore be reviewed together.
The review should cover an already imposed fine as well as other statutory consequences. The decisive question remains which consequence has been imposed on the predecessor or emerges from the proceedings. Calling the transaction a restructuring or group measure does not replace the analysis.
Section 10(2) VbVG treats an individual succession as equivalent to universal succession where substantially the same ownership exists in the association and the business or activity is substantially continued. Both conditions concern the specific transaction and must be tested against the records.
A buyer should document ownership structure and operational continuity separately. A transfer of selected assets alone does not answer the question. Formal proximity between the parties is also insufficient where the business activity materially ends. The assessment must follow the actual sequence.
The three statutory situations require separate documentation.
| Situation | Review question | Transaction records |
|---|---|---|
| Universal succession Do rights and liabilities pass to another association? | Identify transfer route, predecessor, successor and date. | Merger documents, Companies Register, VbVG file |
| Equivalent individual succession Are ownership and activity substantially unchanged? | Document ownership and operational continuation separately. | Acquisition agreement, ownership chart, activity records |
| Several successors How are the fine and other consequences allocated? | A fine may be enforced against each successor; other consequences follow the relevant activity. | Allocation plan, activity areas, authority correspondence |
This grid provides an initial structure. The concrete allocation depends on the transfer route, ownership and continuing activity.
Section 10(3) VbVG addresses the case of more than one successor. A fine imposed on the predecessor may be enforced against each successor. The transaction review must therefore identify every successor and its connection with the transfer.
Other consequences may be allocated to individual successors insofar as they correspond to that successor’s area of activity. The due diligence file needs an activity and responsibility map. The treatment of the fine must remain separate from the allocation of other consequences.
The sequence connects corporate records, procedural files and agreement mechanics.
Bring legal entities, register records and dates together.
Identify predecessor, successor, transfer route and relevant dates precisely.
Separate universal succession from equivalent individual succession.
Read merger or acquisition documents together with ownership structure and the activity description.
Connect imposed and procedurally relevant consequences with the predecessor.
Secure decisions, authority correspondence and other VbVG records. Record imposed consequences expressly.
Separate fines and other consequences under section 10(3).
Prepare an activity and responsibility matrix where more than one successor exists.
Record disclosure, indemnity, cooperation and closing consequences.
Translate the finding into disclosure, contract protection and defined duties before and after closing.
The buyer should record the VbVG history in due diligence and the disclosure letter. The file should show the succession type, ownership structure, continued activity, procedural status and imposed consequences. The records must make the connection between predecessor and successor traceable.
Depending on the finding, specific warranties, an indemnity, a holdback or cooperation duties may be appropriate. The contractual response should follow the identified facts. The existing article on share deal and asset deal helps with the prior structure question; it does not replace the section 10 VbVG review.
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