I. Disposition of property as a whole

1. Background

In many cases, the company represents almost the entire assets of the owner. If the owner wants to sell his company or transfer it in the course of a restructuring in such a case, section 1365 German Civil Code [Bürgerliches Gesetzbuch – BGB] must be observed. This provision stipulates that a spouse living under the statutory matrimonial regime of the community of surplus may not dispose of his or her “property as a whole” without the consent of the other spouse. The term “property as a whole” also applies if the transferred property comprises 85 percent to 90 percent of the total assets. This authorization requirement is intended to prevent one spouse from depriving the family of its economic basis by a unilateral measure without the consent of the other spouse.
In its decision of 14 March 2019, the Saarbrücken Higher Regional Court commented on whether approval is also required if a company managed as a sole proprietorship is transferred to a company in which the owner continues to hold a significant stake.

2. Concrete protection of assets

The case concerned specifically an entrepreneur who transferred his business, which was previously run as a sole proprietorship, to a newly founded general partnership [Offene Handelsgesellschaft – OHG]. This new company was to be managed jointly with a new business partner, with both shareholders holding half of the company’s shares.
Despite holding half of the shares, the Saarbrücken Higher Regional Court classified the OHG partnership agreement, which required the transfer of almost all of the assets into the OHG, as a single transaction involving all assets. The decisive factor is that section 1365 BGB protects the assets not only economically but also concretely. When interpreting this family-law provision, it is irrelevant whether a consideration corresponding to the value of the shares is provided, for example, by taking over shares in a new company. In the end, the discontinuation of the previous sole ownership reduced the substance of the assets.

3. Awareness of the contracting party

If a single asset is sold which essentially represents the entire assets of the seller, however, an additional condition for the existence of the obligation to obtain approval is that the contractual partner is aware of this circumstance. If this is not the case, case law grants the unaware contracting party higher protection than the spouse concerned.

4. Practical advice

The decision of the Saarbrücken Higher Regional Court follows the prevailing opinion in both literature and case law. However, it is also evident that section 1365 BGB offers only poor protection for the other spouse concerned. In the present case, the other spouse who applied for the invalidity of the transaction failed because of the heavy burden of proof. He would have had to prove not only that 85 percent to 90 percent of the assets had been disposed of in terms of value, but also that the business partner was aware of this or at least that he was aware of the circumstances from which this is apparent.

II. Transfer of the limited partner’s share in favor of minors

1. Background

If assets are to be transferred to minors, a supplementary curator may have to be appointed. This is because minors are generally unable to make a declaration of intent in legal transactions and must therefore be represented by one parent. In the case of contracts between parents and their minor children, however, the parents can only act on behalf of their children if the latter receive only a legal advantage from the legal transaction. If, on the other hand, the minor suffers a legal disadvantage as a result of the legal transaction, the parents are excluded from representation and a supplementary curator must be engaged.
The Oldenburg Higher Regional Court had to decide on the question, which had been disputed to date, whether the gift of a fully paid-up limited partner’s share to a minor constitutes a legally advantageous transaction.

2. Legal disadvantage due to duty of loyalty under corporate law

In the court’s view, the minor suffers a legal disadvantage as a result of the gift because of the fact that he or she has entered into a permanent contractual relationship. In the end, a shareholder position is accompanied by the obligation to promote the company’s purpose and to participate in decision-making processes in which the shareholder is subject to the duty of loyalty under corporate law. Despite the payment of the liability contribution, this obligation to promote the company purpose, as the main obligation of any articles of association, has the effect that the transfer of shares does not constitute a transaction that is only legally beneficial, unless the articles of association contain provisions protecting minors.

3. Family court approval

Regardless of the question of the necessity of appointing a supplementary curator, it must always be examined whether (additional) approval by the family court is necessary. With regard to a transfer of a limited partner’s share, the decisive factor is whether the business purpose of the limited partnership is purely asset management or a trade or business. Only if the minor enters into a contract for the operation of a trade or business does the family court approval constitute a requirement pursuant to section 1822 no. 3 BGB. In the present case, the answer to the question of a trade or business was affirmative, since services of all kinds were provided, in particular renting and leasing of real estate and movable property, so that a business activity going beyond mere asset management must be affirmed.

4. Practical advice

While the requirement of a family court approval for the acquisition of a limited partner’s share in a limited partnership, the purpose of which is directed towards trade or business, reflects the unanimous view of literature and case law, case law is inconsistent with regard to the question of whether the acquisition of a limited partner’s share free of charge by a minor is only legally advantageous. Due to the divergent court decisions and owing to the absence of a corresponding decision by the Federal Court of Justice [Bundesgerichtshof – BGH], it is therefore advisable in such cases to coordinate closely with the locally competent family court and the commercial register. In any case, the safe way is to appoint a supplementary curator.