Profit and loss pooling agreement

The relevant shareholder
resolutions must be notarized. This applies not only to stock
corporations (Aktiengesellschaft – AG), for which the above
requirements are stipulated by the Stock Corporation Law
(Aktiengesetz– AktG), but also to limited liability companies (Ge-
sellschaft mit beschränkter Haftung – GmbH), for which the case
law of the Federal Court of Justice (Bundesgerichtshof – BGH)
establishes comparable requirements in the absence of explicit
statutory provisions.

The Stock Corporation Law contains specifc provisions for any
“enterprise agreement” (Unternehmensvertrag) entered into
by a stock corporation (AG) or a limited partnership with share
capital (KGaA). Enterprise agreements (which include inter alia
proft and loss pooling agreements) only become effective after
the relevant resolution has been approved at a general meeting
of shareholders.

The management board of the AG or KGaA
is required by law to submit a comprehensive written report,
which must describe the nature of the enterprise agreement, the
individual terms of such agreement and, in particular, the type
and extent of compensation and consideration paid to minority
shareholders. The report must substantiate the various aspects
of the agreements from a legal and fnancial perspective. It
must also draw attention to any special diffculties in valuing the
businesses of the contracting parties and the potential conse-
quences for the interests of the shareholders. The enterprise
agreement must be audited by qualifed independent auditors
unless all of the shares of the controlled company are held by the
controlling entity.