The German federal supreme court (BGH) has held that, in the event of a merger, claims of the transferor transfer to the transferee by operation of law, even if they are subject to a contractual non-assignment covenant. This has formerly been disputed. The German Reorganisation Act (Umwandlungsgesetz, UmwG) stipulates that in the event of a merger all assets and liabilities of the transferor automatically transfer to the transferee by way of universal succession (sec. 20 sub-sec. 1 no. 1 German Reorganisation Act). Still, some courts and legal authors have previously taken the view, that such universal succession does not extend to claims that are subject to a non-assignment covenant pursuant to sec. 399, second alternative, German Civil Code, but that such claims expire upon the merger becoming effective.

According to the BGH this view renders unjust consequences: given that reorganisation law provides for the transferee automatically acquiring the transferor’s obligations, an exclusion of claims from universal succession due to a non-assignment agreement between the transferor and its contractual partner would eventually require the transferee to fulfil the obligations vis-à-vis that contractual partner without being able to recover respective receivables. Thus, the provision of sec. 399, second alternative, German Civil Code is in the BGH’s opinion not designed to govern the particularities of universal succession, but is aimed at individual contractual transactions, only. The court considers its view to be in line with the intentions of the legislator: the deletion of the former provision of sec. 132 German Reorganisation Act, pursuant to which limitations on the assignability of claims had applied to transfers by way of a split-off, showed that restrictions on singular succession should no longer apply within the scope of reorganisation law.

Please click here for the German text of the decision. If you are interested in further information on this topic, please do not hesitate to contact Christine Oppenhoff.