Acquisition GmbH: Get the corporate purpose right before the deal

One line can mean another notary appointment.

Searchers frequently establish an acquisition vehicle before signing or closing their first transaction.

One seemingly minor detail deserves attention at that stage: the corporate purpose stated in the articles of association. It should fit the intended deal structure.

Share Deal

In a conventional share deal, an appropriately drafted holding purpose may be sufficient.

The Acquisition GmbH acquires and holds the shares in the target company. It does not itself conduct the target's operating business.

That remains true whether the target operates a carpentry business, a software company or a care provider.

Asset Deal

The situation may be different if the acquisition is structured as an asset deal.

If the acquisition vehicle itself acquires the operating assets and subsequently conducts the business, a corporate purpose limited to holding participations may be too narrow.

The same issue can arise if the acquisition vehicle is intended to become operational after closing for other reasons.

The consequence

If the corporate purpose does not cover the intended activity, the articles may need to be amended. That means:

• Shareholder resolution
• Notary
• Commercial Register
• Additional time and cost

None of this is dramatic. But it is avoidable.

Structure first. Incorporate second.

The Acquisition GmbH should therefore not simply be incorporated on autopilot using a standard holding purpose.

First understand the intended acquisition structure. Then draft the corporate purpose accordingly.

A small point at incorporation can avoid unnecessary friction later in the deal.