Auc­tion of com­pa­ny shares by the nota­ry: What cli­ents need to know.

Public auc­tions of com­pa­ny shares (com­pa­ny shares) and rights of all kinds

Accor­ding to Sec­tion 383 BGB, the legal defi­ni­ti­on, rights can be exer­cis­ed by publicly appoin­ted, sworn auc­tion­eers, bai­liffs or, if neces­sa­ry, nota­ries — pro­vi­ded that the auc­tion is asso­cia­ted with a nota­riza­ti­on. In prac­ti­ce, judi­cial offi­cers, who would have to have an expert opi­ni­on — due dili­gence — pre­pared and have the cor­re­spon­ding con­trac­tu­al docu­ments at their dis­po­sal, also refu­se such an assign­ment with the refe­rence that sui­ta­ble publicly appoin­ted, sworn auc­tion­eers are available. Bai­liffs may refu­se wit­hout giving reasons, § 191 (1) GVGA. Cf. also: OLG Colo­gne, decis­i­on 30.12.1999 — AZ: 7 VA 2/99. A publicly appoin­ted, sworn auc­tion­eer can be appoin­ted for the rea­liza­ti­on via § 825 ZPO “Other type of rea­liza­ti­on”: § Sec­tion 825 (2) “The auc­tio­ning of an atta­ched pro­per­ty by a per­son other than the bai­liff may be orde­red by the enforce­ment court at the request of the cre­di­tor or the deb­tor.”

The­re are no spe­cial imple­men­ta­ti­on regu­la­ti­ons by the publicly appoin­ted, sworn auc­tion­eer or by the nota­ry. Howe­ver, this area of law, which is actual­ly very old, is not as unre­gu­la­ted as it first appears. Anyo­ne who stu­dies the rele­vant com­men­ta­ries will find that a lay­man in this field of law quick­ly finds hims­elf in a “mine­field”. Expen­si­ve legal traps could be the result of incor­rect advice or igno­rance.

We at Deut­sche Pfand­ver­wer­tung can pro­vi­de valuable prac­ti­cal advice based on our many years of expe­ri­ence in the public auc­tion of pled­ged com­pa­ny shares and rights of all kinds. The sub­ject is com­plex and exten­si­ve. It is worth rea­ding this detail­ed artic­le to the end in order to under­stand the scope of pos­si­ble risks.

The public auc­tion of com­pa­ny shares or other rights is divi­ded into three sec­tions.

First­ly: the gene­ra­ti­on of pro­s­pec­ti­ve buy­ers. Second­ly: the vie­w­ing. Third­ly: the auc­tion pro­cess.

First­ly:
The legis­la­tor sti­pu­la­tes that a pledge auc­tion must be made public in accordance with Sec­tion 1237 BGB. This announce­ment is not an end in its­elf, but ser­ves to crea­te publi­ci­ty. This is whe­re the first major pit­falls lurk. If the auc­tion has not been publi­ci­zed or has not been ade­qua­te­ly publi­ci­zed, it is unlawful and a bid can­not have been effec­tively accept­ed. The legal­ly com­pli­ant public announce­ment of auc­tions of rights such as com­pa­ny shares is sub­ject to exten­si­ve requi­re­ments.

With the stan­dar­diza­ti­on of the public announce­ment accor­ding to Sec­tion 1237 sen­tence 1 BGB, the legis­la­tor uses an unde­fi­ned legal term. The con­tent of this unde­fi­ned legal term can only be deter­mi­ned through inter­pre­ta­ti­on.

The inter­pre­ta­ti­on results in three requi­re­ments for the public announce­ment:

• a per­son­nel requi­re­ment
• a time requi­re­ment
• a requi­re­ment for qua­li­ta­tively appro­pria­te ran­ge.

Accor­ding to the sys­te­ma­tic inter­pre­ta­ti­on of sec­tion 1237 sen­tence 1 BGB, the publi­ca­ti­on of an auc­tion — also car­ri­ed out by the nota­ry — must com­ply with the gene­ral legal ide­as set out abo­ve. When inter­pre­ting a legal pro­vi­si­on, the ori­gi­nal mea­ning can chan­ge over time. The reasonable func­tion it can have at the time of appli­ca­ti­on must be taken into account. Compa­re: Fede­ral Con­sti­tu­tio­nal Court 34, 238, 288 f.

The gene­ral­ly reco­gni­zed methods of legal inter­pre­ta­ti­on must be obser­ved for pro­per publi­ca­ti­on:

- gram­ma­ti­cal inter­pre­ta­ti­on

- Sys­te­ma­tic inter­pre­ta­ti­on

- his­to­ri­cal inter­pre­ta­ti­on

- teleo­lo­gi­cal inter­pre­ta­ti­on.

Based on the mea­ning of the word, “public” means gene­ral­ly acces­si­ble. Accor­ding to this, some­thing has been made public if ever­yo­ne has heard about it. This means that it is neces­sa­ry to pro­vi­de ever­yo­ne with the oppor­tu­ni­ty to poten­ti­al­ly gain know­ledge of the auc­tion event through “public” announce­ments. Howe­ver, it makes litt­le sen­se to bring announce­ments of auc­tions to the atten­ti­on of cir­cles that are excluded as poten­ti­al inte­res­ted par­ties from the out­set.

The result of the gram­ma­ti­cal inter­pre­ta­ti­on can be sys­te­ma­ti­cal­ly sub­stan­tia­ted at this point. Sys­te­ma­ti­cal­ly, it can be seen that the requi­re­ments of a “public” announce­ment are ful­fil­led as soon as a majo­ri­ty of poten­ti­al, rea­li­sti­cal­ly reacha­ble poten­ti­al buy­ers have been given the oppor­tu­ni­ty to learn about the auc­tion. The sys­te­ma­tic inter­pre­ta­ti­on is based on the uni­for­mi­ty of the legal sys­tem. In accordance with this uni­for­mi­ty, it must be assu­med that the legal prin­ci­ples are con­sis­tent. For this reason, con­clu­si­ons about the con­tent of legal norms can be drawn from the sys­te­ma­tic syn­op­sis of the­se norms.

In terms of per­son­nel, the lar­gest pos­si­ble num­ber of poten­ti­al bidders with the appro­pria­te sub­ject mat­ter must be infor­med of the auc­tion at reasonable cost and within a reasonable peri­od of time. In terms of time, the­se bidders must be infor­med in good time so that they are in a posi­ti­on to form an opi­ni­on about the rights to be auc­tion­ed and to rai­se the neces­sa­ry funds for a bid. The ext­ent of the publi­ca­ti­on of an auc­tion in terms of per­son­nel, time and qua­li­ty is the­r­e­fo­re lar­ge­ly deter­mi­ned by the assu­med mar­ket value and the com­ple­xi­ty of the pled­ged pro­per­ty.

The aim of the law to inform the lar­gest pos­si­ble num­ber of poten­ti­al bidders by publi­shing the auc­tion is gene­ral­ly con­firm­ed. The mea­ning and pur­po­se of a sta­tu­to­ry pro­vi­si­on is deter­mi­ned by teleo­lo­gi­cal inter­pre­ta­ti­on. This pos­si­bi­li­ty of inter­pre­ta­ti­on makes sen­se becau­se the expe­di­en­cy and pur­po­seful­ness of the widest pos­si­ble publi­ca­ti­on empha­si­zes the resul­ting inten­si­ty of com­pe­ti­ti­on, which con­sists of achie­ving the grea­test pos­si­ble pro­ceeds for the bene­fit of all par­ti­ci­pan­ts.

Accor­ding to the legal requi­re­ments, the pur­po­se of the public auc­tion announce­ment is to enable the grea­test pos­si­ble con­cen­tra­ti­on of demand on the day of the auc­tion on the mar­ket crea­ted spe­ci­fi­cal­ly for this pur­po­se. To this end, the opti­mum num­ber of rea­li­sti­cal­ly reacha­ble, sui­ta­ble poten­ti­al bidders must be approa­ched at reasonable expen­se. The legis­la­tor sees this con­cen­tra­ti­on of demand as the best pos­si­ble oppor­tu­ni­ty to achie­ve opti­mum auc­tion pro­ceeds. This obvious con­nec­tion bet­ween demand con­cen­tra­ti­on and auc­tion pro­ceeds is also empha­si­zed by eco­no­mics.

In terms of the legal sys­tem, the nota­ri­al auc­tion must the­r­e­fo­re be published in such a way that poten­ti­al bidders, gene­ra­ted at reasonable cos­ts, are given the oppor­tu­ni­ty to take note of the auc­tion date. Howe­ver, becau­se the cos­ts are to be attri­bu­ted to the deb­tor as the ori­gi­na­tor, the­se must also be reasonable. Fin­ding every pos­si­ble buy­er that theo­re­ti­cal­ly exists any­whe­re would cer­tain­ly not be appro­pria­te — not least due to the thres­hold prin­ci­ple. Cos­ts and bene­fits must cor­re­la­te.

Not only the auc­tion­eer but also the nota­ry must publicly announ­ce the auc­tion in an appro­pria­te man­ner in terms of time frame, scope and publi­ca­ti­on media in accordance with sec­tion 1237 BGB. From a sys­te­ma­tic point of view, exact­ly the same prin­ci­ples must be obser­ved here that must be ful­fil­led by the publicly appoin­ted sworn auc­tion­eer when announ­cing an auc­tion.

A pledge auc­tion in accordance with the Ger­man Civil Code (BGB) is the public sale of a pled­ged asset. It is in con­trast to a pri­va­te sale.

The sale of a pled­ged pro­per­ty is deter­mi­ned by public auc­tion in accordance with Sec­tion 1235 BGB becau­se the deb­tor has no influence on the sale of the pled­ged pro­per­ty. The public is the only cor­rec­ti­ve. The public should ensu­re that any inten­tio­nal dama­ge cau­sed by the influence of an indi­vi­du­al is excluded. Espe­ci­al­ly in the case of non-mar­ke­ta­ble, i.e. unlis­ted, com­pa­ny shares or other rights, a mar­ket is crea­ted spe­ci­fi­cal­ly by the auc­tion.

The local and tem­po­ral con­cen­tra­ti­on of demand on this mar­ket is inten­ded to pre­vent the rights — inclu­ding com­pa­ny shares — from being squan­de­red. The con­cen­tra­ted demand pre­vents the cre­di­tor from mani­pu­la­ting the hig­hest bid down­wards and bid­ding for the pled­ged pro­per­ty below the opti­mum achie­va­ble pri­ce. Such mani­pu­la­ti­on would be to the detri­ment of the pled­gee. In such a case, the pled­gee could then, if not ful­ly satis­fied by the auc­tion pro­ceeds, make use of the pled­ge­e’s assets by way of fur­ther judi­cial reco­very. It is argued in legal cir­cles that the­re is always a risk of the pled­ged pro­per­ty being squan­de­red in favor of one of the par­ties invol­ved in public pledge auc­tions becau­se they are always distress sales. Howe­ver, a fre­quent­ly suspec­ted accu­sa­ti­on of squan­de­ring is now rela­ti­vi­zed by the exten­ded pos­si­bi­li­ty of an online live auc­tion. This rea­ches a con­sider­a­b­ly lar­ger group of bidders, both natio­nal­ly and inter­na­tio­nal­ly.

Com­mu­ni­ca­ti­on via the tra­di­tio­nal print media has lost much of its impact. For this reason, a man­da­to­ry announce­ment only in the Fede­ral Gazet­te or in a dai­ly news­pa­per aut­ho­ri­zed for public announce­ments is no lon­ger suf­fi­ci­ent nowa­days. As can be regu­lar­ly obser­ved, the public announce­ment of a public auc­tion by nota­ries is often made via the abo­ve-men­tio­ned com­mu­ni­ca­ti­on chan­nels, usual­ly only by means of a mini­mal announce­ment in the Fede­ral Gazet­te. This is not suf­fi­ci­ent, as it does not meet the afo­re­men­tio­ned, man­da­to­ry requi­re­ments for a legal­ly com­pli­ant public announce­ment.

The iden­ti­fi­ca­ti­on and gene­ra­ti­on of pro­s­pec­ti­ve buy­ers for com­pa­ny shares and other rights must be car­ri­ed out in accordance with cur­rent M&A stan­dards and the latest prin­ci­ples of ban­king finan­ce and busi­ness admi­nis­tra­ti­on. For nota­ries, con­duc­ting public auc­tions is one of many acti­vi­ties. Auc­tions are rare. It almost never makes eco­no­mic sen­se for a nota­ry’s office to stock­pi­le employees with the neces­sa­ry M&A know-how. The­r­e­fo­re, neither the appro­pria­te and legal­ly com­pli­ant public announce­ment nor the iden­ti­fi­ca­ti­on of pro­s­pec­ti­ve buy­ers can be rea­li­zed with the exis­ting staff. Trans­fer­ring the public announce­ment to the pled­gee or their repre­sen­ta­ti­ve, such as lawy­ers or other third par­ties, does not ful­fill sec­tion 1237 BGB. Becau­se the cre­di­tor always has the right to par­ti­ci­pa­te in the auc­tion in accordance with Sec­tion 1239 BGB “Bid­ding by cre­di­tors and owners”, it must the­r­e­fo­re be assu­med that the­se per­sons invol­ved are bia­sed. The pled­gee could be accu­sed of arbi­tra­ri­ly deter­mi­ning the publi­ca­ti­on uni­la­te­ral­ly to the detri­ment of the pled­gee by choo­sing the per­son of the auc­tion­eer and thus the man­ner of publi­ca­ti­on. The pled­gee can be accu­sed of negli­gence or gross negli­gence if the pledge was sold to a buy­er of his choice or even to hims­elf as a result of the arbi­tra­ry and pos­si­bly ina­de­qua­te­ly announ­ced auc­tion. This is par­ti­cu­lar­ly the case as the pled­gee can take recour­se to the remai­ning debt at the expen­se of the deb­tor due to the pro­ba­b­ly insuf­fi­ci­ent pro­ceeds from the auc­tion as a result of the auc­tion being kept secret, so to speak, but also due to the pos­si­bi­li­ty of recour­se to the remai­ning debt. In any sub­se­quent insol­ven­cy pro­cee­dings, this is also to the detri­ment of the other cre­di­tors. In legal pro­cee­dings, the pled­gor could be requi­red to pro­ve who exact­ly car­ri­ed out the public announce­ment.

If the legal­ly com­pli­ant imple­men­ta­ti­on of Sec­tion 1237 of the Ger­man Civil Code (BGB) were not com­pli­ed with in nota­ri­al auc­tions, the legal­ly com­pli­ant public announce­ment would not be made. The public auc­tion of com­pa­ny shares or other rights is sub­ject to dis­pu­te. The pled­gee is initi­al­ly lia­ble if the public auc­tion is not car­ri­ed out in accordance with the law, which is also signi­fi­cant in terms of the insol­ven­cy of the pled­gor. For exam­p­le, an insol­ven­cy admi­nis­tra­tor could dis­pu­te the lega­li­ty of the public auc­tion. It should be noted that an insol­ven­cy admi­nis­tra­tor is entit­led to legal aid in insol­ven­cy pro­cee­dings.

The­r­e­fo­re, for their own pro­tec­tion, pled­gees should make strict com­pli­ance with Sec­tion 1237 BGB in all aspects men­tio­ned here a con­di­ti­on when com­mis­sio­ning a nota­ry.

For the­se reasons, most nota­ries now reject the public auc­tion of com­pa­ny shares and refer to sui­ta­ble publicly appoin­ted, sworn auc­tion­eers. For the gene­ral­ly publicly appoin­ted, sworn auc­tion­eer spe­cia­li­zing in this field of acti­vi­ty, con­duc­ting public auc­tions of com­pa­ny shares is regu­lar prac­ti­ce. The cor­re­spon­ding com­mer­cial trai­ning pre­desti­nes him to iden­ti­fy the cir­cle of poten­ti­al buy­ers and to ensu­re cor­rect, legal­ly com­pli­ant public announce­ments. Just like the nota­ry, the publicly appoin­ted sworn auc­tion­eer is sworn to be inde­pen­dent in the pro­cee­dings. He car­ri­es out the public announce­ment in the inte­rests of the pled­gor and pled­gee.

Inci­den­tal­ly, the legis­la­tor has not issued any regu­la­ti­ons on the exe­cu­ti­on of public announce­ments of auc­tions by the publicly appoin­ted, sworn auc­tion­eer. The pro­vi­si­ons in the ins­truc­tions for judi­cial offi­cers are not rele­vant for him.

The auc­tion­eer regu­lar­ly recei­ves a per­cen­ta­ge of the auc­tion pro­ceeds as his remu­ne­ra­ti­on. For this reason, the auc­tion­eer stri­ves for the best pos­si­ble publi­ca­ti­on in his own inte­rest alo­ne. For this reason, auc­tion­eers do not requi­re any fur­ther imple­men­ting pro­vi­si­ons regar­ding the man­ner in which an auc­tion is publi­ci­zed. In con­trast to the auc­tion­eer, the judi­cial offi­cer — com­pa­ra­ble to a nota­ry — is not remu­ne­ra­ted on a per­for­mance-rela­ted basis.

The auc­tion­eer, who is sworn to car­ry out the auc­tion con­sci­en­tious­ly, shall deci­de on the type of announce­ment at his due dis­cre­ti­on, taking par­ti­cu­lar account of the indi­vi­du­al case. This includes pos­ting, publi­ca­ti­on in news­pa­pers, inter­net plat­forms, social media, press work, news­let­ters to exis­ting and known pro­s­pec­ti­ve buy­ers as well as approa­ching risk inves­tors, mar­ket ana­ly­sis, iden­ti­fi­ca­ti­on of pos­si­ble fur­ther pro­s­pec­ti­ve buy­ers natio­nal­ly or inter­na­tio­nal­ly, let­ters and per­so­nal cont­act with poten­ti­al bidders — to name just a few of the neces­sa­ry mea­su­res.

The aim of the public announce­ment is to inform per­sons who may be inte­res­ted in buy­ing in the indi­vi­du­al case of the upco­ming auc­tion as com­pre­hen­si­ve­ly as pos­si­ble. In the case of high-value com­pa­ny shares, com­pli­ance with the afo­re­men­tio­ned requi­re­ments means that the auc­tion must be published via all rele­vant natio­nal or inter­na­tio­nal com­mu­ni­ca­ti­on chan­nels so that as many bidders as pos­si­ble have the oppor­tu­ni­ty to take note. Other­wi­se, as alre­a­dy men­tio­ned, the pled­gee could also deter­mi­ne the man­ner of the announce­ment by choo­sing the per­son entit­led to par­ti­ci­pa­te in the auc­tion.

Accor­ding to the his­to­ri­cal inter­pre­ta­ti­on, the publi­ci­ty obli­ga­ti­ons for public auc­tions were inten­ded by the his­to­ri­cal legis­la­tor to inform the lar­gest pos­si­ble group of poten­ti­al bidders about the auc­tion event. In doing so, the his­to­ri­cal legis­la­tor express­ly empha­si­zes the need to give the lar­gest pos­si­ble num­ber of poten­ti­al bidders the oppor­tu­ni­ty to learn about the auc­tion date.

With this in mind, the his­to­ri­cal legis­la­tor of the BGB cho­se a mode of auc­tion that gua­ran­tees a public “coll­ec­tion of offers” that is not influen­ced by the cre­di­tor. In the pre­vious ver­si­on of the BGB, it was sti­pu­la­ted that “cus­to­ma­ry for the loca­li­ty” had to be announ­ced. In the amend­ment of the BGB, the term “cus­to­ma­ry in the loca­li­ty” was remo­ved in order to adapt the requi­re­ments to the glo­ba­li­zed eco­no­my with the new com­mu­ni­ca­ti­on media. The aim of the his­to­ri­cal inter­pre­ta­ti­on is the­r­e­fo­re also that the lar­ge num­ber of bidders should ensu­re that no indi­vi­du­al can exert a mani­pu­la­ti­ve influence on the hig­hest bid.

Final­ly, accor­ding to the teleo­lo­gi­cal inter­pre­ta­ti­on, the regu­la­to­ry pur­po­se of sec­tion 1237 sen­tence 1 BGB con­firms that the publi­ca­ti­on should give as many bidders as pos­si­ble the oppor­tu­ni­ty to take note in order to regu­la­te a spe­ci­fic, typi­cal­ly occur­ring con­flict of inte­rest. Stan­dar­diza­ti­on the­r­e­fo­re pur­sues iden­ti­fia­ble pur­po­ses. The deter­mi­na­ti­on of this pur­po­se is based on the objec­ti­ve will of the legis­la­tor, i.e. the will that results from the legis­la­ti­ve decis­i­on in the norm. In this con­text, the Fede­ral Con­sti­tu­tio­nal Court lite­ral­ly sta­tes: “The inter­pre­ta­ti­on of a sta­tu­to­ry pro­vi­si­on can­not always remain with the mea­ning ascri­bed to it at the time of its crea­ti­on. It must be taken into account what reasonable func­tion it can have at the time of appli­ca­ti­on”.

Sum­ma­ry:

A pledge auc­tion in accordance with the Ger­man Civil Code (BGB) is the public sale of pled­ged pro­per­ty. It stands in mark­ed con­trast to a pri­va­te sale. The auc­tion is cho­sen if the public sale appears neces­sa­ry to pro­tect the inte­rests of the deb­tor, as the deb­tor has no influence on the sale of the pled­ged pro­per­ty, so that the public is the only cor­rec­ti­ve. The public should ensu­re that any inten­tio­nal dama­ge cau­sed by the influence of an indi­vi­du­al is excluded. To this end, a mar­ket is crea­ted by the auc­tion, par­ti­cu­lar­ly in the case of non-mar­ke­ta­ble com­pa­ny shares or rights (such as secu­ri­ties, trade­mark rights, domains, patents or licen­sing rights). The local and tem­po­ral con­cen­tra­ti­on of demand on this mar­ket is inten­ded to pre­vent the com­pa­ny shares or rights from being squan­de­red. This appli­es first of all with regard to the pled­gee: the con­cen­tra­ted demand pre­vents the pled­gee from mani­pu­la­ting the hig­hest bid down­wards and buy­ing the asset at auc­tion below the opti­mum pri­ce; such mani­pu­la­ti­on would be to the detri­ment of the pled­gee, as the pled­gee could enrich hims­elf — if he was not satis­fied — by means of recour­se against the pled­gee. The pled­gee would thus have made a dou­ble pro­fit: He would have acqui­red the com­pa­ny shares or rights hims­elf at a low pri­ce and, in addi­ti­on, could still obtain satis­fac­tion from the pled­gee for the lost auc­tion pro­ceeds. The risk of the pled­ged pro­per­ty being squan­de­red in favor of one of the par­ties invol­ved exists, as is often argued and is also jus­ti­fied in the event of impro­per publi­ca­ti­on, in the case of public pledge auc­tions, abo­ve all becau­se they always repre­sent distress sales. Howe­ver, the same also appli­es as far as the deb­tor is con­cer­ned. The con­cen­tra­ti­on of demand makes it impos­si­ble for bidders (e.g. via straw men of the pled­gee) to form a bid­ding car­tel and push the ham­mer pri­ce below the achie­va­ble pri­ce to the detri­ment of the pled­gee.

Second­ly, the tour.

A sale by public auc­tion is always sub­ject to the exclu­si­on of any war­ran­ty in accordance with Sec­tion 445 BGB. The cor­re­la­te of this exclu­si­on of war­ran­ty is the inspec­tion. Accor­ding to the Auc­tion­eers’ Regu­la­ti­ons, pro­s­pec­ti­ve buy­ers must be given the oppor­tu­ni­ty to inform them­sel­ves about the auc­tion­ed pro­per­ty within a reasonable peri­od of time. This should also app­ly ana­log­ous­ly to an auc­tion by the nota­ry.

When auc­tio­ning com­pa­ny shares or other rights, the inspec­tion takes place via a data room. The data room pro­vi­des the oppor­tu­ni­ty to inspect the pled­ged pro­per­ty pri­or to the auc­tion. Alt­hough the legis­la­tor has not spe­ci­fi­cal­ly regu­la­ted the inspec­tion of com­pa­ny shares, the nota­ry must also make it pos­si­ble to inspect the pled­ged pro­per­ty via a data room during the nota­ri­al auc­tion. In the event that obs­truc­ti­ve or legal­ly unin­for­med pled­gers or pled­gees refu­se or delay the pro­vi­si­on of the data requi­red for the data room, they must be infor­med by the nota­ry or auc­tion­eer of the resul­ting loss of pro­ceeds to their dis­ad­van­ta­ge.

The pro­vi­si­ons of the GDPR must be obser­ved when set­ting up a vir­tu­al data room. The data may not be hos­ted on a ser­ver out­side the EU, which is the case with Ame­ri­can or Chi­ne­se ser­ver pro­vi­ders, for exam­p­le. In order not to dama­ge the auc­tion­ed goods, access may only be gran­ted to per­sons who have signed an exten­ded con­fi­den­tia­li­ty agree­ment sta­ting that they will not dis­c­lo­se the infor­ma­ti­on obtai­ned via the data room to third par­ties with the excep­ti­on of their legal advi­sors, tax con­sul­tants or finan­cial insti­tu­ti­ons.

Third­ly, the auc­tion pro­cess.

Not only the publicly appoin­ted, sworn auc­tion­eer, but also the nota­ry must con­duct the auc­tion con­sci­en­tious­ly. It is his duty to make available all pos­si­bi­li­ties to achie­ve an opti­mal auc­tion result so that the hig­hest pos­si­ble pri­ce is achie­ved. Nowa­days, this can no lon­ger be gua­ran­teed by the face-to-face auc­tions con­duc­ted by nota­ries in their offices alo­ne. In addi­ti­on to sub­mit­ting bids in per­son, in wri­ting or by tele­pho­ne, pro­s­pec­ti­ve buy­ers expect to be able to sub­mit bids via a live online auc­tion plat­form. Hard­ly any pro­s­pec­ti­ve buy­ers are wil­ling to tra­vel to an auc­tion in the know­ledge that only one per­son will win the bid, espe­ci­al­ly if they have to tra­vel a long way. Howe­ver, at public auc­tions of com­pa­ny shares, whe­re usual­ly only one item is put up for bid, only one bidder has a chan­ce of win­ning. The offer to take part in such a face-to-face auc­tion is hard­ly ever accept­ed. Online live auc­tions with live streams have long been the stan­dard in inter­na­tio­nal auc­tio­ning. The pre­re­qui­si­tes for this must be in place. This appli­es to the soft­ware for the online live bid to be pla­ced in per­son, sui­ta­ble ser­vers as well as tech­ni­cal equip­ment and staf­fing. Set­ting up a live stream stu­dio with a man­da­to­ry short laten­cy peri­od when recei­ving bids and using a Ger­man ser­ver due to the GDPR is tech­ni­cal­ly, finan­ci­al­ly and per­son­nel-inten­si­ve. Trai­ned spe­cia­list staff are requi­red for hand­ling, which must be pro­vi­ded or com­mis­sio­ned. Mee­ting the­se stan­dards only pays off if auc­tions are held regu­lar­ly. For this reason, face-to-face auc­tions in a nota­ry’s office tend to reach only tho­se bidders who are loca­ted local­ly. As nota­ries are gene­ral­ly unable to meet all of the­se requi­re­ments for con­duc­ting legal­ly unas­sailable public auc­tions, many nota­ries refu­se to con­duct public auc­tions of com­pa­ny shares or other rights and refer to sui­ta­ble publicly appoin­ted, sworn auc­tion­eers. If the pled­gee nevert­hel­ess wis­hes to ins­truct a nota­ry, he should ensu­re that the nota­ry is able to con­duct a live online auc­tion with a live stream in order to avo­id legal dis­ad­van­ta­ges.

Con­clu­si­on:
Not only the exe­cu­ti­on, but also the legal­ly com­pli­ant public announce­ment must be appro­pria­te to the pled­ged pro­per­ty in all aspects. The lienor or his legal repre­sen­ta­ti­ve or a third par­ty appoin­ted by him may not, as a bia­sed par­ty, make the public announce­ment hims­elf. In the event of a dis­pu­te, the plain­ti­f­f’s lawy­er could demand the sur­ren­der of docu­ments as pro­of that the nota­ry, as the auc­tion­eer and inde­pen­dent aut­ho­ri­ty, made the public announce­ment hims­elf. Fur­ther­mo­re, the nota­ry may only dele­ga­te this task to sui­ta­ble ser­vice pro­vi­ders if he has obli­ged them to main­tain con­fi­den­tia­li­ty. In addi­ti­on, it must be pro­ven that the nota­ry com­mis­sio­ned with the auc­tion has pro­vi­ded all opti­ons for accep­ting bids. If this is brea­ched, the auc­tion could be chal­len­ged and may have to be rever­sed or dama­ges may have to be paid to the deb­tor and bidder. This could have serious con­se­quen­ces for the cre­di­tor if the legal prin­ci­ples set out in sec­tion 1237 sen­tence 1 BGB have been vio­la­ted. If the lega­li­ty of the auc­tion is dis­pu­ted, it is not the nota­ry who is initi­al­ly lia­ble, but the cli­ent. In the event of negli­gence or gross negli­gence, the nota­ry is also lia­ble. The auc­tio­ning of com­pa­ny shares or other rights is almost always the sub­ject of dis­pu­te. This usual­ly invol­ves very high claims for dama­ges, which trig­ger cor­re­spon­din­gly high legal cos­ts.

Fur­ther infor­ma­ti­on (link): About the auc­tion of com­pa­ny shares and rights

Plea­se cont­act us if you have a spe­ci­fic case for a public auc­tion: To the cont­act form

We have pro­vi­ded an expl­ana­to­ry video to pro­vi­de infor­ma­ti­on about the assign­ment: To the expl­ana­to­ry video for cli­ents

Infor­ma­ti­on on the auc­tion pro­cess: To the expl­ana­to­ry video for bidders

Thumb­nail pho­to col­la­ge using pho­tos: Pho­to­grapher vees1studio, enva­to ele­ments Licen­se code ABCT684KMJ + Pho­to­grapher Ngampol7380, enva­to ele­ments Licen­se code 8YLCZJ6XV3. Ava­tar pho­to: pipio.ai