The public auction of corporate shares and IP rights of any kind, by virtue of the mandatory public notice requirement under § 1237 BGB, ensures open market access and competition-based price discovery through transparent, non-discriminatory publication of the auction.
Executive Summary
When enforcing against pledged company shares and other rights, it is not the “form” that is decisive, but the effect: anyone who treats the public announcement as a mere box-ticking exercise (e.g. a minimal notice in the Federal Gazette) risks avoidance, unwinding and substantial liability exposure in the event of a dispute — especially with unlisted shares, where the auction itself effectively creates the market in the first place.
In addition, there is an inherent structural tension: the secured creditor (pledgee) should not, as a rule, control the announcement himself, because he is entitled to bid and may therefore be exposed to allegations of bias and value-destructive conduct (waste/undervalue). In an insolvency context, these issues become particularly acute. n an insolvency context, these issues become particularly acute.
Warum das so ist, welche Publizitätsstandards § 1237 BGB tatsächlich verlangt – und weshalb Online-Live-Versteigerungen heute oft der entscheidende Schlüssel zur erforderlichen, angemessenen Markterschließung und potentiellen Erlösoptimierung sind – erläutert der folgende Beitrag Schritt für Schritt.
Legal classification and responsibility
Pledge Rights within the meaning of Section 383 BGB may be realized, as a matter of statutory design, by auctioneers, bailiffs or — where the auction is coupled with notarization — by notaries who are publicly appointed and sworn for this field. In enforcement practice, bailiffs regularly decline to conduct such realizations.
This is largely because the realization of company shares or other rights typically requires expert valuations, economic and legal due diligence and a robust contractual framework. Bailiffs generally lack the structural and personnel resources to deliver this. Moreover, pursuant to Section 191 (1) GVGA, bailiffs are entitled to refuse an assignment without stating reasons; see also OLG Cologne, decision of 30 December 1999 — Ref. 7 VA 2/99.
If company shares or other rights have been attached pursuant to a court judgment, Section 825 of the German Code of Civil Procedure (Zivilprozessordnung – “ZPO”) allows the enforcement court, upon application by either the creditor or the debtor, to order realization by a publicly appointed and sworn auctioneer.
Section 825 (2) ZPO expressly provides:
“Upon application by the creditor or the debtor, the enforcement court may order that the auction of an attached asset be conducted by a person other than the court bailiff.”
New legal framework as of 01.01.2025.
With effect from 01.01.2025, the amendment to Section 383 BGB entered into force. The legislator has expressly emphasized the importance of pledges over rights and, at the same time, for the first time expressly anchored in statute the conduct of online auctions by publicly appointed, sworn auctioneers.
The publicly appointed, sworn auctioneer is now expressly listed first in the statutory provision as the central authority for the realization of objects and rights arising from contractual and statutory pledges over rights. Their involvement serves to ensure an independent, legally compliant and fair execution of the realization process and is accepted by both creditors and debtors. Its involvement serves to ensure an independent, legally compliant and fair handling of the realization procedure and is accepted by both creditors and debtors.
When enforcing claims against pledged rights and assets, the generally publicly appointed, sworn auctioneer specializing in such realizations pursuant to Section 1237 BGB stands for the best possible realization of proceeds.
Lack of implementation regulations and practical risks
There are no specific statutory implementing rules governing the conduct of public auctions of rights, neither for publicly appointed auctioneers nor for notaries. However, this traditional field of law is by no means unregulated. A review of the relevant commentary literature quickly demonstrates that non-specialists are exposed to significant contestation and liability risk. Incorrect advice or insufficient expertise can cause material economic loss.
Due to many years of practical experience in the public auction of pledged company shares and rights of all kinds, Deutsche Pfandverwertung has in-depth expertise that goes far beyond a purely theoretical approach. The complexity of the subject requires a comprehensive review of all procedural steps.
The public auction is divided into three clearly distinguishable phases:
Generation of prospective buyers,
Inspection phase,
Auction process.
Generation of prospective buyers — public announcement (§ 1237 BGB)
Normative starting point:
Pursuant to Section 1237 sentence 1 BGB, the pledge auction must be made public. This publicity obligation is not a formality for its own sake; it is a central legal safeguard. An auction that is not publicized, or not publicized adequately, is unlawful; a bid cannot be validly accepted.
The legislator deliberately employs an open-textured legal term in Section 1237 BGB. Its content must be determined exclusively by interpretation.
Interpretation of the term “to be made public”
The interpretation results in three cumulative requirements:
personnel range,
time appropriateness,
qualitatively appropriate scope of the announcement.
Grammatikalische Auslegung
“Public” means generally accessible. An announcement is public if anyone can potentially gain knowledge of it. However, this does not mean that any person must be reached. The decisive factor is the accessibility of potential buyers.
Systematic interpretation
The requirements are met once a substantial proportion of the realistically reachable potential bidders has been given the opportunity to take note of the announcement. This systematic interpretation follows the principle of coherence of the legal order.
Historical and teleological interpretation
The historical legislator sought the broadest possible dissemination of information to prevent manipulation. The teleological interpretation confirms that the purpose of the provision is to concentrate demand in order to achieve optimal auction proceeds (see BVerfG 34, 238, 288 f.).
Based on the ordinary meaning of the word, “public” denotes general accessibility in the technical legal sense. Accordingly, an announcement is public if anyone potentially has the opportunity to become aware of it. This entails an obligation to announce the auction in a manner that enables an undefined group of persons to potentially take note of the auction event. It is not required that anyone actually does so. At the same time, it must be taken into account that it is neither appropriate nor intended by the legislator to make auction announcements accessible to circles of persons who are excluded from the outset as potential buyers.
The grammatical interpretation must then be corroborated systematically. From a systematic perspective, the requirements for a “public” announcement are already fulfilled if a significant proportion of the potential, realistically reachable prospective buyers has been given the opportunity to learn about the upcoming auction. The systematic interpretation is based on the principle of coherence within the legal system, according to which legal norms are presumed internally consistent. Conclusions regarding the content, scope and intensity of the publicity obligation can therefore be derived from a systematic analysis of relevant legal provisions.
From a personnel perspective, it must be ensured that the largest possible number of thematically relevant potential bidders is informed of the upcoming auction at reasonable cost and within a reasonable period of time. The decisive factor is not an abstract maximization of reach, but rather the targeted addressing of those audiences that can realistically be considered purchasers in light of the type, scope and economic structure of the pledged asset.
These potential bidders must receive information about the auction date sufficiently in advance to enable them to form an informed view of the company shares or other rights to be auctioned, conduct economic and legal due diligence and arrange the funding required to submit a bid.
Hieraus folgt, dass sich Art, Umfang und Intensität der Veröffentlichung einer Versteigerung in personeller, zeitlicher und qualitativer Hinsicht maßgeblich nach dem anzunehmenden Verkehrswert oder Fortführungswert, der wirtschaftlichen und rechtlichen Komplexität, dem nationalen oder internationalen Kontext sowie der Marktgängigkeit des Pfandguts richten.
The legislative objective of informing the largest possible number of potential bidders through publication of the auction is widely recognized and is confirmed by teleological interpretation. The purpose of the statutory publicity obligation is to increase competitive intensity through the most comprehensive yet appropriate publication. Such competitive intensity is a precondition for achieving the best possible auction proceeds and for striking an appropriate balance between the interests of all parties involved — in particular the pledgor and the pledgee.
According to statutory requirements, the purpose of publicly announcing the auction is to produce the greatest possible concentration of demand on the auction date in the market specifically created by the auction. To this end, the optimal number of realistically reachable and objectively suitable potential bidders must be approached at reasonable cost. The legislator attaches central importance to this concentration of demand, as it constitutes the best possible prerequisite for achieving optimal auction proceeds. The correlation between concentration of demand and proceeds levels is also supported by economic literature.
Systematically, it follows that a notarial auction must likewise be published in such a way that potential bidders — at reasonable cost — are afforded a genuine opportunity to become aware of the auction date. Since realization costs are generally borne by the debtor as the responsible party, they are subject to a reasonableness standard. Targeted or even comprehensive identification of all theoretically conceivable potential buyers worldwide would clearly be disproportionate, not least in light of economic proportionality considerations. The costs and benefits of the publication measures must be proportionate.
Pursuant to Section 1237 BGB, the announcement of the auction must be made publicly, properly and dutifully not only by the publicly appointed, sworn auctioneer, but also by the notary. The same principles that apply to the auction announcement by a publicly appointed and sworn auctioneer must be observed systematically with regard to timeframe, scope and selection of publication media. A differentiation of requirements based solely on the identity of the auctioneer cannot be inferred from the statute.
The pledge auction under the German Civil Code constitutes the public sale of pledged assets and stands in deliberate and emphatic contrast to a private sale.
In Section 1235 BGB, the legislator expressly chose public auction as the default method of realization because the pledgee has no factual or legal influence over the sale of the pledged asset. The public nature of the procedure is the central and indispensable safeguard in this context.
The public nature of the auction is intended to eliminate intentional or structural harm arising from the influence of any single party. It ensures that price formation is not controlled or manipulated by one-sided interests. In particular where the asset is illiquid or non-marketable — such as unlisted company shares or other rights — the public auction creates a market in the first place. Absent the auction, there is typically no transparent, comparable or functioning market mechanism for such assets.
The concentration of demand in terms of time and place on the market created by the auction is intended to prevent the pledged asset — including company shares and rights — from being dissipated. The practical effect is that it becomes de facto impossible for the pledgee to depress the top bid in a targeted manner or to acquire the pledged asset himself at a price below the optimal achievable value. Such influence would operate directly to the detriment of the pledgor. Moreover, if the auction proceeds are insufficient to fully satisfy the secured claim, the lien creditor typically remains entitled to pursue the debtor’s remaining assets for the shortfall by way of further enforcement. In that scenario, manipulation of the auction outcome would confer a double economic benefit on the pledgee.
In legal debate, it is often argued that public pledge auctions are structurally akin to distress sales and therefore entail an increased risk of dissipation or sale at an undervalue. In current practice, however, this concern is materially mitigated by the expanded possibilities of online live auctions. Digital, location-independent bidding mechanisms allow a substantially larger — yet still suitable — bidder universe to be reached nationally and internationally. The resulting increase in demand intensity effectively counteracts the risk of undervaluation of the pledged asset.
Public announcement, market approach and liability consequences for auctions of company shares and rights
Traditional print media have lost significant reach and impact as a result of digitalization. Against this background, it will generally not satisfy today’s factual and legal standards to limit the public announcement of an auction solely to a mandatory notice in the Federal Gazette or in a daily newspaper authorized for public notices. Such minimal publication frequently fails to generate meaningful market response and is therefore typically unsuitable to achieve the purpose of Section 1237 BGB.
In der Praxis ist zu beobachten, dass öffentliche Versteigerungen – insbesondere durch Notare – häufig lediglich über diese klassischen Kanäle angekündigt werden, oftmals beschränkt auf eine formale Kurzmitteilung im Bundesanzeiger und/oder (lokale) Zeitungsanzeige. Eine solche Vorgehensweise ist jedoch nicht ausreichend, da sie den zwingenden Anforderungen an eine rechtskonforme öffentliche Bekanntmachung nicht gerecht wird, wie sie sich aus der grammatikalischen, systematischen, historischen und teleologischen Auslegung des § 1237 BGB ergeben.
Instead, the identification and generation of suitable prospective buyers for company shares and other rights requires an approach aligned with current M&A practice and established principles of banking, finance and business administration. This includes market analyses, target-investor identification, structured investor outreach and the use of modern national and international communication channels.
For notaries, conducting public auctions is typically ancillary. Public auctions of company shares are comparatively rare. The permanent provision of staff with specific M&A, valuation and capital market expertise is generally not economically feasible for a notary’s office. Against this background, it is typically neither feasible to deliver a public announcement meeting legal requirements nor to identify and approach a properly defined group of potential buyers using the staffing typically available in such offices.
Transferring the public announcement to the pledgee or its agents — such as lawyers, consultants or other third parties — does not fulfill the requirements of Section 1237 BGB. Since the creditor is always entitled to his own right to co-bid in accordance with Section 1239 BGB (“co-bidding by creditor and owner”), it must be assumed that he and his vicarious agents are structurally biased. The pledgee could be accused of unilaterally influencing the course of the proceedings to the detriment of the pledgee by selecting the person selling the property and by designing the announcement.
If an auction is announced arbitrarily or inadequately and the pledged property is sold to a purchaser preferred by the creditor or even to the creditor himself, he may be accused of negligent or grossly negligent dissipation. This applies in particular because if the proceeds from the auction are too low, the lien creditor regularly remains entitled to access the debtor’s other assets for the remaining claim. In subsequent insolvency proceedings, such an underutilization is also detrimental to the other creditors. In contentious proceedings, the pledgor may be required to prove who actually made the public announcement, when, how and via which media.
Wird bei notariellen Versteigerungen den Anforderungen des § 1237 BGB nicht in allen wesentlichen Aspekten entsprochen, ist die rechtskonforme öffentliche Bekanntmachung nicht bewirkt. Öffentliche Versteigerungen von Unternehmensanteilen oder sonstigen Rechten sind regelmäßig streitbefangen. If the sale is not carried out in accordance with the law, the client of the auction, usually the pledgee, is initially liable. This is particularly important with regard to a possible insolvency of the pledgor. An insolvency administrator can contest the legality of the auction and assert claims for damages; in addition, he is regularly entitled to legal aid in insolvency proceedings, which considerably increases the litigation risk for the pledgee.
For these reasons, when commissioning a notary, pledgees should, in their own interests under liability law, expressly make full and verifiable compliance with the requirements of section 1237 BGB in all the dimensions described here a prerequisite.
Against this background, many notaries now refuse to conduct public auctions of company shares or rights and refer to suitable publicly appointed and sworn auctioneers. The auctioning of company shares is part of the regular professional practice of a publicly appointed, sworn auctioneer specializing in this field of activity. His commercial and economic training enables him to identify the relevant group of bidders and to ensure an appropriate, legally compliant public announcement. Like the notary, the auctioneer is also sworn to independence and conscientious performance of his duties and carries out the publication in the interests of both the pledgor and the pledgee.
The legislator has deliberately not created a special set of implementation rules for public announcements by publicly appointed, sworn auctioneers. The instructions for bailiffs do not apply to them. Der Versteigerer wird regelmäßig erfolgsabhängig, das heißt prozentual vom Versteigerungserlös, käuferseitig vergütet. In its own economic interest alone, it therefore endeavors to publish as comprehensively, appropriately and effectively as possible. Unlike bailiffs or notaries, they are not remunerated on a flat-rate or fixed-fee basis.
The sworn auctioneer shall decide on the type, scope and medium of the announcement at his due discretion, taking into account the particularities of the individual case. These include, in particular, publications in print and online media, specialized internet platforms, social media, press relations, newsletters to known investors, targeted approaches to financial and strategic investors, market analyses and national and international direct approaches to potential bidders.
The aim of the public announcement is to inform the persons who could be serious purchasers in the specific individual case as comprehensively as possible about the upcoming auction. In the case of high-value company shares, compliance with these principles regularly means that the auction must be publicized via all relevant national and international communication channels. Otherwise, there would be a risk that the pledgee would also indirectly influence the scope of the publication by selecting the auctioneer.
According to the historical interpretation, the disclosure requirements were intended to inform the largest possible number of potential bidders. The original version of the BGB provided for a “customary” announcement. The legislator deliberately deleted this term in order to take account of the requirements of a globalized economy and modern means of communication. The aim was and is to ensure a public “collection of offers” uninfluenced by the creditor.
Finally, the teleological interpretation confirms that Section 1237 sentence 1 BGB aims to resolve a typical conflict of interest and prevent manipulation of pricing. The objective intention of the legislator is decisive. The Federal Constitutional Court states in this regard:
“The interpretation of a legal provision cannot always remain with the meaning ascribed to it at the time of its creation. It is necessary to consider what reasonable function it can have at the time of application.”
Excursus:
Necessity of conducting an online live auction to ensure the maximum possible reach and optimal realization of value.
The use of state-of-the-art online live auction software in this context is not merely a technical alternative, but a structural necessity to achieve the requisite reach and density of demand. Digital live auctions make it possible to address a bidder pool that is independent of time and location—both nationally and internationally—thereby reaching a substantially larger number of potential purchasers. This increases competitive intensity and, as a rule, also the proceeds achievable. By contrast, purely traditional formats—particularly in-person auctions or the classic notary-supervised auction relying on announcements through traditional media—are by their nature limited in reach and often cannot produce a concentration of demand adequate to prevailing market conditions.
From a structural standpoint, it is regularly not feasible for a notary to carry out, on a specialized basis, a public auction with comprehensive market outreach. Notarial services are primarily directed toward the notarization and legal administration of transactions; they do not encompass the ongoing provision of personnel or infrastructure for market analyses, target-group outreach, or digital marketing and auction processes. A notary’s office typically does not have the organizational and technical resources required to meet the complex demands of broad public notice and tailored digital bidder outreach. In practice, notarial auctions are often limited to traditional publication channels that do not meet contemporary standards for market-appropriate realization.
Against this background, the use of specialized live-auction software with digital publication, real-time bidding, and management functionalities is both economically warranted and required as a matter of legal compliance in order to achieve the necessary market reach and competitive bidding. Only in this way can the debtor’s entitlement to the best possible realization be satisfied and the risk of achieving proceeds below the level otherwise attainable be avoided.
Conclusion:
Warum eine notarielle Versteigerung den Pfandgläubiger exponiert:
Bei der Verwertung verpfändeter Unternehmensanteile wird häufig auf die notarielle Versteigerung gesetzt – in der Annahme, damit rechtlich auf der sicheren Seite zu sein. Diese Annahme ist trügerisch. Im Streitfall wird die notarielle Versteigerung regelmäßig nicht als haftungsentlastendes Schutzschild anerkannt, sondern als formeller Zwischenschritt, dessen wirtschaftliche Folgen dem Pfandgläubiger zugerechnet werden.
The notary typically satisfies only the minimum requirements, not the standard of appropriateness. Public notice is generally effected in a formally proper manner (e.g., via the Federal Gazette and, where applicable, a newspaper notice), but with limited market impact. In the case of privately held (non-listed) interests, this means that no reliable evidentiary basis for competitive bidding is established.
The notary does not create or organize a market.”
“The notary does not assume economic risk.”
“The notary’s responsibility and liability are primarily formal in nature.
ypical line of attack: the allegation of a ‘sham auction.
This is precisely where challenges are typically brought—regularly by shareholders, co-financiers, or insolvency administrators. The allegation is: formally proper, but economically insignificant.
Typical lines of attack include:
lack of market outreach, or outreach that is missing, unsuitable, or insufficient;
a de facto sole bidder, without documentation evidencing the market reach actually achieved;
a hammer price materially below going-concern value or the legitimately expected value;
the secured creditor’s reliance on the notary as a “shield.”
Legally relevant in this context is the following:
Engaging a notary does not relieve the secured creditor of responsibility for a purpose-appropriate realization. Liability is regularly “passed through” to the secured creditor.
Structural dilemma for creditors and funds:
Creditors—and even more so finance and legal funds—must not actively steer the market themselves, as doing so may expose them to allegations of bias or self-dealing, particularly in an insolvency context. At the same time, a purely formal auction is often insufficient to document, in an evidentiary manner, either (i) market value or (ii) the absence of a third-party market.
Consequence for the realization strategy:
A purely notarial auction
minimizes fees,
but does not minimize challenge and recourse risk.
Additional structure, documentation, and market access serve not primarily price discovery, but rather the defensibility of the realization.
The liability risk does not begin with the award of the bid, but with the decision to employ a process that neither creates a market nor documents, in an evidentiary manner, the absence of such a market. For finance and legal funds, this constitutes an independent due diligence item in its own right.
Reference: Schütze, Daniel: Wider die Verschleuderung von Unternehmen durch Pfandversteigerung, 03/2004, Hrsg. Prof. Dr. Christoph Schalast, Hochschule für Bankwirtschaft (HfB), Frankfurt am Main.
Disclaimer:
This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. It reflects general legal and economic considerations regarding security interests, enforcement and realization, and distressed M&A. No liability is assumed for accuracy or completeness; readers should obtain independent legal advice for any specific case.
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
