Auctioning company shares: Seize opportunities, avoid mistakes!

Contractual pledges of rights: seize opportunities, avoid mistakes!

Creditors can expand their scope of action by pledging and legally realizing contractually agreed pledges of rights to company shares (company shares).

Legal guidelines and practical recommendations

Introduction

The public auction of company shares to enforce contractual or statutory pledges of rights (Sections 1204 et seq. of the German Civil Code) offers creditors an effective means of realizing their claims and expanding their economic scope for action. Strict legal requirements must be observed in order to avoid procedural errors and liability risks.

Legal framework

Creditors who assert contractually agreed pledges of rights to shares should in particular observe the provisions of Sections 1233 et seq. BGB on collateral enforcement. The public auction is prescribed in accordance with Section 1235 BGB, unless otherwise agreed. In the case of a pledge based on a judgment, the creditor can apply to the court for the application of Section 825 ZPO — other type of realization — and thus, following a court order, instruct the publicly appointed, sworn auctioneer to realize company shares or other rights.

A central aspect is the public announcement of the auction (Section 1237 BGB). This announcement must inform both the debtor and potential bidders comprehensively and in good time. Formal errors can jeopardize the legal validity of the award (Section 125 BGB) and lead to challenges.

Strategic advantages for creditors

The takeover of shares by public auction opens up far-reaching opportunities for creditors:

Examination of company documents: By taking over the shares, creditors can gain insight into the economic situation and transactions of the company (Sections 716, 580 HGB).
Identification of liability facts: The review of management can provide indications of personal liability (Sections 43, 64 GmbHG) and thus promote willingness to pay.
Economic restructuring: The conversion of debt into equity (see debt-to-equity swap) strengthens the balance sheet and opens up new prospects for the company’s development.

Practical implementation and procedural security through Deutsche Pfandverwertung

Deutsche Pfandverwertung Ostermayer und Dr. Gold GbR, as publicly appointed and sworn auctioneers, guarantees the legally compliant conduct of such auctions. Every step of the process is systematically checked with particular attention paid to compliance with the Auctioneers Ordinance (§§ 1–4 VersteigerVO).

Particular attention must be paid to the proper public announcement (Section 1237 BGB). This must be carried out in accordance with the recognized methods of interpretation (grammatical, systematic, historical and teleological interpretation) in order to achieve maximum scope and rule out manipulation.

Modern technologies for efficient public auctions — Online auction

Participation in auctions is made considerably easier through the use of digital platforms. Online live auctions with live streaming meet modern standards and ensure broad international participation. The requirements of the GDPR must be observed, especially when setting up virtual data rooms (Section 1 (1) GDPR in conjunction with Section 1237 BGB).

The sale of company shares by public auction is a sovereign act.

The legally compliant process requires not only precise planning, but also in-depth legal knowledge. Creditors are well advised to involve experienced partners such as Deutsche Pfandverwertung in order to minimize economic risks and achieve the best possible liquidation proceeds.