German Management and Operation Agreements

    View Authors March 2014

    We wish to advise/remind everyone involved with German real estate assets or other facilities – in particular hotels, resorts, clinics and other commercially used facilities such as industrial plants – on the following:

    The Case

    If a German corporation (GmbH/AG) owning an asset engages an operator/manager by means of a management and operations agreement (be it included in a lease or by means of a separate agreement) for all of its assets or parts thereof, the agreement may constitute a “contract between enterprises” (Unternehmensvertrag), in particular a Betriebspachtvertrag or a Betriebsführungsvertrag (but possibly also a Teilgewinnabführungsvertrag) within the meaning of German group of companies law.

    If this is the case, such an operation agreement will be null and void, provided the mandatory rules for the conclusion of contracts between enterprises were not complied with. Where the agreements are included in a lease SPA and other agreement, these contracts will most likely be void as well.

    In particular, these rules require German shareholder resolutions, a notarial record, (German) written form of the agreement and registration with the commercial register. They are part of German corporate law and, from a German IPR perspective, may apply regardless of any choice of law between the parties to such agreement. Pending the fulfillment of the said requirements the agreement will be de facto only, meaning that where an agreement was actually in operation it will be upheld for the time being, but is subject to immediate cancellation by both parties without any further cause.

    Why is this Important?

    1. If you want to terminate or make claims under such agreement, you should explore the possibility of an immediate cancellation due to the above rules and the consequences for your case.
    2. If you want to enter into such kind of agreement, you need to consider this aspect and confirm that:
      1. your agreement doesn’t qualify as a German contract between enterprises; or
      2. that the above rules are complied with; or
      3. you prefer the possibility of immediate cancellation regardless of the term of the agreement (this, of course, should be documented).
    3. In particular, at the beginning of a project/service those rules are easy to comply with and, in most cases, it is simpler and more cost effective to observe them rather than run through the contract and make material tests.

    4. If you have entered into such an agreement without seeking proper advice on this, you may consider whether you want the agreement tested and, where necessary, take steps to cure legal defaults. Should you experience this issue and are unsure how to deal with it, please contact us.

    Should you experience this issue and are unsure how to deal with it, please contact us.