Investment Screening: When the Federal Government Has a Say in the Sale

Sale of a company to a buyer from outside the EU – notification duty, closing prohibition and the planned Investment Screening Act

According to media reports, the European Commission has approved the takeover of a large German retail group by a Chinese investor only subject to conditions; the issue there was subsidies from third countries. Independently of this, the German federal government reviews acquisitions of companies by investors from outside the EU. This also affects many mid-sized companies, for example in a sale to U.S. investors. In addition, in October 2026 the Federal Ministry for Economic Affairs presented the draft of a new Investment Screening Act.

Who can be screened

The Federal Ministry for Economic Affairs may examine whether the acquisition of a domestic company by a “non-Union investor” – an acquirer that is resident neither in the EU nor in an EFTA state – is likely to impair public order or security (§ 5 para. 2 AWG, § 55 para. 1 AWV). The acquisition of a separable part of a business or of all essential operating assets is treated like a share purchase (§ 55 para. 1a AWV). An asset deal, that is, the purchase of individual assets, can therefore also be caught.

The review is triggered at certain shares of voting rights: 10 per cent, for example, for operators of critical installations, 20 per cent for the other sectors listed in § 55a para. 1 AWV, and 25 per cent for all other companies (§ 56 para. 1 AWV). For defence and certain IT security products, a separate procedure with a notification duty applies that covers every foreign acquirer (§ 5 para. 3 AWG, §§ 60, 60a AWV).

Notify before closing

The catalogue of § 55a para. 1 AWV is broad. It ranges from semiconductors, robotics and additive manufacturing through cloud services and artificial intelligence to critical raw materials. If the target company belongs to it, the buyer must notify the contract without undue delay after signing (§ 55a para. 4 AWV). The closing transaction, such as the transfer of shares, remains provisionally ineffective until the acquisition has been cleared or the review periods expire without a prohibition (§ 15 para. 3 AWG). Until then the buyer may not exercise voting rights and may not receive certain company-related information (§ 15 para. 4 AWG). Intentional violations are a criminal offence – also for the person who passes on such information (§ 18 para. 1b AWG).

The Ministry has two months from becoming aware of the signing to open a review procedure, and thereafter in principle four months from receipt of the complete documents (§ 14a para. 1 AWG); extensions are possible. If no notification is made, a review can take place up to five years after signing (§ 14a para. 3 AWG). For acquisitions that are not subject to notification, the buyer can therefore apply for a certificate of non-objection (§ 58 AWV).

What is set to change

The ministerial draft (Referentenentwurf) of an Investment Screening Act is in the consultation phase; comments may be submitted until 12 November 2026. It is intended to consolidate the law and to align it with the new EU Screening Regulation (EU) 2026/1386, which applies from 17 January 2028. According to specialist publications, the draft provides for shorter review periods, a reorganised system of thresholds, additional sectors and, for the first time, fines for omitted or late notifications. Until further notice, the AWG and AWV apply.

Practical checklist for sellers

• Clarify early whether the company falls under § 55a or § 60 AWV – also check subsidiaries and individual products.

• Establish the origin of the buyer and its shareholders, including indirect holdings.

• Regulate clearance as a closing condition in the purchase agreement and align the timetable accordingly.

• Control the flow of information to the buyer until clearance.

• For contracts from a cut-off date in 2027, the draft provides that the new law is to apply.

Conclusion

Investment screening is not a topic for large groups only. Those who plan for it early can avoid delays at closing. Please contact us if you have any questions.

As of: 04.11.2026

NIETZER Rechtsanwälte · Attorneys at Law (USA) · Heilbronn · www.unternehmensrecht.com

This article is for general information purposes only and does not replace legal advice in an individual case.