A non-EU acquirer moves to take a minority stake in a German technology supplier. The deal looks straightforward on paper – a clean share purchase, a registered GmbH (German private limited company), a willing seller. Then the notification obligation lands. Failure to file before closing can render the transaction void under Germany's foreign investment legislation. The consequences extend beyond delay: they reach into deal certainty, financing conditions, and investor liability.
Germany's foreign investment screening system, administered by the Federal Ministry for Economic Affairs and Climate Action, imposes mandatory pre-closing notification requirements on acquisitions of voting shares in German companies active in defined sensitive sectors. Thresholds triggering notification start at ten percent of voting rights for critical infrastructure and security-relevant sectors, and at twenty-five percent for a broader range of commercial activities. Non-compliant transactions are subject to prohibition or unwinding orders.
This alert covers the key regulatory changes that took effect in early 2025, the categories of business now subject to mandatory screening. The applicable thresholds and deadlines. Additionally, the immediate steps international companies and their advisers should take before signing or closing any affected transaction.
What changed and when it took effect
Germany's investment screening rules derive from its foreign trade and payments legislation, specifically the foreign investment review provisions that implement and extend the EU Foreign Direct Investment Screening Regulation. Amendments introduced in 2024 and effective from the first quarter of 2025 materially expand the scope of mandatory notification.
Three changes are most consequential for international acquirers. First, the list of sensitive sectors subject to the lower ten-percent threshold has been extended. It now explicitly captures companies involved in artificial intelligence development for defence or critical infrastructure applications, advanced semiconductor manufacturing, and quantum computing research. Second, the definition of "indirect acquisition" has been tightened. Acquiring a foreign parent that holds a German target now triggers the same notification duty as a direct share purchase. Third, the concept of "other relevant agreements" has been broadened. Contractual rights that confer de facto control – including veto rights, board appointment rights, or access to sensitive technical data – now independently trigger the notification requirement, even where the share threshold is not crossed.
The Bundesgerichtshof (Federal Court of Justice of Germany) has confirmed in its case law on corporate transactions that agreements producing controlling influence over a German company are subject to regulatory review in the same manner as share transfers. This position reinforces the extended scope of the 2025 amendments.
The effective date of the amended rules was 1 March 2025. Transactions signed but not yet closed before that date and not yet cleared by the ministry must be assessed against the new, broader criteria.
Who is affected: thresholds and business categories
The screening regime applies to acquirers who are not EU or EFTA nationals or entities. Acquirers domiciled or incorporated in the EU or the European Economic Area are generally outside the mandatory notification scope, though voluntary notification remains available and is sometimes advisable where the target operates in sensitive areas.
The ten-percent threshold applies to acquisitions in the following categories:
- Critical infrastructure operators – energy networks, water supply, digital infrastructure, and transport systems
- Companies holding or processing classified government information
- Companies operating in the defence and weapons technology supply chain
- Developers of AI systems with defence, surveillance, or critical infrastructure applications
- Semiconductor and quantum technology businesses
The twenty-five-percent threshold applies to a wider commercial category. This includes media companies with significant public reach, businesses holding proprietary data of public health or safety relevance, and companies providing outsourced IT services to government agencies or financial institutions.
Acquisitions of companies registered in the Handelsregister (German Commercial Register) under any of these categories must be notified to the ministry before closing. The ministry then has a two-month review period from receipt of a complete notification file. That period can extend to four months where the ministry opens a formal review. Parties should treat four months as the effective planning horizon for clearance.
A frequently overlooked trigger is the Amtsgericht (local district court) registration of corporate restructurings. Where a restructuring results in a change of beneficial ownership that crosses a notification threshold – even without a direct share transfer – the notification obligation arises. Many international acquirers conducting intra-group reorganisations fail to identify this trigger in advance.
For transactions involving investment funds, the screening rules look through the fund structure to the ultimate beneficial owner. A non-EU investment fund acquiring a German target through a special purpose vehicle does not avoid the notification requirement by interposing an EU-domiciled holding entity. The ministry applies a substance-over-form analysis.
For a tailored strategy on investment screening compliance in Germany, reach out to info@ferrazwhitmore.com.
Immediate actions for international companies
International acquirers, their in-house counsel, and advisers should treat the following steps as immediate priorities for any transaction involving a German target.
First: conduct a sector classification review. Before signing a letter of intent or term sheet, verify whether the target falls within any of the notifiable categories. This requires examining the target's activities, not merely its stated industry classification. A software company that licenses products to defence contractors may fall within the ten-percent threshold even if it does not describe itself as a defence business. German corporate legislation and the applicable investment screening rules use functional definitions – what the company does, not how it is classified.
Second: map all acquisition routes. Identify every mechanism through which voting rights, board rights, or access to sensitive data will transfer. This includes share purchases, asset deals structured around IP licensing or data access, and any ancillary agreements that confer control. Disclosure obligations under the screening regime extend to these ancillary instruments.
Third: assess the indirect acquisition question. Where the acquirer holds the target through a chain of entities, map the full ownership chain. The ministry applies an aggregation approach: rights held by affiliated entities are counted together when assessing whether a threshold is crossed.
Fourth: prepare the notification file in parallel with transaction documents. A complete notification file requires detailed information about the acquirer's ultimate beneficial owners. The acquirer's existing portfolio of German investments, the target's revenue by product line and customer category. Additionally, a description of all post-closing governance arrangements. Assembling this documentation after signing causes avoidable delay. Practitioners working with the ministry's process consistently note that incomplete files are the principal cause of extended review timelines.
Fifth: consider voluntary notification for borderline cases. Where it is unclear whether the transaction falls within a notifiable category, voluntary notification provides legal certainty. The ministry will issue a clearance certificate within the standard review period. That certificate is a bankable document: it satisfies lender conditions precedent and provides a defence against subsequent challenge. Given the risk of a transaction being unwound post-closing if an unnotified deal is later identified, voluntary notification is the prudent default for any transaction touching a regulated sector.
Companies with existing German investments should also review their current shareholding structures. The 2025 amendments may have brought previously unnotified positions within the notification scope. While the legislation does not impose a retroactive notification duty on completed transactions. It does apply to any future change in the nature or extent of the acquirer's rights. including the exercise of options, conversion rights. Alternatively, calls under existing shareholder agreements.
For capital markets transactions involving a prospectus, securities offering, or IPO of a German company with non-EU shareholders, the screening analysis must be coordinated with the listing requirements and disclosure obligations applicable under securities legislation. An acquirer crossing a notification threshold as part of a public offering process faces parallel regulatory tracks. These should be managed as a single integrated workstream, not sequentially. For related advice on capital markets matters in Germany, our team can assess the full regulatory picture across both investment screening and securities law.
Companies operating in the banking and financial services sector should note that investment screening clearance does not substitute for the separate regulatory approvals required under financial services legislation. The two regimes are parallel and independent. For the financial services dimension, see our coverage of banking and finance regulatory matters in Germany.
Finally, companies with multi-jurisdictional investment programmes should note that Germany's expanded screening rules do not operate in isolation. Portugal has introduced its own investment screening reforms in the same period. For a parallel analysis of those changes, see our alert on investment screening developments in Portugal.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our team combines Portuguese civil law expertise with English common law tradition to deliver cross-border legal solutions in foreign investment screening, capital markets transactions, and regulatory compliance in Germany and across the EU. We advise international acquirers, institutional investors, and in-house legal teams on navigating investment screening procedures, preparing notification files, and coordinating multi-jurisdictional clearance processes. As a law firm in Germany-facing cross-border matters, we work alongside local counsel to provide integrated advice from deal structuring through regulatory sign-off. Engaging a lawyer in Germany with cross-border regulatory experience at the outset of a transaction – rather than after signing – consistently produces better outcomes for international clients. To discuss how Germany's revised screening requirements apply to your transaction, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.