In the case of a company acquisition as an asset deal, contractually existing obligations to cease and desist do not transfer to the buyer according to a ruling by the Cologne Regional Court on 26.09.2022 (Case No. 14 O 225/21).
In a company acquisition under an asset deal, assets and economic goods, including legal relationships, are sold. However, this does not mean that a cease and desist declaration with penalty clause, which the company issued before the sale, automatically transfers to the buyer, explains attorney Michael Rainer, contact for business law at MTR Rechtsanwälte.
In the case before the Cologne Regional Court, the company had previously unlawfully used a plaintiff’s photo for advertising. For this copyright infringement, the company had issued a cease and desist declaration with a penalty clause and committed to pay a contractual penalty in case of violation. Later, the company was acquired by the defendant in an asset deal.
The copyright holder of the photo then found that his photo was unlawfully published again. Based on the cease and desist declaration with penalty clause, he now demanded the payment of the contractual penalty from the company buyer.
However, his claim was not successful at the Cologne Regional Court. The defendant company buyer had not become a party to the cease and desist contract nor was it obligated to pay the contractual penalty for any other reason, the court made clear. Although the defendant had acquired certain assets through an asset deal, it was undisputedly not identical to the company that had committed to cease and desist. This company had been absorbed into another company, the Cologne Regional Court explained.
The acquisition of certain legal positions within the asset deal did not result in the defendant becoming a universal successor. Neither had it become a universal successor through universal succession, nor particularly by special provisions of the UmwG. Additionally, there was no continuation of the business operations of the sold company. Furthermore, the defendant is not passively legitimized.
Therefore, the Cologne Regional Court ruled that the defendant company does not need to pay the contractual penalty. However, the plaintiff can still sue the company for a cease and desist.
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