Term and definition of Completion in law
The term ‘Completion’ refers, in the legal context, primarily to the conclusion of a particular legal transaction or a deal, especially in the area of commercial and corporate law. In contracts, ‘Completion’ is often defined as a critical date by which all contractually agreed performances, obligations, and conditions must be fulfilled by the involved parties so that the transaction is deemed conclusively completed.
In German law, the equivalent of Completion is often found under the terms ‘Vollzug’ (‘consummation’) or ‘Abschluss’ (‘conclusion’). The Completion date has significant legal effects because, from this point onward, economic risks, as well as rights and obligations related to the subject of the contract, generally transfer.
Completion in Mergers & Acquisitions (M&A)
Significance of Completion in company acquisitions
In the context of share purchase agreements (Share Deal or Asset Deal), Completion marks the moment when all conditions precedent have been fulfilled and the transaction is actually implemented through the transfer of shares or assets. The previously concluded contract is referred to as ‘Signing,’ while Completion denotes the actual closing.
Typical conditions leading to Completion include obtaining approvals from authorities, authorizations under foreign trade law, consent from shareholders or banks, as well as the absence of any material adverse changes (‘Material Adverse Change Clause’).
Completion and transfer of risk
Upon Completion, economic risks, opportunities, and control regularly pass from the previous owner/seller to the buyer. Guarantee and indemnification obligations are often also linked to the Completion date and commence from this point on.
Completion Accounts and determination of purchase price
In many share purchase agreements, the final purchase price is determined based on ‘Completion Accounts’, i.e., a balance sheet drawn up at the Completion date. This method offsets value fluctuations between contract signing and final completion, thus minimizing valuation risks.
Completion in real estate law
Transfer of real estate ownership
In real estate law, Completion refers to the crucial date on which ownership, use, and burdens related to a property pass to the purchaser. Prerequisites for Completion are usually the payment of the purchase price and the entry in the land register. Between signing the purchase contract and Completion, there is typically a phase for obtaining approvals (e.g., the municipality’s right of first refusal, obtaining deletion consents).
Transfer of benefits and burdens
Usually, a so-called ‘transfer date’ is specified in the notarized purchase agreement, which coincides with the Completion date. From this date, the purchaser is liable for taxes and levies and bears the risk of profit and loss.
Completion in international contract law
Completion is a widely used international term, particularly in contracts governed by English law. The meaning in a context oriented towards German law remains similar: Completion marks the conclusion of contractual performance. In the international context, even more detailed rules are often established regarding individual prerequisites and processes to increase legal certainty in cross-border business transactions.
Closing vs. Completion
In some legal systems, particularly those in Anglo-American countries, a distinction is made between ‘Signing’ (execution of the contract), ‘Closing’ (fulfillment of contractual conditions), and ‘Completion’. In German-speaking countries, the terms ‘Closing’ and ‘Completion’ are used interchangeably, with both referring to the contractually determined point of consummation.
Legal significance and risks of Completion
Requirements for Completion
Completion requires the full fulfillment of all conditions stipulated and defined as prerequisites in the main contract. These regularly include regulatory approvals, clearance by competition authorities, or the absence of certain adverse developments.
Legal consequences if Completion is not achieved
If Completion is not achieved for reasons attributable to one party, contractually pre-defined legal consequences typically apply, such as rights of withdrawal, claims for damages, or contractual penalties. The exact design of these consequences is a key element of contract negotiations.
Warranty and guarantee from Completion
All claims arising from warranty and guarantee regularly commence from Completion. Limitation periods are, as a rule, also tied to this point in time.
Summary
The term Completion legally refers to the conclusion of the consummation of a contract, which is connected with far-reaching consequences for the rights, obligations, and liabilities of the contracting parties. While the details may vary depending on the legal area and contract, Completion represents a central cornerstone in the structuring, processing, and securing of various types of transactions. It constitutes a key date for the transfer of rights and risks as well as the beginning or end of contractual claims and is therefore of high practical and legal relevance.
Frequently asked questions
What are the legal consequences of Completion in the context of M&A transactions?
In an M&A transaction, Completion (conclusion) marks the point at which the services agreed upon in the purchase agreement (SPA) are fully rendered reciprocally by both buyer and seller. Legally, this results in the transfer of ownership and usually also the transfer of risk in relation to the sold company or the affected assets. From Completion, the buyer is typically entitled to exercise the income statement and control over the target company. Contractual consequences defined in the purchase agreement, such as guarantees, indemnities, or purchase price adjustment clauses, also take full effect from this point. Furthermore, Completion triggers tax obligations, particularly regarding real estate transfer tax, value-added tax (if relevant), and notification and reporting obligations according to §§ 19, 20 UmwG and § 40 GmbHG or §§ 15 ff. AktG. In addition, from this date, there is increased liability for any longer-term obligations arising from the contract, such as warranty rights.
What typical conditions (Conditions Precedent) must be fulfilled before Completion and what is their legal significance?
Typical conditions precedent to Completion — so-called Conditions Precedent — include, among others, merger control clearance by competition authorities (e.g., the Federal Cartel Office or the European Commission), foreign trade approvals under the Foreign Trade and Payments Act (AWG), consents by third parties (e.g., shareholders, minority shareholders, banks, or other contractual partners), and the adoption of internal corporate resolutions (e.g., general meeting or shareholder resolution under GmbHG or AktG). Legally, these conditions mean that the consummation of the transaction (i.e., Completion) may only take place if all conditions have been cumulatively fulfilled or have been lawfully waived by the parties jointly. Failure to fulfill a Condition Precedent before the contractually defined long-stop date can — depending on the contractual arrangement — result in a right of withdrawal (resolutive conditional relationship) or claims for damages. The conditions are therefore essential to protect the parties against uncontrolled risks and possible legal disadvantages, if regulatory or contractual prerequisites have yet to be fulfilled.
Which legal documents are regularly finalized or delivered on the day of Completion?
On Completion day, the legal documents necessary for the transfer of ownership and the enforcement of the contract are finalized and exchanged. These typically include share transfer certificates (e.g., assignment agreements under § 15 GmbHG), transfer notifications (possibly notarized documents), clearance certificates (e.g., merger control clearance), proof of obtaining required third-party approvals, and board and shareholder resolutions of both parties. Additionally, a closing confirmation may be signed which formally confirms Completion. Depending on the transaction structure, escrow agreements, trust arrangements for secure deposit of the purchase price, and delivery of important company documents are also carried out. It is legally relevant that, with the proper delivery of these documents, the effectiveness of the transfer of the legal entity and the transfer of temporary responsibility frequently coincide.
What liability risks exist for the contracting parties after Completion?
Following Completion, both parties incur liability risks resulting mainly from the purchase agreement. For the seller, this includes liability for breaches of warranties or representations, possible indemnification obligations (e.g., for pre-existing liabilities or pending litigation), as well as the obligation to remedy or compensate for any damage caused by inaccuracies. For the buyer, liability risks arise from the obligation to pay the purchase price, to timely notify authorities of the acquisition, and—in case of breach of contract—to potential claims for damages. The exact scope and duration of liability are contractually governed through limitations of liability, limitation periods, and possible liability exclusions. Under German law, notices of defects and claims for damages can be asserted under § 377 HGB, §§ 433 ff. BGB, and, if applicable, on the basis of specific warranty clauses.
What (public-law) reporting and notification obligations exist after Completion?
After Completion, numerous reporting and notification duties must be fulfilled, and failure to observe them can result in fines or administrative penalties. This includes, for example, the registration of the share acquisition with the commercial register pursuant to § 40 GmbHG and, if necessary, the updating of the shareholders list. Under § 15 AktG, notification to the commercial register is required for share transactions. There are also notification requirements vis-à-vis the Federal Ministry for Economic Affairs and Climate Action (BMWK) under the AWG, as well as obligations to report beneficial owners to the Transparency Register in connection with the Money Laundering Act (GwG). For tax purposes, the tax office must be notified without delay, as notification of the change in company ownership is relevant for VAT or land transfer tax. In international transactions, reporting obligations under the Foreign Trade and Payments Regulation (AWV) may also apply.
Can a Completion be reversed, and under what legal conditions?
The reversal of a Completion essentially takes place through contractually agreed rights of withdrawal or on the basis of statutory grounds for rescission. This may be the case, for example, if a key condition (e.g., a central warranty) subsequently proves to be untrue or if there is mutual agreement about terminating and returning the performances (so-called rescission agreement). Statutory rights of withdrawal under §§ 323, 119 ff. BGB only apply if there is a material breach of duty, a mistake, or fraudulent misrepresentation. The practical unwinding (‘Undo-Completion’) is complex because ownership and rights may already have been transferred and possibly third parties are involved. Therefore, SPAs often include specific reversal mechanisms (so-called claw-back clauses) to provide for an orderly and legally certain reversal. Notarial re-transfers and subsequent notification obligations must be strictly observed.
