Definition and Legal Classification of Premium
Das Premium is a term used in German civil law as well as commercial and capital market law, which plays a central role especially in auctions, sales by auction, the issuance of securities, and in connection with public or private sales processes. The premium describes an additional amount of money that must be paid by the acquiring party over and above the so-called final bid (in auctions) or the nominal value (in securities). The legal treatment and specific structure of the premium largely depend on the type of transaction and the applicable legal framework.
Legal Foundations of the Premium
Civil Law Foundations
In civil law, the premium becomes particularly relevant in public and private sales, for example in auctions pursuant to §§ 156 et seq. BGB. As a component of the total price, the premium usually constitutes a supplementary fee that the auction organizer or auctioneer charges as remuneration for conducting or brokering the sale.
Commercial and Capital Market Law Particularities
In commercial and company law (especially HGB and AktG), the premium is significant in the context of raising equity capital. When issuing shares or other securities, a so-called ‘agio’ (synonym: premium) may be charged. The agio constitutes the portion of the issue price that exceeds the nominal value and is allocated to the company, primarily to strengthen capital reserves (§ 272 para. 2 no. 1 HGB).
In trading debt securities or other financial instruments, the premium is considered the difference between the issue price and the nominal value. This ensures that issuers receive a higher amount than the nominal value and can thus cover issuance costs or improve the company’s capital structure.
Areas of Application and Legal Structure
Premium in Auctions and Sales by Auction
Legal Relationship and Contract Design
In public or private auctions, the premium is usually a percentage of the final bid that must be paid by the buyer in addition to the successful bid. In many cases, the premium is declared as a buyer’s commission and is contractually anchored in the terms and conditions of participation or auction terms. For the buyer, the premium is regularly part of the total purchase price; its amount and exact structure are subject to judicial review regarding transparency and the control of standard terms according to §§ 307 et seq. BGB.
VAT Treatment
In auctions, the premium is generally subject to VAT, provided the auctioneer is an entrepreneur and provides a taxable service. The assessment base for VAT includes the entire remuneration including the premium.
Premium in the Acquisition of Securities
Share Issuance
According to § 9 AktG, new shares may not be issued below nominal value (for no-par shares, below their proportional share of the share capital); issuance above nominal value (including a premium or agio) is permitted. The premium collected in this context is allocated to a separate capital reserve in accordance with § 272 para. 2 no. 1 HGB. In this way, the premium strengthens the company’s equity base.
Debt Securities and Other Financial Instruments
When acquiring debt securities or similar instruments, the premium is the difference between the issue price (above nominal value) and the nominal value. In such transactions, the premium serves both to cover issue costs and to provide additional financing sources for the issuing company.
Significance in Insolvency and Foreclosure Sales
In the context of foreclosure sales, the premium is also collected as part of the distributable assets and may be subject to specific statutory regulations if applicable. In addition, additional fees and premiums affect both liability and the order of priority among creditors in insolvency proceedings.
Taxes and Fee Law Related to Premiums
VAT and Capital Gains Tax
Depending on the circumstances, the premium is subject to different tax regulations. In business transactions, such as auctions or brokerage transactions, the premium is regularly subject to VAT. In the capital market, the agio can be relevant for determining corporate income tax and capital gains tax.
Regulatory Aspects of Fees
While additional fees and costs are regulated by the legislator in public law, for example in the case of judicial auctions, more detailed agreements on premiums and incidental costs are often found in the general terms and conditions of organizers or issuers in private law.
Case Law and Contract Design Regarding Premiums
Case Law
German case law has defined the framework and limits of premiums in various contractual constructs—such as in auction law, company law, and banking law—in a multitude of decisions. The focus is often on questions of appropriateness, transparency, and the admissibility of premium clauses in standardized contracts.
Contract Clauses and Consumer Protection
Consumer protection provisions (§§ 305 et seq. BGB) require the clear and transparent disclosure of premiums, especially in general terms and conditions. If there is a lack of transparency or an unreasonably high assessment, the validity of such clauses may be restricted or lead to their invalidity.
Distinction from Comparable Terms
The premium (agio) is to be distinguished from the disagio (discount), which denotes a deduction below nominal value. Both terms play an important role particularly in credit and capital market transactions and have different economic and accounting impacts for the contracting parties.
Summary
The premium is a multifaceted, legally relevant term that is significant in numerous scenarios within civil, commercial, and capital market law. It particularly manifests as an additional price component in auctions, the issuance of securities, or in the liquidation of assets during insolvency or enforcement proceedings. The legal situation is structured differently depending on the regulatory area and is shaped by civil, tax, and company law frameworks. From an economic perspective, the premium serves as remuneration for brokerage services, cost coverage, or capital increase, but is always subject to legal requirements on transparency, reasonableness, and legal clarity.
Frequently Asked Questions
Which legal bases govern the premium in public auctions?
The premium in the context of public auctions, especially for real estate or movable property, is essentially governed legally by the applicable auction terms and the statutory provisions of the German Civil Code (BGB) as well as special laws such as the Compulsory Auction Ordinance (ZVG). In foreclosure sales, the premium is expressly permitted as an ancillary service, provided this is disclosed transparently in the auction terms. Specifically for auctions, the premium is often levied as a percentage surcharge on the hammer price and must be clearly announced in advance by the auctioneer or the conducting company (§ 312j BGB, information obligations in distance contracts and contracts in electronic commerce). The design and enforcement of the premium are generally the responsibility of the respective auctioneer, whereby charging an unreasonably high premium can be scrutinized for immorality according to § 138 BGB. In addition, there are civil law information obligations and—when dealing with businesses—often public-law requirements, for example under price indication law.
Does the premium have to be listed separately in the contract?
Legally, the premium as part of the total remuneration is subject to detailed disclosure requirements in the contract. According to § 1 of the Price Indication Ordinance (PAngV), in contracts with consumers the final price—including all fees and premiums—must be displayed transparently and in good time before the contract is concluded. This applies especially to online auctions or auctions as part of distance selling, as well as to in-person auctions involving consumers. A non-disclosed premium can lead to the invalidity of the relevant clause, particularly if the consumer is thereby unfairly disadvantaged (cf. § 307 para. 1 BGB—control of standard terms and conditions). In auctions between businesses, the parties have greater freedom to negotiate premium disclosure. Nevertheless, clear written agreements are also recommended here for legal certainty and evidentiary purposes.
Is the premium subject to VAT?
The premium is generally subject to VAT according to German tax law, provided the auctioneer acts as an entrepreneur within the meaning of § 2 Value Added Tax Act (UStG) and the auction takes place in the course of a business or professional activity. VAT is applied to the premium as it is to other components of consideration, unless exemptions apply (for example, in deliveries to third countries or certain auctions for non-profit organizations). Buyers should note that the final price usually consists of the hammer price, the premium, and the corresponding VAT. Correct VAT treatment and disclosure is mandatory—incorrect information may result in tax arrears and fines.
Are there legal limits to the amount of the premium?
German law does not provide absolute maximum limits for the premium. However, the amount of the premium must generally be determined by the standards of morality and transparency. An excessive premium may be void under § 138 BGB if it crosses the threshold of usury or if the buyer is disadvantaged by non-transparent or surprising standard terms (§ 305c, § 307 BGB). Courts decide on a case-by-case basis, considering all the circumstances, whether the fixed amount of the premium is still lawful. In practice, market-standard rates have been established for various auction types, such as 15 to 25 percent in art auctions, which are usually not objected to.
Can premiums be contested retrospectively?
A retrospective right of contestation regarding the premium generally exists only if the buyer was not properly informed about the premium at the time the contract was concluded, or if there was fraudulent misrepresentation or a legal error. Especially for consumers: if the premium was not transparently disclosed, this may result in the contestability of the entire contract or the relevant clause (§§ 119, 123 BGB). In the event of a successful challenge, the auctioneer would be obliged to refund the unlawfully received premium. For companies, contestation is more difficult and usually requires demonstrable deceit or errors in the contract documentation.
How is the premium legally distinguished from other incidental costs?
Legally, the distinction between the premium and other additional costs is made according to the function of the respective remuneration. The premium expressly represents an additional remuneration for the auctioneer for conducting the auction and is charged to the buyer in addition to the hammer price (final bid). Other ancillary services, such as shipping costs, storage fees, or insurance charges, are separate items that must usually be disclosed separately and are often subject to different legal information and pricing requirements. In individual cases, an incorrect or unclear aggregation of various incidental costs under the umbrella term ‘premium’ can be construed as misleading under competition law to the detriment of the buyer.
What information obligations exist in connection with the premium?
The information obligations surrounding the premium derive from a variety of legal sources, including the German Civil Code (BGB), the Price Indication Ordinance (PAngV), and, in electronic commerce, § 312j BGB. In particular, the premium must be clearly and understandably indicated, and disclosed before contract conclusion where consumers are involved. Violations of these obligations may not only render individual contract clauses invalid but may also result in competition law warnings or administrative sanctions. For auctions abroad or in cross-border contexts, the relevant national laws and EU consumer protection directives must additionally be observed.
