The proposals are intended to offer protection to companies targeted by buyout firms and to elaborate on how the bids are financed.
The funds would also be compelled to announce their intentions for their buyout targets when seeking to raise their stake above ten per cent.
Private equity companies in particular have proved a source of much controversy in Germany since they were dubbed 'locusts' which prey on German assets by Chancellor Franz Muntefering in 2005.
Since then however, Frau Merkel's statement that the funds had an important role to play in the German economy and her pledges to remove investment barriers had been perceived by analysts to indicate that the country's position on the firms' activities had softened.
Pending parliamentary approval, the measures become law in 2008.