RULES Research Unit Law and Economics Studies Paper No. 2013‐9 Shareholders’ Agreements in Listed Companies: Germany By Markus Roth Shareholders’ Agreements in Listed Companies: Germany Markus Roth, University of Marburg I. Introduction 1. Factual background and European framework 2. Types of shareholders’ agreements a) Shareholder voting agreements b) Pooling and consortium agreements c) Mutual understanding 3. Major legal problems II. Validity of shareholders’ agreements 1. Development of the German legal doctrine 2. No direction by the company 3. Agreements between shareholders generally allowed 4. Agreements between shareholders and third parties 5. Further limits III. The shareholders’ agreement 1. Legal nature of shareholders’ agreements a) Plurality of legal forms b) Civil partnership as main device 2. Voting in the shareholders’ agreement 3. Enforcement of shareholders’ agreements 4. Sanctions a) Damages and contractual damage clauses b) Shareholders’ agreements and resolutions at the general meeting 5. Pool‐treaties: selling clauses IV. Disclosure of shareholders’ agreements 1. General Disclosure Requirements a) Stock Corporation Act 
Preliminary Draft: Please do not cite or circulate. I thank Martin Wilhelm for initial language revision. b) Annual Report 2. German Securities Trading Act a) Notification requirements b) Publication requirements of the issuer c) Information of the Financial Supervisory Authority and the d) Information of the company register 3. Sanctions for non‐disclosure V. Shareholders’ agreements in German take‐over law 1. Mandatory bid 2. Acting in concert 3. Exemptions VI. Conclusion and outlook I. Introduction 1. Factual background and European framework Shareholders’ agreements have a long tradition in Germany: they are accepted by the courts since nearly hundred years. Shareholders’ agreements of various kinds are still of relevance, for close corporations and listed companies alike. Among the shareholder voting agreements in the DAX and, perhaps even more relevant, in the MDAX are Henkel, METRO and probably Porsche Holding SE. These companies are held by families, Henkel and METRO openly speak that there are shareholders’ agreements in place. In the case of Henkel, the shareholders’ agreement itself is named as shareholder in the notification (Mitglieder des Aktienbindungsvertrags, 111 members) and disclosed to the public. The members of the pooling agreement are holding 53,21 per cent of the voting rights in Henkel, the preferred shares (without voting rights) are in dispersed ownership. In the case of Porsche Holding SE, shareholders’ agreements are explicitly mentioned in some of the numerous mandatory disclosures due to notifications of shareholders.1 Significant shareholdings are disclosed on company investor relation websites and on the site of the German Financial Supervisory Authority.2 Interestingly, the information differs: According to the site of the Financial Supervisory Authority, several companies (named after natural persons) directly own shares and quite a number of companies and natural persons hold at least 75 per cent of the voting rights, but less than 83 per cent of the voting shares. By contrast, disclosure by Porsche Holding SE mentions both more and less shares held by the involved persons. Porsche Holding SE is an interesting example in terms of concentration of ownership and of relevance also since Porsche Holding SE owns the majority of the voting rights of Volkswagen. What is clear is that the figures vary according to their source and this is not an isolated problem. At the European level, in the Report on the Proportionality Principle in the European Union, shareholders’ agreements are discussed as control enhancing mechanism (CEM) and are generally 1
2
http://www.porsche‐se.com/pho/de/investorrelations/mandatorypublications/stimmrechtsmitteilung/ http://ww2.bafin.de/database/AnteileInfo/start.do. accepted also for listed companies.3 That the report of the Shearman & Stearling, ISS & ECGI mentions no shareholder voting agreements in German firms is due to the restriction of the sample on the largest 20 DAX‐companies, not including that time DAX 30‐members METRO and Henkel and the not indexed Porsche AG, Porsche declines to file quarterly reports and is therefore not included in the DAX or MDAX. In listed companies, European law governs securities trading. The transparency directive requires disclosure also of shares which are subject to long‐term shareholders’ agreements according to the transparency directive.4 In Germany, as far as public data and reports on factual background are accessible, shareholder voting agreements are concluded mostly by long‐term shareholders,5 which are often significant or together hold a majority of shares in their company. Many shareholders’ agreements are referred to by the parties of the shareholders’ agreement as a Schutzgemeinschaft – in English: Protection Association. Therefore the two leading decisions by the German Federal Supreme Court are called Schutzgemeinschaft I6 and Schutzgemeinschaft II7 – in English: Protection Association I and Protection Association II. The rationale behind this denomination is the preservation of the firm as a family firm.8 Generally, shareholders’ agreements may have the purpose to secure the character of a family company and prevent outside influence.9 Due to the function to secure the secrecy of internal agreements of the members of the pool/shareholder voting agreement,10 it appears appropriate to speak of an often anxious secrecy of shareholder (voting) agreements.11 Concerning the number of agreements, the European disclosure requirements for listed companies today give an indication of the numbers of shareholder voting agreements in listed companies, even if data is far from perfect. But imperfect data is not the only relevant issue for European discussion; long‐termism is of interest too. The discussion on long‐termism and sustainability has to consider shareholders’ agreements: if long‐term shareholders have the possibility to get a double dividend (not: vote) like in France, questions of majority/minority conflicts are enhancedfueled and pyramid structures might be supported. 2. Types of Shareholders’ agreements a) Shareholder voting agreements Shareholder voting agreements are agreements among shareholders aiming at the voting at the general meeting. In Germany, there is a legal obligation of the parties of the shareholders’ agreement to vote in a certain way and potentially also an obligation not to vote, a so called 3
Shearman & Stearling, ISS & ECGI, Report on the Proportionality Principle in the European Union, p. 22, 35. Artt. 9, 10 (a) Tranparency directive. 5
For the 1960ies Janberg/Schlaus AG 1967, 33. 6
BGHZ 126, 226. 7
BGHZ 179, 13. 8
In the 1960ies Deumling DB 1960,1689. 9
Jan Schröder ZGR 1978, 578. 10
Wertenbruch NZG 2009, 645; König ZGR 2005, 417,419. 11
Jan Schröder ZGR 1978, 578. 4
“Entherrschungsvertrag” (in English: de‐powering‐treaty) is also accepted.12 The rationales for shareholder voting agreements are besides securing the influence of the family on the management of a listed company13 the surpassing of ceilings for voting rights.14 b) Pooling and consortium agreements The German Federal Supreme Court uses the term Pool or Poolvertrag, when shareholders agree not only upon the voting in the general meeting but also to maintain the number of pooled shares.15 Members of the pool promise not to sell the shares without consent or prior offering the shares to other shareholders in the pool. In German academia, such treaties are referred to as pool treaties (Poolverträge).16 There are also pools with special committees deciding on the acquisition and selling of shares: In practice, the pool committee might – like a German supervisory board or internationally a board of directors – get together several times a year while the individual pool members meet only once a year.17 A special form of shareholders’ agreements exist in the form of pool treaties, in which all shareholders become parties to the agreement. These are referred to as Konsortialvertrag – consortium agreement, Special rules apply to these agreements, such as that resolutions at the general meeting which conflict with prior resolutions in the consortium agreement are voidable. c) Mutual understanding At least some German academics and legal practitioners argue that mutual understandings should also be treated like a shareholders’ agreements. In mutual understandings, there is no legal obligation for certain votes at the general meeting but rather some kind of common understanding. Such understanding may be in place when the institutional investors act as activist investor, some in Germany treat this as acting in concert. Explicitly named are the Council of Institutional Investors for the US and the National Association of Pension Funds for the UK.18 This may be even more relevant for mutual understandings in companies which are owned at least to a significant part by members of a family. A telling example is BMW, where members of the Quandt family (Johanna Quandt, Stefan Quandt, Susanne Klatten) own more than forty per cent of the shares). 3. Major legal problems 12
Reichert/Harbarth AG 2001, 447, 453‐454. May Sicherung des Familieneinflusses auf die Führung der börsengehandelten Aktiengesellschaft, 1992. 14
See Martens AG 1993, 495. 15
BGH NJW 1987, 890 concerning a listed company. 16
Hopt ZGR 1997, 1. 17
Hopt ZGR 1997, 1. 18
Schneider/Schneider ZIP 2006, 493. 13
Major legal problems discussed in German company law are the validity of shareholders’ agreements and the effect of majority voting requirements on resolutions at the general meeting when shareholders’ agreements are in place. Shareholders’ agreements in German practice may trigger the majority/minority problem: The Stock Corporation Act requires majorities for certain decisions. At least if the core of the rights of the shareholders, being members of the company, is at stake and shareholders’ agreements are in place which cover that majority but foresee internal simple majority voting, the boundaries of the intuitive convincing concept of certain majorities become apparent. Until now the German Supreme Court has answered the question as to whether legal intervention is required from the perspective of the minority in the shareholders’ agreement, not from the perspective of the outside shareholders of the company but from the perspective of the minority in the shareholders’ agreement. What may be most interesting is the family aspect, hinting at the boundaries of legal concepts. Company law issues are central to understanding the discussion and the enacted provisions on shareholders’ agreements in the Securities Trading Act and the Take‐Over Act. In securities trading and take‐over law, shareholders’ agreements are not discussed as such, but rather under the concept “acting in concert”. The financial supervisory authority (BaFin) refers to “coordinated conduct” under the Securities Trading Act19 and to “acting in concert” under the Take‐Over Act.20 Similar provisions are implemented both in the Securities Trading Act and in the Take‐Over Act, both referring in a first alternative to agreements among shareholders on the exercise of voting rights. The traditional reluctance concerning disclosure first in company law might is still to be seen in the reluctance towards disclosure of shareholders’ agreements as a securities law device. More stringent than the transparency directive is the sanction for violations of disclosure duties. Also corresponding with traditional German company law principles is the understanding of the acting in concert provision in the German Take‐Over Act. Take‐over law was controversial in Germany, not only due to overlaps with the German group of companies law, the Konzernrecht. The failure of the first attempt at implementing the European Take‐Over directive can be attributed to Volkswagen influencing the German chancellor at the time, Gerhard Schröder. In the EU this lead to the establishment of the High Level Group of Company Law Experts and to a watered‐down neutrality principle for the management in the final version of the directive. II. Validity of shareholders’ agreements 1. Development of the German legal doctrine In a decision in the first years of the 20th century, the Supreme Court of the German Reich rejected shareholders’ agreements.21 In a decision concerning a shareholders’ agreement in which two lineages in a family‐owned close corporation controlled the composition of the supervisory board, the Supreme Court of the German Reich declared that allowing legal binding rules concerning the voting in the general meeting was contrary to the idea of the corporation. This was contrary to legal 19
Issuer Guideline (Emittentenleitfaden) from the Bafin, German Supervisory Authority, p. 145. Press releases: Deutsche Börse, Beiersdorf. 21
RG, 16.3.1904, I 491/03, RGZ 57, 205, 208 (ein Familienstamm sollte gebunden werden). 20
practice and already the majority view in academia at that time.22 In another decision the Supreme Court of the German Reich was not quite so strict in formulating an overall rule, but still found it not acceptable to bind the will to a third party trying to buy a share if the company does not give its consent required by its articles of association.23 In the early Weimar Republic, the Supreme Court of the German Reich accepted shareholders’ agreements in a decision concerning a stock corporation.24 Besides giving up the old rule of law, this case was remarkable in another respect: besides the shareholder, the company itself was party to the contract, and the shareholder should be bound if the management board and the supervisory board take the same position in its resolutions.25 According to some, the acceptance of such bound shares could be explained early attempts to prohibit or, rather limit, foreign infiltration due to capital shortage.26 In the late Weimar Republic, the Supreme Court of the German Reich generally accepted shareholders’ agreements27 and stated that agreements between shareholders, in which the shareholders bind themselves to vote in a special resolution, or generally in a certain way, are lawful. They constitute a contractual obligation between the parties of the shareholders’ agreement by which the voting at the general meeting is not affected. Already the Supreme Court of the German Reich in the Weimar Republic accepted shareholders’ agreements.28 The approach was very liberal: Until 196529 German Stock Corporation Law allowed shares for which votes were to be executed under the direction of the stock corporation itself. During the World Economic Crises from 1929 onwards, the German legislator introduced some regulations concerning the law governing stock corporations. The first regulation on stock corporations30 introduced the concept of the so called “gebundene Aktien” (bound shares). While legally the shareholder was bound by the agreement with the company, the phrasing hinted at the share to be bound.31 The report of the management board has to provide information on voting under the direction of the company. According to Section 260a (3) no. 3 Commercial Code 1931, an explicit or implicit agreement in favor of the company, a dependent company or a company within the group of companies to use the right of the share had to be disclosed in the annual report. The courts accepted bound shares,32 as did the majority view in academia and the commentaries.33 The minority view was that there should be at least no voting right.34 Contrary to the general 22
The later president of the company law senate of the Federal Supreme Court, Robert Fischer, in Honours Kunze, 1969, p 95, 98 name strong, emotional words of the Supreme Court of the German Reich, references on literature page 99, footnote 3. 23
RG, 7.6.1908, II 632/07, RGZ 69, 134, 137 ( im Fall nach Gesellschaftsvertrag Übertragung der Geschäftsanteile nur mit Zustimmung des Aufsichtsrats). 24
RG, 19.6.1923, II 53/23, RGZ 107, 67, 70. 25
Legal point was to attack the resolution of the general meeting issuing new shares. At this time, there were no provisions for stock options in the German Stock Corporation Act; the predecessor of Section 221 German Stock Corporation Act was introduced only in 1937. 26
Büssemaker, Stimmbindungsverträge bei Kapitalgesellschaften in Europa, 1999, p. 34. 27
RG, 11.6.1931, II 398/29, RGZ 133, 90, 93. 28
RG, 20.11.1925, II 576/24, RGZ 112, 273, 279; RG, 10.1.1928, II 173/27, RGZ 119, 386, 388; RGZ 133,90, 93, referring to this string of decisions also RG 5.4.1939, II 155/38, RGZ ,257, 262 and RG, 12.10.1940, II 33/40, RGZ 165, 68, 78. 29
See Boesebeck NJW 1960, 7, 9. 30
1. Verordnung über Aktienrecht vom 19.9.1931 31
Boesebeck NJW 1960, 7, 9. 32
RGZ 119, 386, 388; RGZ 144, 183. understanding, it was accepted that there was no enforcement of the shareholders’ agreement by the company, but only a damages claim.35 That might have been one of the rationales of that decision, however, accepting such agreements is in line with the international legal standards as was – surprisingly – the establishment of the leadership principle in the German Stock Corporation Act 1936. The Rabel Journal in the 1920ies had an own title named Stock Corporation Law Reform in which the stock corporation laws of the world were presented in German. The Federal Supreme Courts accepts shareholders’ agreements for close corporations36 and for stock corporations, in a rather recent decision speaking also of ten per cent in dispersed ownership, hinting to a listing.37 Shareholders’ agreements with members of the management or supervisory board are treated as being distinct. Accepted are voting trust agreements when the member of the management or supervisory board is also a shareholder. Academia is reluctant, when the member of the management or supervisory board is not a shareholder.38 2. No direction by the company Under section 136 (2) German Stock Corporation Act agreements with the company to vote according to the direction of the company or its directors are void. In other words, a treaty in which a shareholder binds himself to use his voting rights according to the instruction of the company, the management board or the supervisory board, is void. Also void is a treaty according to which the shareholder is obliged to vote in favor of the proposals of the management board or the supervisory board. Votes according to the agreement are not void, the voting itself has no deficiency, only the agreement does.39 This finding of the Federal Supreme Court of the German Reich was followed in the 1990ies by the higher court (OLG) Nürnberg.40 Academia assumes that voting in the general meeting is already clear when the agreement is made.41 3. Agreements between shareholders generally allowed a) Company law 33
Boesebeck NJW 1960, 7, 9 citing Staub/PinnerSection 226 Commercial Code no. 31; Gadow/Heinichen Section 51 no. 10; Adler/Düring/Schmalz 3rd ed. Section 128 no. 59, against: Gierke 5th ed. 1941, Brodmann Section 252 Commercial Code no. 2c. 34
Schmidt in Großkomm AktG, Anm 43 zu § 114 Stock Corporation Act 1937; Janberg/Jacobs Aktiengesetz IIB 2, S. 14 f (according to Boesebeck). 35
Boesebeck NJW 1960, 7, 9. 36
BGHZ 48, 163, 167. 37
BGHZ 179, 13. 38
Grundmann in Großkomm Section 136 no. 78. 39
RGZ 133, 90, 93. 40
AG 1996, 228, 229. 41
Otto AG 1991, 369, 377. Shareholders’ agreements are accepted in German stock corporation law42 also for listed companies.43 It was and accepted that the parties in a shareholders’ agreement holding three quarters of the share capital may consent to the candidates to be elected as supervisory director.44 However, at least according to a strong opinion in academia, the articles of incorporation may forbid shareholders’ agreements in the form of a voting trust.45 b) Securities law In the German discussion on securities law, academics assume that some hardships were caused by the misunderstanding, that shareholders’ agreements were no longer allowed.46 As elsewhere, also the German Securities Trading Act imposes only disclosure duties and sanctions for violations of these duties. The German Take‐Over Act provides for a mandatory bid also for acting in concert of more than 30 per cent of the share capital. 4. Agreements between shareholders and third parties Focusing on agreements between shareholders and third parties, German stock corporation law clearly forbids the selling or purchasing of the voting rights according to section 405 (3) no. 6, 7 Stock Corporation Act. The German Stock Corporation Act prohibits to give or promise special advantages to shareholders for voting in a certain way and for shareholders to ask for, get promised or to take special advantages. Doing so is an administrative offence with the effect that such agreements are void (Section 134 Civil Code). Such shareholders’ agreements are void,47 the shareholders are not bound. Voting according to the agreement, despite being such an administrative defense, is nevertheless possible. The voting is not void, if the shareholder thought to be bound, he may declare avoidance,48 which will not occur in practice. Whether shareholders in general may bind themselves to the instructions of third parties is disputed in German academia. Some see agreements with non‐shareholders as inflicting the prohibition to separate the share and the right to vote at the general meeting, also because of the duty of loyalty in exercising the voting rights.49 The majority view in academia is that also shareholders’ agreements with non‐shareholders should be accepted.50 Even if such agreements are accepted, there are peculiarities: while shareholders’ agreements among shareholders are seen as civil partnerships, 42
Grundmann Großkommentar, Section 136 no. 75: undisputed. Supra II.1. 44
RG, 7.2.1936, II 207/36, HRR 1936, Nr. 747. 45
Grundmann Großkommentar, Section 136 no. 81 with further references. 46
Schneider in Assmann/Schneider, Section 22 no. 163. 47
RG, HRR 1936, Nr. 747. 48
Grundmann in Hopt/Wiedemann, GroßkommAktG, Section 136 no. 94. 49
Hüffer Section 133 no. 27. 50
Spindler in Spindler/Stilz Section 136 no. 37. 43
agreements with third parties will mostly be agency or trust relationships. For voting agreements in partnerships:51 no binding obligation towards third parties. 5. Further limits The overall concept to limit the scope of shareholders’ agreements is the duty of loyalty. In the general meeting of the stock corporations, the duty of loyalty of the shareholders is the general limit for the binding by the shareholders’ agreement.52 For votes concerning members of the supervisory board, the Supreme Court of the German Reich declared that the shareholder may not be bound if he has reasonable grounds that the nominee to be elected lacks the necessary knowledge or capabilities or is not to be trusted.53 Relevant is also the regulation on selling of shares in Section 68 Stock Corporation Act,54which may not be circumvented. Academia also discussed circumstances in which limits for voting rights might not by surpassed with shareholder voting agreements by the formally independent voting of the bound shareholders.55 In shareholders’ agreements in the legal form of a civil partnership, also the duty of loyalty as a partner of the civil partnership is limiting the scope of possible resolutions. The German Supreme Court in a recent decision clarified that.56 III. Functioning of shareholders’ agreements 1. Legal nature of shareholders’ agreements a) Legal forms The Supreme Court of the German Reich treated shareholders’ agreements as private law partnerships57 or a non‐incorporated association.58 In the cases brought before the German Supreme Court, the German Supreme Court decided that they are partnerships in the form of a private law partnership.59 Private law partnerships are since 2001 (in the aftermath of Centros and before Überseering) attributed with legal capacity when they are as such taking part in legal relations. Since in the case of shareholders’ agreements, the shareholders themselves vote in the general meeting, 51
Busse BB 1961, 261 For close corporations Herfs Einwirkung Dritter auf den Willlensbildungsprozeß der GmbH,1994. 53
RGZ 133, 90, 96. 54
Sieveking/Technau AG 1989, 17; Otto AG 1991, 369. 55
Uwe H. Schneider AG 1990, 56, 60 56
BGHZ 179, 13. 57
RG JW 1938, 2833. 58
RG, 29.10.1940, VII 44/40, RGZ 165, 140, 143. 59
BGH, 13.6.1994, II ZR 38/93, BGHZ 126, 226, 234 (typischerweise Innengesellschaft ohne Bildung von Gesamthandsvermögen), BGHZ 179, 13. 52
the German Federal Supreme Court treats a shareholders’ agreement as an internal (non‐disclosed) partnership60 and held that shareholders’ agreements in most cases are internal partnerships so.61 b) Civil partnership as main device A private law partnership has to have a common purpose (Section 705 German Civil Code). In the case of a shareholders’ agreement this common purpose is the uniform voting in the general meeting of the investee company.62 Since there are some consequences of that legal form, a short description of German partnership law might be helpful. The ultimate consequence would be to apply the German Konzernrecht, the law for groups of companies also to shareholders’ agreements: according to Bruno Kropff (who drafted the Stock Corporation Act 1965 in the Ministry of Justice) the civil partnership of a shareholders’ agreement might be controlling company according to the German group of company law (Konzernrecht) if not the shareholders but the partnership exercises “einheitliche Leitung”.63 In Germany, the term company law covers corporations (limited liability and stock corporations, newly the Unternehmergesellschaft (business corporation) as German form of a one‐euro limited liability company). Shareholders’ agreements as a partnership act as a “firm in the firm”: German law distinguishes commercial partnerships (Offene Handelsgesellschaften) and non‐commercial partnerships (Gesellschaft bürgerlichen Rechts, civil law partnership). Commercial partnerships are regulated in the Commercial Code, non‐commercial private law partnerships are regulated in the Civil Code. Besides civil law partnerships and commercial partnerships also limited partnerships with a general partner and a partner with limited liability, also in the form of the limited liability limited partnership, a limited partnership with a limited liability corporation (GmbH) as sole general partner are regulated in the Commercial Code or at least generally accepted. The name partnership is used in German law for professional partnerships (so called Partnerschaft, for professionals like lawyers, doctors, auditors). For non‐commercial, private law partnerships, German law may provide legal capacity and the capacity to be party in legal proceedings. This doctrine was established in 2001 by the company law senate of the German Supreme Court while the Überseering case was pending at the European Court of Justice. The Weißes‐Ross decision ended a so called thirty year war64 on that question. Weißes Ross differs between so called Außengesellschaften and so called Innengesellschaften. Außengesellschaften are taking part in the legal relations, Innengesellschaften do not and are translated into English as non‐disclosed partnerships and, more literary and better, as inside partnerships. Unlike silent associations, such partnerships are disclosed and as such are participating in legal affairs with others than the partners. Whether there is an inside (non‐disclosed) partnership (Innengesellschaft) or a private law partnership which takes part in the legal relations affects disclosure on the basis of the Securities Trading Act. A civil partnership with legal personality may itself be named to comply with the 60
BGH, 24.11.2008, II ZR 116/08, BGHZ 179, 13, 19. Referring also to BGHZ 126, 226, 234. 62
Federal Supreme Court of the German Reich RG JW 2833 f; RG DR 1940, 244, 246; RG DNotZ 1936, 564, 549. 63
Kropff BB 1965, 1281, 1285. 64
Karsten Schmidt NJW 2001, 993, 995. 61
transparency rules of the Securities Trading Act. Presumably, the Aktienbindungsvertrag of the Henkel family, holding more than fifty per cent of the voting shares of Henkel, is such a civil partnership with legal personality. 2. Voting in the shareholders’ agreement Majority voting requirements for decisions among the partners of the shareholders’ agreement might be laid down in the terms of the shareholders’ agreement. Due to the applicability of the law for civil partnerships to shareholders’ agreements, the default rule is not simple majority voting but unanimous voting, Section 709 (1) German Civil Code. Simple majority voting is the default rule if majority voting is provided for, according to Section 709 (2) German Civil Code in case of doubt that simple majority is the majority of the partners. In German stock corporation law, there are special quotas for resolutions at the general meeting. The German Stock Corporation Act requires a quota of three quarters of the voting shares attending the general meeting for some resolutions such as changes of the articles of incorporation65 and raising of capital, for other resolutions even more, up to 95 per cent of all voting shares for a squeeze‐out.66 The problem is apparent in cases in which shareholders’ agreements cover also super‐majorities in the general meeting (in practice: likely in Porsche Holding SE), a majority of the bound shareholders is reached with less than forty per cent, meaning that even a minority at the general meeting might direct votes leading to a super‐majority, possibly severely affecting the rights of other (outside) shareholders Some in academia advocate that such quotas have to be met also in resolutions of the parties of a shareholders’ agreement when the law requires higher quotas than simple majority voting.67 However, the majority view in academia, commentaries and practice is to accept simple majority.68 According to the Federal Supreme Court,69 there is no break‐through rule for majority‐requirements from stock corporation law to the law governing the shareholders’ agreement.70 Some doubt is cast by the accompanying argument of the Federal Supreme Court that otherwise, also minority rights would have to be transferred.71 Nevertheless, the differentiation appears appropriate since otherwise, also for other legal forms, a break‐through rule for super‐majority voting had to be established, like for limited liability companies (GmbH), resulting potentially in problems to meet super‐majority quotas at the general meetings and therefore hindering the prosperity of the company. 65
Section 179 German Stock Corporation Act. Sections 327a subseq Stock Corporation Act. 67
Habersack ZHR 164 (2000) 1, 12‐22. 68
Noack, Gesellschaftervereinbarungen bei Kapitalgesellschaften, p. 206‐208; Grundmann in Großkomm Section 136 no. 84; Odersky in FS Lutter 2000, p. 557. 69
BGHZ 179, 13. 70
Supporting this decision Podewills BB 2009, 733. 71
BGHZ 179, 13, 23. 66
3. Enforcement of shareholder voting agreements The Supreme Court of the German Reich, who in the early 20th century rejected the possibility of shareholders’ agreements outright, also held that they are unenforceable.72 According to the first decision of the Supreme Court of the German Reich concerning shareholders’ agreements, an enforceable duty to comply with the shareholders’ agreement would infringe on the decision‐making process of the general meeting and is therefore not acceptable.73 The general meeting gives the possibility to discuss and exchange arguments, giving the resolutions a better foundation: freedom for the shareholders in the voting secures a factual review of the agenda items.74 Academics in the Weimar Republic argued that the shareholder had to have the possibility to encounter also the arguments made during the discussion of the general meeting and that the company is not affected by a dispute on a shareholders’ agreement and its execution.75 It would be against the structure of the general meeting that in lieu of the shareholder, a “stony guest” with the voting verdict in its hands sits at the table.76 The German Federal Supreme Court in 1967 reviewed these arguments in a decision concerning a close corporation (GmbH) and ruled that the decisions of the Supreme Court of the German Reich are tempting to a breach of contract.77 Although it is desirable that the shareholders decide in the light of the arguments exchanged in the general meeting, it was admitted that a lot of shareholders are already determined. The enforceability does not infringe the free will of the general meeting since only the shareholder is bound by the shareholders’ agreement. The German Federal Supreme Court declared shareholders’ agreements to be enforceable according to the rules on enforcements of declarations of intent (Section 894 Civil Procedure Code), not on actions (Sections 887, 888 Civil Procedure Code).78 Before, it was disputed whether the declaration of intent.79 In practice, fellow shareholders filing for petitions to enforce shareholders’ agreements will however not succeed in getting a favorable voting in the general meeting due to the time needed to end judicial proceedings. Courts decline the possibility of an interim injunction80 while at least some in academia argue in favor of such an interim injunction.81 Arbitrational tribunals are accepted.82 Due to Section 136 (2) German Stock Corporation Act, there is no enforcement for bound shares. 72
See RGZ 112, 273, 279; 119, 386, 388; 133, 90, 95; 160, 257, 262; 170, 358, 371/72. See RGZ 112, 273, 279. 74
RG JW 1927, 2992. 75
Brodmann JW 1929, 615. 76
Max Wolff JW 1929, 2115, 2116. 77
BGHZ 48, 163, 171. 78
BGHZ 48, 163, 173. Before, academia was split: Zluhan AcP 128 (1928) 257, 300: Section 894 Code of Civil Procedure; Peters AcP 156 (1957) 311 differed between an obligation in the articles of association (Section 894 Code of Civil Procedure) and shareholder voting agreements (Section 887 Code of Civil Procedure). Erman AG 1959, 267, 300 found Section 894 Code of Civil Procedure applicable for the declaration itself, 300‐301, and Section 887 Code of Civil Procedure for the duty to install the partner in the shareholders’ agreement as agent, 301‐302. 79
Denying this Brodmann JW 1929, 615. 80
OLG Celle GmbHR 1981, 264, 265; OLG Frankfurt BB 1982, 274; OLG Saarbrücken NJW‐RR 1989, 1512; OLG Koblenz, NJW 1991, 1119; Littbarski S. 73 f, 156. 81
Spindler in Spindler/Stilz, 2nd edition Section 136 no. 49. As a practioner Buchta DB 2008, 913. Kiethe DStR 1993, 609, 611 refers to OLG Koblenz NJW 1986, 1693; GmbHR 1991, 22; GmbHR 1986, 428, 430. 73
4. Sanctions in shareholder voting agreements a) Damages and contractual damage clauses According to general principles of German civil law, parties of a shareholders’ agreement may apply for damages if other parties of the shareholders’ agreement breached their obligations. In practice, the problem will occur to name an exact figure for damage caused by voting in conflict with the obligations according to the shareholders’ agreement. Contractual damage clauses83 giving damages without proving that “damages” are caused by the breach of the shareholders’ agreement are still relevant.84 Contractual damage clauses were found essential before the recognition of enforceability of shareholder voting agreements by the courts85 but nowadays are said to be not widespread.86 b) Shareholders’ agreements and resolutions at the general meeting Part especially of the traditional German understanding of shareholder democracy is the control of resolutions of the general meeting by the courts.87 Such resolutions are in each general meeting the annual discharge of managing and supervisory directors and the appointment of supervisory directors. Resolutions are said to be affected if all shareholders are parties in the shareholders’ agreement,88 the resolution is voidable. Generally, even a vote given in breach of a shareholders’ agreement is valid. 5. Pool‐treaties: selling clauses The German Federal Supreme Court generally accepts clauses which provide for the member of the pool having to offer shares first to the pool.89 The German Federal Supreme Court accepts that even after a termination declaration, the shares have to be offered first to the pool.90 Due to the application of the provisions for civil partnerships, also Section 723 (3) Civil Code is applicable. Therefore, no unreasonable price may be specified. Price clauses in pool treaties are subject to 82
Noack, Gesellschaftervereinbarungen bei Kapitalgesellschaften, 1994, p. 223‐228. Noack, Gesellschaftervereinbarungen bei Kapitalgesellschaften, 1994, p. 219. 84
See the facts in BGHZ 179, 13, 15. 85
Janberg/Schlaus AG 1967, 33, 36. 86
Grundmann in GroßkommAktG, Section 136. 87
For problems occuring at least traditionally but also after some recent reforms Baums/Drinhausen/Keinath, ZIP 2011, 2392; Bayer/Hoffmann/Sawada, ZIP 2012, 897. 88
Noack Gesellschaftervereinbarungen bei Kapitalgesellschaften, p. 168, see also BGHZ 29, 385, 392. 89
BGHZ 126, 226. 90
BGHZ 126, 226, 238. 83
judicial review and if necessary to adjustment.91 However, the price may not be the market value of the shares.92 IV. Disclosure of shareholders’ agreements 1. General Disclosure Requirements a) German Stock Corporation Law Section 20 Stock Corporation Act93 sets disclosure duties for quotas of more than a quarter of shares held and majority of shares held. This corresponds cum grano salis with voting requirements of the German Stock Corporation Act but not all, since contrary to some94 the disclosure duties of council directive on the information when a major holding in a listed company is acquired or disposed of were not implemented in the Stock Corporation Act but in the Securities Trading Act. While for normal resolutions simple majority (more than half of the votes) is enough, super‐majority is set at “at least” three‐quarters of the shares. The disclosure duties in Section 20 German Stock Corporation Act were implemented in the Stock Corporation Act 1965 and among the issues most controversially discussed in the legislative process.95 In the Marburger Discussion on the Stock Corporation Law Reform, such disclosure was portrayed as contrary to “a core element of our free business order”.96 The head of division presenter in the German ministry of justice responsible for drafting the reform, Bruno Kropff, remembered that even 25 years later.97 Section 20 Stock Corporation Act requires shareholders to disclose shares held by the shareholder, by a dependent company, of shares held for the company and of shares the company is obliged to acquire. This duty is seen as deriving from the status of the shareholders as members of the stock corporation.98 This company law duty is not extended to the disclosure of shareholders’ agreements.99 To follow the minority view100 is questionable, but some arguments, especially when majority requirements differ between the civil partnership building the shareholders’ agreement and the stock corporation law. Disclosing shareholders’ agreement might be seen as good practice, not as legal duty, disclosure is uncommon. 91
BGHZ 126, 226, 241. BGHZ 126, 226, 245. 93
Janberg/Schlaus AG 1967, 33, 38‐39. 94
Burgard AG 1992, 41, 51. 95
Windbichler in Hopt/Wiedemann (eds), GroßkommAktG 4th edition Section 20 no. 1 96
Vallenthin, Aktienrecht und Kapitalmarkt, in: Marburger Aussprache zur Aktienrechtsreform, 1959, p. 36. 97
Kropff in Lutter (ed), 25 Jahre Aktiengesetz, 1991, p. 35. 98
Windbichler in Hopt/Wiedemann (eds), GroßkommAktG 4th edition Section 20 no. 8. 99
Koppensteiner in Zöllner/Noack (eds) Kölner Kommentar Aktiengesetz, 3rd edition Section 20 no. 40. 100
Lübbert, p. 202. 92
b) Annual Report All listed companies have to report shareholders’ agreements known to the company in the management report, Section 289 (4) (1) no. 2 Commercial Code. The same applies to a consolidated report, section 315 (4) (1) no. 2 Commercial Code. Section 289 (4) (1) no. 2 Commercial Code was introduced by the Act implementing the Take‐Over Directive.101 The management report (Lagebericht) has to provide information of restrictions of voting rights or transfer of shares, also resulting from agreements between shareholders which are known by the management board of the company. The management report is part of the annual report. Sections 289 (4) (1) no. 2 Commercial Code speaks of limitations concerning voting rights or the transfer of shares, also resulting out of agreements between shareholders. The provision focuses on limitations resulting from the articles of association but encounters also shareholders’ agreements.102 Not explicitly touched is the prerequisite for such disclosure, namely the knowledge of the management board. The Commercial Code does not name a duty to ask shareholders whether they fixed a shareholders’ agreement and a duty of the shareholder to answer such questions. In practice, there is at least a hint for such agreements when the shareholders disclose higher numbers of shareholding then 100 per cent of the shares of the company. Referring to the disclosure of more than a quarter or the majority of shares held,103 one might assume a company‐law rationale for the disclosure (required in Germany primarily by the Securities Trading Act) of the number of shares held by the public. Even more duties might be applied to directors: May a director of the management or supervisory board which is bound as shareholder by a shareholders’ agreement decline to answer questions of his fellow director colleagues if there is a duty for non‐disclosure in the agreement? German Federal Supreme Court sees shareholder voting agreements as civil partnerships in the form of an undisclosed or inside civil partnership. This hints that there is no disclosure duty towards the company. The more literal translation is inside civil partnership, also hinting that there is no duty of disclosure. One has to differ between the duty of the civil partnership to inform the company (not convincing as long as the partnership is not itself shareholder) and the duties of the shareholders forming the shareholders’ agreement. Inside civil partnership also when its existence is known but the partnership is not itself taking part in legal relationships.104 No inside civil partnership if the partnership has own assets,105 the German Federal Supreme Court in its decision states that the internal civil partnership had no assets.106 According to section 793 UK Companies Act 2006 a company may require information from a shareholder about his present (and to a certain degree: past) interest in shares. A company may in this context also require information whether a shareholder is party in a shareholders’ agreement on the acquisition of shares or on the exercise of any rights out of shares. In Italy, there is even a duty to disclose the text of the shareholders’ agreement itself. 101
2006. BT-Drucks. 16/1003, page 25, where particularly voting trust agreements are mentioned 103
Supra IV.1.a. 104
Wertenbruch NZG 2009, 645. 105
Wertenbruch NZG 2009, 645, 646. 106
Supra III.1.b. 102
According to the notes to the governmental draft to the Act implementing the Take‐Over Directive, there is neither a duty of the shareholders to inform the management of the company nor a right of the management board to ask whether there are shareholders’ agreements in place.107 In the transformation process of the council directive on information to be published when a major holding in a listed company is acquired or disposed of108 it was proposed not only to implement Art. 7 of this directive in German Law but also to introduce transparency requirements for shareholders’ agreements.109 It was proposed (by referring as example for shareholders’ agreements also to the failed take‐over of Continental by Pirelli)110 that such transparency should encounter the existence, the parties and the content of shareholder voting and other conduct agreements, also indirectly, like with broker houses, concerning the execution of voting rights or buying or selling of shares. 2. German Securities Trading Act a) Notification requirements aa) Initial discussion and concept Notification requirements surpassing the notification according to Section 20 Stock Corporation Act were subject to discussion in Germany. The council directive on the information when a major holding in a listed company is acquired or disposed of was meant to be implemented until January 1, 1991111 but in the end was implemented only on January 1, 1995.112 That delay was due also to different concepts towards implementation in the German Stock Corporations Act or in the Securities Trading Act.113 Apart from that, some undisclosed approaches to listed companies were criticized,114 namely an engagement of the Flick family which was closely related to the German regime during World War II, the attempt of Pirelli to buy the tire‐maker Continental and the purchase of the steel‐
maker Hoesch by the steel‐maker Krupp. These attempts are named for having changed the environment for establishing more stringent transparency rules than the minimum requirements established in the council directive on the information when a major holding in a listed company is acquired or disposed of,115 in Germany often referred to as transparency directive I. In Germany, the concept for acting in concert or coordinated conduct in the Securities Trading Act is the same as the concept in the Take‐Over Act. This is the case even in the aftermath of the amendment of the German Securities Trading Act by the Act on Minimizing Risks Associated with 107
16/1003, p. 25. Council Directive of 12 December 1988, 88/627/EEC, OJEC L 348/62. 109
Burgard AG 1992, 41, 53. 110
Burgard AG 1992, 41, 42‐44. 111
Art. 17 (1) Transparency Directive. 112
Art. 20 2. Finanzmarktförderungsgesetz, Gesetz über den Wertpapierhandel und zur Änderung börsenrechtlicher und wertpapierrechtlicher Vorschriften (2. Finanzmarktförderungsgesetz), 26.7.1994, German Federal Gazette I 1749. 113
For a pragmatic view Hopt ín WM‐Festgabe Hellner 1994, p. 29, 34, towards the Stock Corporation Act Burgard AG 1991, 41, for denying any need for Reform Happ JZ 1994, 240, 245. 114
Burgard AG 1992, 41‐44. 115
Schneider in Assmann/Schneider, Vor Section 21, no. 5. 108
Financial Investments (Risikobegrenzungsgesetz) in 2008.116 The financial committee of the German parliament, the Bundestag explicitly stated in the notes to the final draft of the Act on Minimizing Risks Associated with Financial Investments (Risikobegrenzungsgesetz) that there is only one concept for acting in concert, the notes for the new provision in the German Take‐Over Act refer to the notes for the new provision in the Securities Trading Act. Despite the equal phrasing in the Take‐Over Act, at least some in the literature plea for different solutions for special cases due to different purposes of the provisions117 and dispute the need for a uniform understanding of the acting in concert‐
concept in take‐over and securities law.118 In fact, a less close form of co‐operation might be relevant for the financial market but not necessarily requiring a mandatory bid to protect outside shareholders. That is especially the case for companies owned to substantial parts by members of a family for a long time, when there is no change of control and therefore no offer to outside directors in question. Therefore, to distinguish also the legal provisions with the German Financial Authority is preferable. I will use the term coordinated conduct for the Securities Trading Act, and acting in concert for the Take‐Over Act. bb) Section 22 (2) Securities Trading Act Section 22 (2) Securities Trading Act requires shareholders to disclose also the shares held by other shareholders with which the shareholder has a shareholders’ agreement which aims at coordinated conduct with the other shareholders in the voting at the shareholders’ meeting or in other forms, and has the purpose of a long‐lasting and significant change of the business practice of the issuer. Disclosure also when there is a non‐disclosure clause in the shareholders’ agreement.119 Art. 10 lit a Transparency Directive, 2004/109/EG refers to a long‐term strategy of the management of the company. German securities law in the first alternative of Section 22 (2) Securities Trading Act does not name a long‐term goal. Therefore, academia assumes that in the first alternative, the intent of the shareholders forming the shareholders’ agreement, especially whether they pursue a long‐
term goal in terms of impacting on the management, is not of relevance.120 This is explained with German stock corporation law not allowing the general meeting to determine about business policy like in some other European jurisdictions.121 Section 22 (2) Securities Trading Act no longer refers only to shareholders’ agreements concerning the voting in the general meeting122 but also to other common understandings aiming to change the business of the issuer in a long‐lasting and significant way. The governmental draft for the Act on Minimizing Risks Associated with Financial Investments (Risikobegrenzungsgesetz)123 foresaw also to include coordinated buying of shares in its coordinated conduct concert‐clause.124 To include 116
12.8.2008, Federal Gazette I, 1666. Schneider in Assmann/Schneider Section 22 no. 161. 118
Handelsrechtsausschuss des Deutschen Anwaltsvereins, NZG 2008, 60. 119
For this rationale of shareholders’ agreements see Wertenbruch supra footnote 10. 120
Schneider in Assmann/Schneider 5th edition, Section 26 no. 178; see also Wilsing/Goslar DB 2007, 2467, 2468. 121
Schneider in Assmann/Schneider 5th edition, Section 26 no. 178a. 122
Governmental Draft, notes, German Parliamentary Papers 16/7438, p. 11. 123
Governmental Draft, notes, German Parliamentary Papers 16/7438. 124
Section 22 (2) 1 German Securities Act (draft), Parliamentary Papers 16/7438, p. 5 117
coordinated buying had its rationale in the application of the acting in concert clause under the Take‐
Over Act only to voting at the general meeting by the German Federal Supreme Court.125 Some in the German literature point also at institutional investors for coordinated conduct: Uwe H. Schneider names as example from the US the Council of Institutional Investors as “Calpers‐AG” (Calpers‐Inc ‐ Calpers‐stock corporation), as examples from the UK the Association of British Insurers and the National Association of Pension Funds.126 A partner in the Frankfurt office of Linklaters LLP, Christoph F. Vaupel, argues that also the use of advisors like ISS fulfills the requirements of coordinated conduct on the basis of the German Securities Trading Act but states that there is no legal consequence like the loss of the voting right in the general meeting.127 The Issuer Guideline (Emittentenleitfaden) from the Bafin, the German Supervisory Authority, clarifies that all parties of a shareholders’ agreement have to indicate the aggregate holding, also in the case of one shareholder dominating the shareholders’ agreement.128 cc) Burden of proof, presumption or indication The existence of a shareholders’ agreement or other forms of coordinated conduct in terms of the Securities Trading Act is to be proven. Even for close family members, there is no shift for the burden of proof in the relevant sections of the German Securities Trading Act.129 However, indication derived from all the facts of a particular case is accepted,130 provided it is not disputed131 and the facts from which such indications are derived are not generally accepted. 2) Publication requirements of the issuer According to Section 26 (1) 1 German Securities Trading Act, the issuer has to publish the information in due course, no later than three trading days after the information by a shareholder was received. If the information given by the shareholder is incomplete, a duty of the issuer to ask for information is assumed in academia.132 Besides publishing information of securities holders in due course, the company bears an information obligation concerning own shares. The issuer has to publish the threshold of a quota of five or ten per cent of own shares, held by the issuer himself or by a third party for the issuer, 26 (1) 1 German 125
Parliamentary Papers 16/7438, p. 11. Uwe H. Schneider in Assmann/Schneider, WpHG, 6th edition 2012, Section 22 no. 173. 127
Vaupel AG 2011, 63, 76. 128
Issuer Guideline (Emittentenleitfaden) from the Bafin, German Supervisory Authority, p. 146. 129
Schneider in Assmann/Schneider, Section 22 no. 194. 130
See LG Köln, AG 2008, 336, 338; OLG München WM 2005, 1414. 131
Schneider in Assmann/Schneider, Section 22 no. 195. 132
Schneider in Assmann/Schneider Section 26 no. 13. 126
Securities Trading Act. If the issuer is based in Germany, the threshold of a quota of three per cent has to be reported. The ministry of finance might enact an order for details of the information duties concerning content, language, length and form of the information, but insofar has not done so. To do so might help to minimize irritations due to differing information given by the issuer on its website and the Financial Supervisory Authority on holdings of the same persons as shareholders of the issuer. c) Information of the Financial Supervisory Authority Italy requires the shareholders concluding a shareholders’ agreement to inform the national Financial Supervisory Authority by sending a copy to Consob.133 There is no such rule in Germany. According to Section 21 (1) Securities Trading Act, the shareholder has to give the same information he gives to the public also to the issuer and the financial supervisory authority. Apart from this, the issuer has to inform the Financial Supervisory Authority at the same time as the issuers publishes his statement, Section 26 (2) Securities Trading Act. As mentioned in the introduction, the information given on the internet site of the Financial Supervisory Authority and the information given on the investor relation sites of the companies differ in at least more than one case. From an investor protection point of view, this is hardly acceptable and raises the question whether the company has a duty to control the information giving on its shareholder structure.134 d) Company register According to Section 26 (1) Securities Trading Act, the issuer also has to inform the electronic company register. The Securities Trading Act names the company register according to Section 8b German Commercial Code for purposes of data storing, the electronic register. This kind of information is to be given only by issuers from Germany, since the reform of the transparency directive.135 3. Sanctions for non‐disclosure According to Art 15 of the initial council directive on information to be published when a major holding in a listed company is acquired or disposed of,136 it was up to the member states to implement adequate sanctions for violation of the disclosure duties. The same was said in Art. 92 of the Directive 2001/34/EC on the admission of securities to official stock exchange listing and on 133
Art. 122, Legislative Decree no. 58 of 24 February 1998. Assuming such duties Schneider in Assmann/Schneider Section 26 no. 14. 135
Bayer in Goette/Habersack (eds) Münchener Kommentar Aktiengesetz, Section 22 Anhang, Section 26 WpHG No. 2. 136
Council Directive of 12 December 1988, 88/627/EEC, OJEC L 348/62. 134
information to be published on those securities.137 Section 28 Transparency directive is now calling for “penalties”, at least a more rigid phrasing for the effective measures to be taken. Sanction for non‐disclosure under section 28 Securities Trading Act is the suspension of rights from the share, meaning especially no voting rights138 and no dividend rights as long as the duties for disclosure are not fulfilled. Such suspension was subject to a decision of the German Supreme Court139 concerning a Treuhand (trust). In case of intent or gross negligence, such rights may not be exercised for six month after the disclosure duties were finally fulfilled. While for voting rights the effects will concentrate on presence and future decisions of the general meeting, for dividends also past payments may be challenged. Academia assumes a duty of the shareholders to pay back dividend received without having a right to receive them due to suspension as a sanction for non‐
disclosure.140 The sanction of Section 28 Securities Act does apply to coordinated conduct, there are no rights to shareholders which do not fulfill their disclosure duties.141 Non‐compliance of other shareholders alone does not lead to the loss of rights out of the shares. 142 According to German Stock Corporation law, voting in the general meeting is not allowed if the shareholder failed to disclose a shareholders’ agreement with another shareholder Dividend rights might be upheld if there was no intent to violate disclosure duties,143 the burden of proof is on the side of the shareholder which violated his duties.144 According to the majoriy view, there is no intent, when the duty is not known,145 Uwe H. Schneider pleas for a strict interpretation not denying intent.146 In the transformation process of the initial directive, it was proposed that rights deriving from the shares not disclosed might be suspended indefinitely.147 Since the amendment of the German Securities Trading Act by the Act on Minimizing Risks Associated with Financial Investments (Risikobegrenzungsgesetz),148 the rights out of shares may not be used also six month following the phase of wrong disclosure, if the amount of shares to be disclosed is concerned and there was intent or gross negligence in not complying with the legal requirements.149 Rule for non‐disclosure of shares demanded by the German Securities Trading Act is stricter than for non‐disclosure required by the German Stock Corporation Act. The Stock Corporation Act suspends the rights of non‐disclosed shares only during the period of non‐disclosure.150 137
To this see Schneider/Schneider ZIP 2006, 493. 139
BGHZ 190, 291 = NZG 2011, 1147. 140
Assmann/Schneider Section 28, no. 35; Fuchs/Dehlinger/Zimmermann, Section 28 no. 46 141
Assmann/Schneider WpHG 5. Auflage § 28 no. 56. 142
Assmann/Schneider WpHG 5. Auflage § 28 no. 56. 143
Section 28 Sentence 2 Securities Trading Act. 144
Assmann/Schneider WpHG 5. Auflage § 28 no. 69. 145
See Mülbert in Honours Karsten Schmidt, 2009, 1219, 1233; Fleischer DB 2009, 1335, 1340. 146
Assmann/Schneider WpHG 5. Auflage § 28 no. 66. 147
Burgard AG 1992, 41, 54, hinting to Section 216 UK Companies Act 1985 (suspension of voting rights/non‐
transferability ordered by a court). 148
12.8.2008, Federal Gazette I, 1666. 149
Section 28 (3) Securities Trading Act. 150
Section 20 (7) German Stock Corporation Act. 138
V. Shareholders’ agreements in German take‐over law 1. Mandatory bid In German take‐over law, a mandatory bid takes place only in the case of a change of control, Section 35 German Take‐Over Code. For the change of control, Section 35 German Take‐Over Code refers to the general principle laid down in Section 29 (2) German Take‐Over Code. Control is the holding of at least 30 per cent of the voting rights of the issuer. There is no additional mandatory bid for other quotas of voting rights; even if a shareholder surpasses the quotas of fifty or seventy‐five per cent, there is no additional duty for a public offer. The quota of 30 per cent provides a strong indication that an acquirer will be in a position to have the majority of votes in a general meeting, it might be set even too high for covering “control” of the company in the majority of cases. According to a contribution of Andreas Cahn,151 in Germany the average attendance at general meetings of the DAX‐30 companies was 49, 87 per cent in 2006 and of 57,58 per cent in 2011, the average in the years from 2006 to 2011 was 56,36 per cent, with the high of 58,63 per cent in 2009. The average in 15 European countries was slightly higher with 52,97 per in 2006 and 65,06 per cent in 2011. 2. Acting in concert, Section 30 (2) German Take‐Over Act a) The concept Acting in concert is discussed in Germany under the English expression and is besides the board neutrality rule and the mandatory bid at the center of academic interest. Acting in concert is in short defined in the European directive as co‐ordination to get control of the company. Whether control has to have a long‐term element like the acting in concert provision in the transparency directive is not clear, at least not necessarily from the phrasing of the Take‐Over directive. The amendment of the acting in concert provision in 2008 aimed to expand the provision but also to keep it harmonized with the acting in concert‐provision under the German Securities Act.152 Nevertheless, the different purposes of the Securities and the Take‐Over Act might make differences necessary.153 Section 30 German Take‐Over Act defines acting in concert in short as shareholders’ agreement which aims at coordinated conduct with the other shareholders in the voting at the shareholder’s meeting or in other forms with the purpose of a long‐lasting and significant change of the business practice of the issuer. In full in the translation of the Financial Supervisory Authority: Any voting rights attached to shares in the target company which belong to a third party shall also be attributed to the offeror in full if the offeror or his subsidiary coordinates, on the basis of an agreement or in 151
Cahn in Mülbert/Kiem/Wittig (eds) 10 Jahre WpÜG, 2011, 77, 81‐82. Gätsch/Schäfer NZG 2008, 846, with reference to the notes. 153
Gätsch/Schäfer NZG 2008, 846; Schockendorf/Wagner NZG 2008, 361, 363, see also Fleischer ZGR 2008, 185, 197 and supra IV.2.a.aa. 152
another manner, his conduct with such third party in respect of the target company; agreements in individual cases shall be excluded. Coordinated conduct requires that the offeror or his subsidiary and the third party reach a consensus on the exercise of voting rights or collaborate in another manner with the aim of bringing about a permanent and material change in the target company’s business strategy. The financial supervisory authority (BaFin) restricts the assignment of shares to shares included in a shareholders’ agreement, other shares held by the partner in the shareholders’ agreement do not have to be taken into account.154 Practitioners report that this rule is practice also in take‐over situations, but hold that the wording of the Take‐Over Act requires the assignment of all shares held by the partner in the shareholders’ agreement, even if they are in part explicitly not covered by the agreement.155 Shareholder voting agreements are to be seen as the “classical” case of acting in concert.156 Acting in concert is also applied when the free will of all parties is lacking.157 Controversially discussed is the question whether shares must be attributed to all partners in the shareholders’ agreement. While the Financial Services Authority (BaFin) requires this at least for the disclosure,158 practice demands that at least for the acting in concert provision in the German Take‐Over Act, the attribution has to be restricted to a controlling partner in a shareholders’ agreement.159 There are also differing views concerning the content of the shareholders’ agreement necessary to establish acting in concert. Some assume that also agreements introducing only duties to consult with the other partners of the shareholders’ agreement,160 leaving the voting in the general meeting nevertheless at the discretion of the partner in the shareholders’ agreement,161 while others exclude such arrangements.162 The establishment of parallel purchase of shares as an explicitly regulated special form of acting in concert was skipped during the legislative process.163 When Allianz sold its stake in Beiersdorf, some supposed that two buyers who together hold more than thirty per cent of the shares are (or at least: should be seen as) acting in concert. In the acquisition process of Continental, conducted by Schaeffler, the question arose whether a swap might constitute acting in concert.164 b) Election of supervisory directors 154
For the Securities Trading Act see Issuer Guideline (Emittentenleitfaden) from the Bafin, German Supervisory Authority, p. 146. 155
Von Bülow in Kölner Kommentar Section 30 no. 255. 156
Diekmann in: Baums/Thoma (eds) Section 30 no. 79. 157
Goette DStR 2006, 2132, 2138 (zu WMF). 158
For the Securities Trading Act see Issuer Guideline (Emittentenleitfaden) from the Bafin, German Supervisory Authority, p. 146 159
Von Bülow in Kölner Kommentar Section 30 no. 256. 160
See Pittroff Zurechnung von Stimmrechten, p. 281. 161
See Schneider in Assmann/Pötzsch/SchneiderSection 30 no. 113. 162
Von Bülow in Kölner Kommentar Section 30 no. 257. 163
German Parliamentary Papers 16/9821, p. 11 164
Habersack AG 2008, 817. Due to the restricted powers of a general meeting in German stock corporation law – Germany introduced a rule generally excluding shareholders from the management of the company, transforming the US rule into the German Stock Corporation Act 1937 –, especially electing supervisory directors is discussed as acting in concert.165 The election only of supervisory directors is treated as a singular case, not leading to application of the acting in concert provision in the German Take‐Over Act, according to the German Supreme Court166 and a widespread view in academia,167 for in Germany regular occurring consultations of major shareholders even an unanimous view in literature is assumed.168 Election of the chairman of the board: independence of the supervisory board169 Acting in concert is assumed if the election of the supervisory board is part of a business concept.170 However, even in this context, practitioners hint to exclusion of agreements in individual cases from the acting in concert provision of the Take‐Over Act.171 In the parliamentary proceedings, the Financial Committee phrased the later enacted Section 30 (2) Take‐Over Act and stated that an agreement on the election of supervisory directors “regularly” leads to the application of the acting in concert provision.172 c) Individual cases Due also to the influence of institutional investors, the co‐ordination in individual cases does not explicitly fall under the acting in concert provision, Section 30 (2) 1, 2. Halbsatz. Also multiple single cases do not lead to the application of the acting in concert provision, necessary is a Fortsetzungszusammenhang (continuation).173 For the continuation, a stricter standard than in the Securities Trading Act seems to be appropriate. In Germany, it is difficult to prove acting in concert.174 Also due to Deutsche Börse, acting in concert by institutional investors is discussed. Before the WMF‐decision of the German Supreme Court literature referred to acting in concert as internationally understood.175 3. Exemption 165
Korff AG 2008, 692, 694‐695. BGH, 16.9.2006, II ZR 137/05, BGHZ 169, 98 (WMF). 167
Diekmann in: Baums/Thoma (eds) Section 30 no. 80; Hammen Der Konzern2007, 344, 348 ff. 168
Von Bülow in Kölner Kommentar Section 30 no. 272. 169
BGHZ 169, 98, 106 (WMF); Goette 2006, 2132, 2138. 170
Diekmann DStR 2007, 445, 446 171
Von Bülow in Kölner Kommentar Section 30 no. 273. 172
Financial Committee of the German Bundestag, Parliamentary Papers 16/9821, p. 12, 13. 173
Diekmann in: Baums/Thoma (eds) Section 30 no. 75. 174
Spindler WM 2007, 2357, 2362. 175
Berger AG 2004, 592, 603. 166
German Supervisory Authority exempted dispended a shareholders’ agreement from a mandatory take over‐bid in a case in which one member had before more than thirty per cent and the whole pool owns less than fifty per cent (Grenkeleasing).176 VI. Conclusion and outlook In Germany, shareholders’ agreements were discussed primarily as a company law issue but are of practical importance also in listed companies. Shareholders’ agreements occur primarily in family held stock corporations but are at least not disclosed in all firms with different family members as shareholders. Forms of shareholders’ agreements are: shareholder voting agreements (Stimmbindungsverträge), pooling of shares, mutual understanding. Legally, shareholders’ agreements are treated as civil partnership, according to the German Federal Supreme Court shareholders’ agreements are non‐disclosed or internal civil partnerships. The application of the rules on partnerships does not transfer the majority requirements from the stock corporation to the decision‐making in the shareholders’ agreement. The general rule of unanimous decision‐making might be transformed to simple majority voting but restrictions of the selling of shares by members of the agreement are to be controlled by the courts, selling clauses have to provide for a fair value, not necessarily the exact market price. Legal provisions dealing with shareholders’ agreements are limited in Germany. The Stock Corporation Act prohibits bound shares. Selling of voting is an administrative offence. In the Securities Trading Act and in the Take‐Over Act, the legislator introduced a common concept, often referred to as acting in concert for both Acts. With the Financial Supervisory Authority, it might be more suitable to speak of coordinated conduct in terms of securities law and of acting in concert in terms of take‐over law. If there is a controlling partner in the shareholders’ agreement, it seems sufficient that the latter has to take out a mandatory bid but all members of the shareholders’ agreement should disclose all shares covered by the agreement. Nominating and voting for supervisory directors is regularly treated as an individual case. Transparency could (and should) be enhanced with a duty not only to name a figure for the shares held, but also the shareholders’ agreement itself. Further, it seems appropriate to publish also the majority voting rules in the shareholders’ agreement. The same would apply, if the shareholders would transform their shares into a limited liability company. For outside shareholders, unanimous or majority voting in the shareholders’ agreement might make a difference. 176
Bescheid vom 7. Oktober 2011.