50	2  Stock Corporation (AG)

Directive in 2009, the German Stock CorporationAct now allows for the articles of association to provide for procedures enabling stockholders to exercise their rights via electronic communication62 and, in particular, to cast their votes via electronic communication and/or postal letter.63

Generally, passing a stockholders’resolution requires a simple majority, i.e. 50% of all votes cast plus one vote (einfache Stimmrechtsmehrheit). However, for certain subject matters a higher threshold may be required, either by statutory provisions or by the articles of association. Apart from the simple majority, the majority threshold most frequently required under the German Stock Corporation Act is that of a so-called qualified majority of the capital participating in the passing of the stockholders’resolution (qualifizierte Kapitalmehrheit).64 To pass a resolution for which such a majority is required, it is necessary that the majority voting in favor of the proposal comprises (1) 75% of all stocks participating in the voting (i.e. yes or no votes; abstentions and invalid votes will not be taken into consideration), as well as

(2) 50% of all votes cast. A majority that meets condition (1) typically also fulfills (2); exceptions may arise where the company has issued stocks with multiple or limited voting rights.65

2.2.5.3  Minority Rights of Stockholders

Apart from pecuniary rights (e.g. the right to receive a share of earned profits66 and liquidation proceeds67) a stock grants its owner a number of rights regarding her/ his participation in the corporation (so-called participation rights). The scope of rights granted to a stockholder, i.e. her/his options of action, depend on the quota which her/his stock represents (possibly in concert with other stockholders). Some minority rights apply to any stockholder provided she/he holds at least one stock (so-called individual minority rights), while other minority rights require a certain quota of votes to come into effect (so-called collective minority rights).

Individual Minority Rights of Stockholders

The most important individual participation right is, of course, the right to cast a vote in the stockholders’ meeting68, which in turn implies the right to attend the meeting.69 In order to enable stockholders to make the best possible use of their voting right, German law puts a strong emphasis on stockholders being provided with

62  See Sec. 118 para. 1 sentence 2AktG. 63  See Sec. 118 para. 2AktG.

64  This majority is—inter alia—required for: amendments of the articles of association (Sec. 179 para. 2 AktG); ordinary capital increase (Sec. 182 para. 1 AktG); restriction of subscription rights on a capital increase (Sec. 186 para. 3AktG).

65  Please note, however, that stocks granting multiple voting rights have been abolished for companies listed on a stock exchange.

66  See Sec. 58 para. 4AktG. 67  See Sec. 271AktG.

68  See Secs. 12, 134AktG. 69  See Sec. 118AktG.

2.2  Internal Organization	51

the necessary information to do so. Thus, in the stockholders’ meeting any stockholder has the right to request information about corporate issues, if and insofar as such information is necessary to permit a proper assessment of an item set out in the agenda.70 The management board may refuse to answer only in exceptional cases, in particular, if such an answer would entail a substantial risk of material damage to the corporation.71

If a stockholder is of the opinion that the management board has violated her/ his rights with regard to the stockholders’ meeting, she/he has the right to register an objection in the minutes and may, within one month after the meeting, file an action to challenge the respective resolution(s). Even if the court rejects the action and deems the resolution valid, such action may come at great expense for the company. A substantial number of resolutions have to be registered in the Commercial Register to come into effect.72 Typically, however, a registration will be postponed until the challenge of the resolution has been decided.

In some cases, this extensive protection rule has lead to abusive practices. Socalled predatory stockholders (räuberische Aktionäre) abused their right to request information to provoke mistakes and then sought an annulment of the resolutions of the stockholders’meeting, hoping that the company would try to pay them off.Typically such stockholders acquired only a negligible amount of stocks immediately before the stockholders’meeting for this specific purpose.73

To combat such abusive practices the German legislature has introduced a special release procedure (Freigabeverfahren) for important stockholder resolutions.74 The release procedure allows, subject to a balancing of the parties’interests, a stockholders’ resolution to be registered even though appeal proceedings are still pending. In particular, a de minimis threshold applies, according to which the plaintiff is required to have held stocks with a total nominal value of at least EUR 1,000.– at the date when the stockholders’meeting was called.75

70  See Sec. 131 para. 1AktG; this includes relations of the corporation to affiliated companies. 71  See Sec. 131 para. 3 sentence 1AktG.

72  This includes resolutions addressing, inter alia, vital and time-critical topics such as capital increases, capital reductions or conclusions of enterprise agreements.

73  For example, in a particular famous case the plaintiff filed an action to set aside a stockholders’ resolution pertaining to a capital reduction of the defendant, a real estate investment company. The plaintiff claimed a violation of his membership rights; at the time of the action, the plaintiff held a total of 47 stocks (0.0253%) of the company. However, as the proceedings have proved, the real reason of the action was to ‘persuade’ the company to enter into an amicable settlement which provided for further 3,500 stocks to be awarded to the plaintiff in return for his withdrawing the action. In its judgment of 23 January 2009 the competent Higher Regional Court (Oberlandesgericht) in Frankfurt dismissed the action to set aside the resolution and instead ordered the plaintiff to pay damages to the company on grounds of his behavior being contra bonos mores (Sec. 826 BGB).

74  See Sec. 246aAktG.

75  See Sec. 246a para. 2 no. 2AktG.

52	2  Stock Corporation (AG)
Table 2.1 Minority rights of stockholders in a German stock corporation
Quota	Minority right
1% or EUR 100,000	Right to apply for a special audita
of the stock capital	Right to assert claims for damages or loss compensation against
	(1) members of the management board or (2) members of the
	supervisory board or (3) third parties based on undue use of their
	influence on the companyb
5% or EUR 500,000	Right to demand the calling of a stockholders’meeting and right
of the stock capital	to demand that items be placed on the agenda of a stockholders’
	meetingc
	Right to take action against a resolution of the stockholders’meet-
	ing on the appropriation of balance sheet profits in certain cases
5% of the stock	Right to prevent integration into another corporationd
capital + 1 stock
10% or EUR 1,000,000	Right to request an individual (instead of general) exoneration of
of the stock capital	members of the management board or supervisory boarde
10% of stock capital	Option to prevent a waiver or settlement of a claim for damages
represented	(1) against members of the managing board based on breach of
at stockholders’meeting	their duty of care;f
	(2) against members of the supervisory board based on breach of
	their duty of care; andg
	(3) against third parties based on undue use of their influence on
	the companyh
25% of the stock capital	Option to prevent the adoption of rules of procedure for the gen-
represented at the stock-	eral meetingi
holders’meeting plus	Option to prevent
1 stock
	(1) the amendment of the articles of association;j
	(2) the conclusion of an enterprise agreement, e.g. a profit and
	loss transfer agreement;k
	(3) any measures to transform theAG under the GermanAct on
	Transformation of Companies, i.e. mergers, spin-offs, split-offs,
	conversions etc.l
25% of votes cast + 1 stock	Option to prevent the removal of elected members of the supervi-
	sory board by the stockholders’meetingm
50% of votes cast + 1 stock	Right to pass any stockholder resolution requiring a simple major-
	ity, e.g. to enforce a claim for damages against members of the

management board.n

a  See Sec. 142 para. 2 and 4AktG b  See Sec. 148 para. 1AktG

c  See Sec. 122 para. 1 and 2AktG d  See Sec. 320 para. 1AktG

e  See Sec. 120 para. 1AktG f  See Sec. 93 para. 4AktG

g  See Secs. 116, 93 para. 4AktG

h  See Secs. 117 para. 4, 93 para. 4AktG i  See Sec. 129 para. 1AktG

j  See Sec. 179 para. 2AktG

k  See Sec. 293 para. 1 and 2AktG

l  See Secs. 65 para. 1, 73, 125 UmwG m  See Sec. 103 para. 1AktG

n  See Sec. 147 para. 1AktG