GERMANY Law and Practice Contributed by: Christoph Nolden, Nicolas Ott, Stefan Mendelin and Thomas Glaser, SZA Schilling, Zutt & Anschütz
1.3 Types or Classes of Shares and General Shareholders’ Rights Stock corporations may issue bearer shares ( Inhab- eraktien ) or registered shares ( Namensaktien ), each as ordinary shares ( Stammaktien ) and ‒ in certain vol- umes – preferred shares ( Vorzugsaktien ). Bearer shares are easy to transfer and are there- fore suitable for listed stock corporations. Regis- tered shares seem more suitable for family-owned companies and are often subject to statutory trans- fer restrictions (see 3.2 Share Transfers ). However, bearer shares are increasingly subject to scrutiny by authorities due to their inherent anonymity, heightened anti-money laundering compliance requirements, and specific reporting obligations regarding their holders. In contrast to ordinary shares, preferred shares are non-voting shares with a preference when it comes to profit distribution. The issuance of preferred shares may be considered, for instance, when certain major- ity ratios should be maintained. In the case of a capital increase, for example, the issuance of ordinary shares may lead to changes in the majority ratios if the exist- ing shareholders do not exercise subscription rights ( Bezugsrechte ); this can be prevented by issuing pre- ferred shares. In 2023, the Financing for the Future Act ( Zukunfts- finanzierungsgesetz ) introduced the option to issue registered shares with multiple voting rights. These shares may carry up to ten votes per share and must be introduced with the unanimous consent of the existing registered shareholders. The authorisation is valid for a maximum of ten years, and the multiple- vote structure terminates automatically upon IPO or transfer of shares unless extended. This marks a significant shift away from the previously strict “one share, one vote” principle and is especially relevant for founders of high-growth companies seeking to retain control. Furthermore, all types of shares may now be issued as electronic shares. In general, there are two basic types of electronic shares. One type will be registered in a central register ( Zentralregisterwertpapiere ) and the other type will be registered in a cryptosecurities register ( Kryptowertpapiere ). Registered shares may
be issued both as central register securities and as cryptosecurities, whereas bearer shares may only be issued as central register securities. The introduction of crypto-registered shares may require updates to share transfer documentation and procedures. In par- ticular, the regulatory framework under the Electronic Securities Act and supervisory guidance by BaFin may apply to cryptosecurities. For limited liability companies, there are no statutory distinctions between types or classes of shares. How- ever, shareholders in limited liability companies have greater flexibility in structuring share classes with vot- ing rights, dividend or liquidation preferences. The shareholders’ membership rights can generally be divided into administrative rights ( Verwaltungsrechte ) and proprietary rights ( Vermögensrechte ). Administra- tive rights include the right of participation in share- holders’ meetings, as well as voting rights and rights to certain information. Proprietary rights include the right to participate in the distribution of the annual profits of the company. The membership rights are mostly set out in the relevant statutes and can – to some extent – be further stipulated in the company’s articles of association. 1.4 Variation of Shareholders’ Rights There are significant differences between stock cor- porations and limited liability companies. For stock corporations, the options to deviate from the regula- tions of the Stock Corporation Act are very limited (the so-called principle of formal strictness ( Sat- zungsstrenge )). The membership rights deriving from a share in a stock corporation are rather standardised, particularly with regard to listed companies, where the stocks are designed to be tradeable by a large variety of investors (including less-experienced investors). In contrast, the articles of association of limited liabil- ity companies are not bound by the principle of for- mal strictness, which leaves much greater room for individual arrangements best suited to the individual shareholders concerned. Thus, limited liability com- panies are predestined for smaller numbers of share- holders, such as joint ventures, family-owned compa- nies or start-ups. However, the new multi-vote share structure with its specific sunset clauses described
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