GERMANY Law and Practice Contributed by: Christoph Nolden, Nicolas Ott, Stefan Mendelin and Thomas Glaser, SZA Schilling, Zutt & Anschütz
been proposed by the company itself (proxy voting). However, there are limits to such proxy voting, which derive from possible risks of conflicts of interest. Spe- cifically, the authorisation of a representative proposed by the company requires the issuance of instructions on each of the agenda items by the shareholder. Fur- thermore, board members should not be proposed by the company to act as authorised representatives. The applicable voting method is governed by the arti- cles of association. In practice, the voting method is usually determined by the chair of the general meet- ing. The voting right is then exercised based on the nomi- nal amounts of the shares and, in the case of no-par- value shares, is based on their number. In principal, dual-class shares (ie, shares carrying more than one voting right per share) are prohibited in stock corpora- tions (for the exemption, see below). Instead, a “one share, one vote” principle prevails. Only a few excep- tions to this principle exist under current law, as fol- lows. • Stock corporations can issue non-voting shares with a preference on profits (preferred shares). • Partnerships limited by shares generally comprise two groups of shareholders, whereby the so-called general partner(s) has the responsibility and power to manage the affairs of the company, whereas the limited shareholders are comparable to the share- holder in a regular stock corporation. In practice, such structures can be seen in listed family com- panies where the family members (or the original shareholders) remain in control of the affairs of the company by assuming the role of or by controlling the general partner(s) while third-party investors can acquire limited shares. However, the strict “one share, one vote” principle no longer applies. With the Financing for the Future Act, the German legislator has authorised multi-vot- ing shares under certain conditions (see 1.3 Types or Classes of Shares and General Shareholders’ Rights ) to address practical needs, particularly for start-ups and growing businesses with high capital demands.
In limited liability companies, the voting requirements are generally less strict and not as regulated as they are in stock corporations. Notably, the articles may stipulate that certain shares can bear voting powers deviating from their actual share in the nominal share capital of the company. The exercise of voting rights by means of electronic communication is possible in virtual shareholders’ meetings (see 2.5 Format of Meeting ). 2.10 Shareholders’ Rights Relating to the Business of a Meeting The general meeting is the central forum where share- holders can exercise their influence over the company, albeit within limits set by the board-driven governance system of the stock corporation. Shareholders have the right to attend, to request information, to speak, and above all to vote on fundamental matters. A key right at the general meeting is the right to infor- mation. Shareholders may request from the manage- ment board comprehensive information necessary to properly assess the agenda items. The board must answer truthfully, unless disclosure would cause sig- nificant harm to the company. In addition, the share- holders only have the right to request that a specific issue be considered at the general meeting if the requesting shareholders’ combined shares equal at least 5% of the total share capital of the company or a proportionate amount of EUR500,000 of the share capital. Each agenda item must be accompanied by a statement of reasons or a draft resolution and be received by the company at least 24 days (or, for a listed company, at least 30 days) prior to the general meeting. The shareholders do not have the right to freely call or dismiss the chairman of the general meeting. The chairman is typically designated in the articles of asso- ciation. In practice, the chairman is usually the chair of the supervisory board. Once properly appointed, the chairman conducts the meeting and has significant authority to maintain order, decide on procedural mat- ters (eg, speaking time, order of speakers), and ensure proper voting. Shareholders have only limited rights to stop or exchange the chairman of the meeting.
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