GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
can decide on the appointment of supervisory board members by a majority vote. However, a shareholder who does not control the majority vote in the share - holders’ meeting may ask for the right to appoint a representative to the supervisory board. Such right may then be implemented in the articles of associa - tion (ie, by shareholder resolution with 75% majority). 6.9 Voting by Proxy Shareholders are permitted to send representatives to the shareholders’ meeting and to vote by proxy. 6.10 Squeeze-Out Mechanisms German law provides for three types of squeeze-out mechanisms, which (only) apply to stock corporations. Squeeze-Outs Under Company Law The most general squeeze-out mechanism under Ger - man law allows any shareholder with a participation rate of at least 95% of a stock corporation’s share capital to force the remaining shareholders to sell their shares. A squeeze-out under company law can but does not necessarily have to take place as a follow-up to a public takeover offer. From a legal perspective, it is not relevant how the majority shareholder’s share package was built. The implementation of a squeeze-out under compa - ny law requires a shareholders’ resolution. If minority shareholders challenge such resolution, the registra - tion of the squeeze-out can temporarily be blocked. However, it is possible to obtain the registration in an accelerated court procedure ( Freigabeverfahren ), which usually takes three to six months. Minority shareholders must be paid a purchase price that is based on a fair market valuation of the company, although disputes about the amount to be paid by the majority shareholder do not block the execution of the squeeze-out but are subject to a specific procedure ( Spruchverfahren ). Squeeze-Outs Under Takeover Law If a bidder holds at least 95% of the shares in a stock corporation following a public takeover offer, it is also possible to buy out the remaining shareholders by way of a squeeze-out under takeover law. This type of squeeze-out mechanism is initiated by filing an application with the Regional Court of Frankfurt am
Main, which will review whether the preconditions of a squeeze-out under takeover law are met. The bidder must pay adequate compensation. Even if the public takeover offer stipulates consideration in shares, such compensation may be paid in cash. If the previous takeover offer was accepted by share - holders with an (aggregated) participation rate of at least 90% of the share capital, the consideration offered in the takeover offer is deemed to be ade - quate. However, it is debated whether such presump - tion can be overturned by minority shareholders and, due to the related uncertainties, the takeover-related squeeze-out has very little practical relevance. Squeeze-Outs Under Merger Law The German Transformation Act ( Umwandlungsge - setz ) provides for a third option to buy out minor - ity shareholders of a stock corporation. This type of squeeze-out is similar to a squeeze-out under com - pany law but lowers the threshold of shares the major - ity shareholder must hold to 90% of the share capital. However, the squeeze-out must occur in the context of an upstream merger with another stock corpora - tion, partnership limited by shares or SE. The majority shareholder is required to adopt the resolution initi - ating the squeeze-out within three months from the conclusion of the merger agreement, and the merger agreement must already contain the prospect of the future squeeze-out. The effectiveness of the squeeze- out in this case depends on the effectiveness of the merger. Delisting In addition to the above-mentioned squeeze-out vari - ants, another way to acquire the shares of minority shareholders would be a delisting of the target com - pany. The Stock Exchange Act requires an offer to the remaining shareholders to be published prior to delisting. The legal requirements regarding such an offer are very similar to those of a public takeover offer under takeover law. However, since the tradability of shares that are no longer listed is very much limited, there is a chance that shareholders who rejected a public takeover offer may accept an offer in the con - text of a delisting.
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