GERMANY Law and Practice Contributed by: Marc Löbbe, Michaela Balke, Oliver Schröder and Martin Kolbinger, SZA Schilling, Zutt & Anschütz
require particularly careful legal assessment and alignment with German corporate law principles. Subject always to applicable disclosure require - ments (eg, a tender agreement or irrevocable commitment may qualify as a financial instru - ment) and potential most favoured treatment rules, public M&A deal security measures between the bidder and current shareholders are not subject to any specific restrictions and in principle are subject to negotiation as long as they are in line with general legal requirements (such as general antitrust law). Restrictions Restrictions apply if measures require the tar - get company’s co-operation, since the target’s management board is obliged to act in the com - pany’s best interest (which is not necessarily identical to the interest of key shareholders who intend to sell their shares). Therefore, the target company can only assume obligations in the context of deal security measures if these are in its best interest and comply with all requirements of applicable stock corporation law. This limits, in particular, exclusivity arrangements (see 5.4 Standstills or Exclusivity ). As a consequence, break-up fees are rare if they concern the target. The admissibility of such arrangements can be questioned for a number of reasons, particularly regarding capital mainte - nance rules and under the corporate benefit test. 6.8 Additional Governance Rights Special investor rights depend on the legal form of the target and are permissible in many private companies. However, in German stock corpo - rations, the options to implement special rights for certain shareholders are limited. The basic structure of the corporate governance of a stock corporation and the rights of the corporate bod -
ies cannot be amended. In particular, the mem - bers of the management board and supervisory board cannot be bound to follow instructions from the shareholders. The shareholders generally have to be treated equally, and their rights depend only on their respective participation rate; golden shares or multi-vote shares are impermissible. To obtain control over the most important decisions taken by the shareholders’ meeting, 50% of voting rights and, for some decisions, 75% are required (see 6.5 Minimum Acceptance Conditions ). If a shareholder wishes to obtain decision- making powers that they would not normally be entitled to with their participation rate, it is possible to enter into a pooling agreement and co-ordinate voting rights with other sharehold - ers. These, however, may constitute “acting in concert” and trigger notification duties and a mandatory takeover obligation. A special right that may be granted to a share - holder is the right to appoint a member of the supervisory board, but this is quite rare in prac - tice. If a shareholder’s participation rate exceeds 50% of the shares, that shareholder can decide on the appointment of supervisory board mem - bers anyway by a majority vote. However, a shareholder who does not control the majority vote in the shareholders’ meeting may ask for the right to appoint a representative to the supervi - sory board. Such right may then be implemented in the articles of association (ie, by shareholder resolution with 75% majority). 6.9 Voting by Proxy Shareholders are permitted to send representa - tives to the shareholders’ meeting and to vote by proxy.
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