GERMANY Law and Practice Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
to dissuade German start-ups from opting for foreign legal structures solely for this reason, enabling founders to maintain control over a company, even after selling shares to investors or undergoing an IPO. Corporations are now permitted to issue registered shares with mul - tiple voting rights (regardless of size or whether they are publicly traded). The super voting pow - er must not exceed ten times the voting rights of “ordinary” shares. Unanimous shareholder consent is required to establish multiple voting shares, rendering their introduction at existing public companies more or less impracticable. The tenure of multiple voting rights terminates ten years after the company’s IPO or inclusion in the regulated unofficial market ( Freiverkehr Sec - tion 48 of the Stock Exchange Act, or BörsenG ) (the so-called sunset clause). This timeframe can be extended by up to ten years via a resolution passed by three-quarters of shareholders. Multi - ple voting shares cannot be issued when utilising authorised capital. The expansion of the allowable amount for a capital increase with simplified exclusion of (statutory) pre-emption rights as stipulated in the Future Financing Act will entail significant practical implications. Pre-emption rights may be waived for a capital increase against cash contributions, especially if the issue price is not considerably below the stock market price. Previously, the volume for capital increases with simplified exclusion of pre-emption rights was capped at 10% of share capital; this limit has now been elevated to 20%. Capital increases with simplified exclusion of pre-emption rights will be more attractive to issuers as legal recourse is significantly limited. Resolutions for such increases cannot be contested on the basis of allegations of an unreasonably low issue price. Shareholders excluded from pre-emption rights are not entitled to cash compensation under the
German Stock Corporation Act ( Aktiengesetz , or AktG). The Future Financing Act also raises certain vol - ume limits for a corporation’s conditional capital. Conditional capital increases to finance stock options for management and employees can now be conducted up to 20% (previously 10%) of the share capital. This change is expected to impact start-ups where a significant portion of compensation may be provided in options. The Future Financing Act stipulates a compre - hensive overhaul to the legal protection mecha - nism for shareholders concerning capital meas - ures approved by the general meeting. Due to the uncertainty of court decisions in connection with contestation litigation ( Anfechtungsklagen ) that alleged the inadequacy of the issue price (in instances where subscription rights were excluded), such contestation litigation posed risks of delays or non-implementation of capital increase resolutions. Under the new version of Section 255 AktG, resolutions can no longer be contested on the basis of the allegation that a shareholder sought to obtain special benefits or due to an allegedly unreasonably low exchange ratio (in case of a share contribution). Instead, it needs to be clarified in appraisal proceedings whether and to what extent the shareholders are In addition to the Future Financing Act, the Ger - man government aims to create incentives for more innovation and investment in new tech - nologies through the German Growth Opportu - nities Act, in order to enhance the competitive - ness of Germany as a business location. The act was passed by the Bundestag and Bundesrat on 22 March 2024, and includes a total volume entitled to a compensatory payment. German Growth Opportunities Act (Wachstumschancengesetz)
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