Table of Contents. Preface. List of Abbreviations. xvii

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1 Preface List of Abbreviations xv xvii PART I The Legal Framework for Stock Corporations 1 1 Introduction Legal Framework German Equity Capital Markets and Their Historic Dimension Public and Private Stock Corporations The German Real Estate Investment Trust The German Stock Exchanges and Their Market Segments Market Segments Index Markets 9 2 Corporate Governance and the Corporate Bodies of a German Stock Corporation The German Corporate Governance Code The Management Board Composition and Appointment Dismissal Resignation by a Management Board Member Other Termination Issues Duties and Responsibilities Liability The Supervisory Board Composition German Particularity: Co-determination Appointment Dismissal Internal Organization of the Supervisory Board 23 v

2 2.3.6 Specific Duties and Responsibilities Liability Shareholders Meeting Function and Competence Organization Resolutions Right to Challenge Resolutions in Court 27 3 Shareholders Rights General Remarks Membership Rights Property Rights Administration Rights Information Rights Voting Rights Right to Bring an Action Statutory Minority Shareholder Rights One Per Cent of the Nominal Share Capital and/or EUR 100,000 Par Value of Shares Five Per Cent of the Nominal Share Capital Five Per Cent of the Nominal Share Capital or EUR 500,000 Par Value of Shares Ten Per Cent of the Share Capital Represented in a Shareholders Meeting Ten Per Cent of the Nominal Share Capital or EUR 1 Million Par Value of Shares Twenty-Five Per Cent of the Voting Share Capital Plus One Voting Share Represented in the Shareholders Meeting Fifty Per Cent of the Voting Share Capital Plus One Voting Share Represented in the Shareholders Meeting Seventy-Five Per Cent of the Voting Share Capital Represented in the Shareholders Meeting Ninety or Ninety-Five Per Cent of the Share Capital Exclusion of Minority Shareholders (Squeeze-Out) Investor Class-Action Lawsuits 35 4 Share Capital and Equity Financing The Shares Classes of Shares Disposal of Shares Legal Background Practical Aspects Restrictions on Transferability of Shares Principles on the Raising and Maintenance of Capital Raising Capital 39 vi

3 4.3.1 Capital Increase Capital Increase against Contribution in Cash or in Kind Conditional Capital Increase Authorized Capital Capital Increase Out of Retained Earnings Debt and Mezzanine Financing Maintenance of Capital Acquisition of the Company s Own Shares Repayment of Capital Capital Reduction 43 5 Compliance Requirements in Share Acquisitions Notifications under the Stock Corporation Act Notifications under the Securities Trading Act Insider Trading and Ad Hoc Disclosure Insider Information Ad Hoc Disclosure Self-Exemption Formal Aspects of Ad Hoc Disclosure Financial Statements Preparation and Approval of Financial Statements Transparency of Defensive Measures against Takeover Offers International Financial Reporting Standards (IFRS) Appropriation of Profits 51 6 German Societas Europeae 52 7 German Partnership Limited by Shares 53 PART II Public Offers 55 1 Overview The Structure of the WpÜG Definitions Control and Three Types of Offers Main Premises Offers Takeover Offers Mandatory Offers WpÜG Structure concerning Offer Types Main Consequences of Offer Types Empirical Data Scope of Application Application to Offers Application to Takeover Offers and Mandatory Offers 65 vii

4 2 Takeover Offer Public Offer Offeror Securities Organized Market Control Attribution of Voting Rights and Acting in Concert Exemptions The Decision to Make a Takeover Offer and Pre-decision Considerations Arrangements between the Offeror and the Target Company Merger Control Creeping-In and Disclosure Obligations Effect of Prior Acquisitions on Takeover Offer Price and Type of Consideration Timing Financing Conditions Impermissible Conditions Permissible Conditions Impermissible Offers No Invitatio ad Offerendum No Reservation of the Right to Revoke or Rescind No Partial Offer Partial Offers in Cross-Border Situations Exclusion of Foreign Shareholders: 24 WpÜG Limiting the Distribution of the Offer Document Obligations Once the Decision Has Been Made Notification Duties concerning the Decision Publication of the Decision Duty to Notify the Target Company Preparation of the Offer Document Details of the Consideration Type of Consideration Amount of the Consideration Securities Traded Exclusively on a German Organized Market Taking into Account Prior Acquisitions Valuation Methods European Passport Regulation Modification of the Takeover Offer Acceptance Period Liability for an Incorrect or Incomplete Offer Document 95 viii

5 2.13 Submission of the Offer Document to the BaFin and Verification of Compliance Publication of the Offer Document Duties of the Target Company s Management Board and Supervisory Board Acceptance Period and Further Procedure Standard Case Further Acceptance Period: The Wren-Rule Publication Duties during and after the Acceptance Period Other Publication Duties Special Case 1: The Offeror Modifies the Offer Special Case 2: The Target Company Calls an Extraordinary Shareholders Meeting Special Case 3: A Competing Offer Intervenes Subsequent Improvement of Consideration due to Share Acquisitions Acquisitions during the Acceptance Period Acquisitions after the Lapse of the Acceptance Period Mandatory Offer Control Attribution of Voting Rights Acting in Concert Disregarding Voting Rights Possible Exemptions Publication Duty Duty to Make the Mandatory Offer Consequences of Non-compliance Strategies to Avoid the Mandatory Offer Rule Simple Offer Consideration Admissibility of Partial Offers Overview of Defensive Measures General Observations Defensive Measures against Simple Offers Defensive Measures against Takeover Offers and Mandatory Offers Default Provisions on Defensive Measures Anticipatory Resolution Opting for the Stricter Rules of the Takeover Directive Stricter Provisions on Board Neutrality Breakthrough Rule and Compensation Reciprocity in Cross-Border Takeovers Prohibition of Unjustified Benefits 123 ix

6 6 Supervisory Powers of the BaFin Appeal Procedure Enforcement Costs 126 PART III Options of the Offeror after a Successful Offer Factual and Legal Position of the Offeror after a Successful Offer Control over the Target Company? Statutory Regime Governing Relationship between Target Company and Its Main Shareholder General Remarks Detrimental Influence over a Stock Corporation Sanctions for Exercising Detrimental Influence Main Considerations regarding Changes at the Level of the Target Company Employee Co-determination Rights of Remaining Minority Shareholders Administrative Burdens Use of Assets in the Interests of the Target Company Tax Considerations Options for Action and Their Limits Replacement of Members of the Company s Governing Bodies Supervisory Board Management Board Conclusion of Enterprise Agreements General Concept Legal Requirements and Legal Consequences Squeeze-Out of Minority Shareholders Squeeze-Out according to the Stock Corporation Act Main Shareholder Procedure Adequate Cash Compensation Bank Guarantee Calling of the Shareholders Meeting Shareholders Resolution Application to the Commercial Register Judicial Review and Compensation Action against the Transfer Resolution Action to Increase the Cash Compensation Merger Control, Regulatory Filings Squeeze-Out according to WpÜG Request for Procedure Offeror as Main Shareholder 152 x

7 Threshold Limited Period for Application Publication of the Request and Procedural Rules Compensation Adequacy of the Compensation Type of Compensation Remedies Relationship between the Takeover Squeeze-Out and the Corporate Law Squeeze-Out Squeeze-Out according to the Transformation Act General Requirements Constitutionality Preparation of the Procedure Initialization Public Disclosure Adequate Cash Compensation Merger Agreement Shareholder Information Works Council s Information Balances Decision-Making Process Squeeze-Out Resolution Merger Resolution Implementation Process Registration in the Commercial Register Actions of Minority Shareholders Payment of Cash Compensation Time Frame Sell-Out Combination of Asset Transfer and Liquidation Integration into Another Stock Corporation Delisting Delisting upon Application of the Target Company as Issuer: General Remarks Delisting upon the Initiative of the Stock Exchange Cold Delisting 165 PART IV Statutory Materials 167 APPENDIX 1 European Takeover Directive 169 xi

8 APPENDIX 2 Securities Acquisition and Takeover Act 209 APPENDIX 3 WpÜG Applicability Regulation 269 APPENDIX 4 WpÜG Supervision Notice Regulation 273 APPENDIX 5 WpÜG Offer Regulation 277 APPENDIX 6 WpÜG Fees Regulation 289 APPENDIX 7 WpÜG Advisory Committee Regulation 293 APPENDIX 8 WpÜG Objection Committee Regulation 297 APPENDIX 9 Stock Corporation Act (Excerpt) 301 APPENDIX 10 German Corporate Governance Code 481 APPENDIX 11 Transformation Act (Excerpt) 509 APPENDIX 12 Commercial Code (Excerpt) 515 APPENDIX 13 Stock Exchange Act (Excerpt) 521 APPENDIX 14 Exchange Rules for the Frankfurter Wertpapierbörse (FWB) (Excerpt) 523 APPENDIX 15 Securities Trading Act (Excerpt) 527 APPENDIX 16 Securities Trading Reporting and Insider Register Regulation 617 xii

9 APPENDIX 17 Market Manipulation Regulation 643 APPENDIX 18 European Merger Control Regulation ECMR (Excerpt) 655 APPENDIX 19 Act against Restraints of Competition (Excerpt) 669 Index 683 xiii

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