Completing an extended rework process that began in 2010, the German legislator finally passed an amendment of the German Stock Corporation Act (the "AktG") in December 2015. The Amendment contains numerous changes and clarifications of the AktG, the most significant of which are:

  • The issuance of bearer shares is subject to a number of restrictions, as stock corporations will only be able to issue bearer shares if (i) they are publicly traded, or (ii) the right to demand the execution of individual share certificates is excluded and a global share certificate is deposited with a central securities depository;
  • Currently, holders of shares equal to 5% or more of the share capital may call for a general meeting and, if such quorum is met or the total nominal value of the shares held exceed €500,000, may require the corporation to add items to the general meeting's agenda. These shareholder rights require the shares fulfilling the quorum to have been held for a certain period of time in advance of the general meeting. The amendment clarifies this must be at least 90 days prior to the corporation's receipt of the meeting request or request to add agenda items, and the shareholders must continue to hold the shares until management or, if management rejects the request, a court reaches a decision;
  • The amendment also introduces reverse convertible bonds ("umgekehrte Wandelanleihen") into the AktG and enables corporations to use contingent capital ("bedingtes Kapitel") as a source for new shares at the time of conversion. Reverse convertible bonds also entitle the corporation itself to convert bonds into equity at its discretion. Thus, reverse convertible bonds mainly serve as a restructuring tool ("debt-to-equity swap") or, for credit institutions, in order to fulfill bank regulatory requirements. Although reverse convertible bonds have been issued by German corporations in the past (e.g. as "contingent convertible bonds" or "mandatory convertible bonds"), the permission to issue such instruments had not explicitly been implemented into the AktG; and
  • Generally, the total volume of the new shares issued through contingent capital is capped at 50% of existing share capital. The amendment entitles the issuer of convertible bonds to exceed such limit if the sole purpose of the contingent capital increase is to enable the corporation to convert bonds into equity (i) in case of an impending insolvency ("drohende Zahlungsunfähigkeit"), (ii) to avoid an over-indebtedness ("Abwendung einer Überschuldung") or (iii) if the corporation is a credit institution, to fulfill bank regulatory requirements.

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