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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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