The Gazette 1981

APRIL 1981

GAZETTE

German Public Companies

individual monetary rights, the members have the right to vote in the dispensing of the year's profits (the amount of which is calculated by the Board of Management and approved by the Board of Supervisors). The General Meeting only acts in determining the profits if the Supervisors and Management cannot agree. With regard to collective rights, the General Meeting, as a body, elects the shareholders' representatives on the Board of Supervisors (Aufsichtsrat), which in turn elects the Board of Management, which body is the executive organ of the company and is responsible for the company's activities. The General Meeting in Germany, in contrast to Ireland, does not have the power to dismiss a member of the Board of Management. It has the right to approve or disapprove of the way in which the Board of Management or the Board of Supervisors are running the company. This approval does not prejudice the General Meeting, or individual shareholder, should it or he subse- quently wish to sue the company or an individual member of the Board of Management or of the Board of Super- visors. The General Meeting, as a body, decides on how the profits, as calculated by the Board of Management, are to be applied, either as reserves or as a dividend. It appoints the auditors of the company and has power to alter the Articles of Association. All the rights conferred on the shareholders acting in the General Meeting are set out in the Aktiengesetz (Company Law Statute) or in the Articles of Association. Individual Rights of Shareholders With regard to individual rights, possibly the most important is the right to participate in the General Meeting. This basic right may be regulated by the Articles. Instead of our registration system, a share- holder in Germany must identify himself and effectively become known to the company a certain period before the General Meeting. The basic right may not be taken away by the Articles or by any act of the company. The indivi- dual right to participate in the company may not be exer- cised elsewhere other than in the General Meeting. The shareholder may ask the Board of Management in general, a question, but may not seek out one member alone — nor may he direct a question to the Board of Supervisors. The Board of Management has a duty to answer these questions, unless it would be against the interest of the company to do so. Should there be a dispute as to whether it is in the company's interests, the courts may decide. It is in this way that individual minority shareholders may create difficulties for big concerns. Under German company law a share does not necessarily carry the right to vote; such a right may or may not be attached to a share. A share may only carry one vote. The exercise of this vote, as in Ireland, need not be personal — it may be exercised by proxy. In contrast to the common practice in Ireland, voting is usually by poll. The right to contest a decision of the General Meeting as invalid attaches to each member individually. When a member of the Board of Management or Supervisors, deliberately, exercises his influence to the detriment of the company or its shareholders, the company is liable in damages to the shareholder in respect of any loss suffered by the company which may have affected him as a shareholder. The member of Manage- ment or Supervisors, who was responsible for the action.

The Rights of Shareholders by Nicola K. Barr, BA. (Mod.)

The shareholder is a necessary and integral part of the German "public company" (Aktiengesellschaft). The Aktiengesellschaft is comparable with the Irish public company. To found an Aktiengesellschaft, a minimum of five shareholders is necessary. When the shareholders come together and form the General Meeting (Hauptver- sammlung) they form, in theory, the highest organ of the company. Although the shareholder is a necessary part of a company, he possesses only those rights which are expressly given him by law or by the Articles of Association (Satzung). It is interesting to note, in contrast to the Irish General Meeting, the German General Meeting may only decide on those subjects expressly permitted by statute or by the Articles of Association. Otherwise, the Board of Management (Vorstand) is competent to take all decisions affecting the company. This is exactly the reverse of the common law position. At common law, the Board of Directors may only act where expressly allowed by the Articles of Association, other- wise the General Meeting is competent to take decisions. However, in practice, the Board of Directors takes most managerial decisions (Table A, Article 80, Companies Act, 1963). In Germany, questions regarding manage- ment may only be discussed and decided when the Board of Management has requested the General Meeting to decide such questions. The Board of Management is bound by this decision. In Ireland, Table A, Article 80, Companies Act 1963, provides that the General Meeting may give the directors directions with regard to manage- ment, on any issue, at its own instigation. The majority of German public companies issue 'bearer shares', which are rarely found in Britain or Ireland. The Irish practice is that shares are registered in a person's name and only that person, or his appointed proxy, may exercise the right attaching to the share. The rights of a shareholder in a German public company may be divided into administrative and monetary rights. The administrative rights include the right to attend and speak at a General Meeting, the right to information, or the right to contest a decision not in accordance with the procedure laid down either by statute or in the Articles of Association. With regard to

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