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Restriction of the shareholder’s right to information

January 2011 - Corporate & Commercial. Legal Developments by Avocado Rechtsanwälte .

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According to a judgment of the German Federal Supreme Court from February 2010, the general assembly (Hauptversammlung) of a stock corporation (“Corporation”) may resolve to include a provision in its articles of association which comprehensively empowers the chairman to reasonably restrict the time available to shareholders to debate during the shareholder’s meeting.

Facts

The plaintiff shareholder filed an action against a resolution adopted by the general assembly to include a provision in the articles of association according to which the chairman of the general assembly shall be empowered to restrict the time available to shareholders to debate. Furthermore, the chairman was to be authorized to determine the overall duration of the general assembly and to adjourn the general assembly at 10.30 p.m.

Decisions of the Courts

The Higher Regional Court Frankfurt (Oberlandesgericht) had ruled that the resolution of the Corporation’s general assembly was void.

The Federal Supreme Court (BGH) reversed the judgment of the Higher Regional Court and ruled that the shareholder’s right to debate may be restricted by the articles of association. The Stock Corporation Act empowers the chairman to reasonably restrict the right to debate in order to prevent abuses. In past instances, shareholders had used such right to disturb the general assembly in order to provoke formal mistakes so that the resolutions adopted by the general assembly could be challenged by them. In order to avoid delays in the implementation of such resolutions, Corporations often agreed to settlement payments. 

Practical impact

The judgment of the Federal Supreme Court prevents shareholders from (mis)using their right to debate during a general assembly. Corporations should therefore consider amending their articles of association accordingly.  However, any such restriction must be reasonable in order to be valid.

avocado rechtsanwaelte
Tarec Alio, LL.M. (Boston), Rechtsanwalt and Attorney-at-Law (New York)

 



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