Background and significance of the German Federal Court of Justice’s decision on the right of minority shareholders to contest resolutions
The decision of the German Federal Court of Justice (BGH) of March 24, 2011 (Case No. II ZR 229/09) sets an important legal precedent in the context of the right of minority shareholders to contest resolutions in listed stock corporations. The focal point of the decision is the extent of the rights of minority shareholders, especially after a general meeting’s decision aimed at a structural change of the company has been formally registered in the commercial register.
Core of the decision
The BGH determined that even after the effective registration of a merger, a single shareholder holding a minority stake is entitled to contest the respective resolutions of the general meeting. This is particularly the case if the law provides for the special protection of shareholders through a right to contest in cases of fundamental restructuring. Recognition of this right to contest serves to protect minority shareholders from potential exploitation by the majority and ensures ongoing control over measures of significant corporate law relevance.
The tension between register entry and legal effectiveness
The role of registration in the commercial register
According to general company law doctrine, the registration of certain structural measures—such as mergers or other transformations—in the commercial register has a constitutive effect. Normally, this creates legal certainty for the parties involved and for legal transactions. The reasoning is to ensure unambiguous legal relations to the outside world and to set a clear effective date for structural measures.
Limits of legal effects and protective interests
However, the BGH decision makes it clear that entry in the commercial register does not unconditionally exclude any judicial review of the associated resolutions. Rather, the rights of shareholders—particularly those of minority shareholders—are at the forefront of judicial review. If certain measures approved in favor of the company could have profound economic consequences for minority shareholders, an effective means of review must be provided. The right to contest is thus understood as a restriction and control mechanism, preventing abusive exploitation of majority positions from going unchecked.
Implications for practice and minority shareholder protection
Strengthening of minority shareholders
This clarification by the highest court amounts to a strengthening of legal protection for minority shareholders under company law. Minority shareholders are given the opportunity to vigorously defend their rights even after registrations have been effected, including, if necessary, through the courts. For corporate restructurings, this means that uncertainties and legal risks may continue to exist even after registration—a factor that majority shareholders and company management must take into account.
Continued review and control competence of the courts
Another novelty is the finding that registration as such does not have a blocking effect with regard to judicial review. Corporate measures that are objectively disadvantageous may be reviewed at the initiative of a single shareholder, provided the statutory requirements for contesting are met. The courts therefore retain the competence to correct impermissible measures even after registration where applicable.
Interactions with corporate law practice
Effects on the company’s structuring options
Already at the preparatory stage of structural measures, the possibility of ongoing contestation rights should be considered. It is recommended that companies and their governing bodies ensure careful documentation and safeguarding of the measure in order to minimize potential conflicts afterwards. Nevertheless, a residual risk resulting from the minority shareholder’s right to review can never be completely ruled out.
Significance for investors and company management
This creates an additional level of legal certainty—but also of legal uncertainty—especially for investors and shareholders from both Germany and abroad. The possibility for changes to be reviewed in the public sphere even after registration contributes to transparency and fair treatment. At the same time, this can delay processes and lead to procedural uncertainties, which require careful legal structuring.
Conclusion
The decision of the German Federal Court of Justice illustrates the relevance of the right to contest resolutions as a central instrument for the protection of minority shareholders in stock corporation law. By clarifying that judicial review of company law measures remains permissible even after registration in the commercial register, the rights of minority shareholders are strengthened.
If you have questions about the possibilities and limitations of the right to contest resolutions in company law matters, the lawyers at MTR Legal are available nationwide and internationally to advise and help clarify the legal framework.
