No obligation for cash compensation to shareholders in the event of delisting
In its decision of October 8, 2013 (Case No. II ZB 26/12), the Federal Court of Justice (BGH) clarified the legal treatment of a company’s complete withdrawal from the stock exchange (so-called ‘delisting’). The judges essentially ruled that in the case of a voluntary delisting, shareholders are not necessarily entitled to a mandatory cash compensation offer from the company for their shares. This ruling marks a significant milestone in the doctrinal development of capital markets law and emphasizes the limits of investor protection in the context of a stock market withdrawal. The following discusses the background, relevant legal standards, and the effects on the market participants involved in more detail.
Initial situation and previous legal framework
Background of delisting
Companies whose shares are traded on a stock exchange may apply to end trading. This withdrawal from stock exchange trading—the so-called delisting—is regulated by the German Stock Corporation Act and the stock exchange rules. Until now, it was disputed whether shareholders, who can no longer sell their shares liquidly on an exchange after delisting, are entitled to compensation in the form of a cash settlement from the company.
Previous opinions in literature and case law
A key point of criticism was that a company’s withdrawal from the stock exchange impairs the tradability and thus the market value of its shares. Some voices therefore demanded that delisting be coupled with a mandatory cash compensation offer, similar to other structural measures that have a significant impact on shareholders’ positions (such as domination or profit transfer agreements).
Decision of the Federal Court of Justice
Core statement of the decision
The BGH clarified that the balancing of interests for shareholders in the event of delisting does not necessarily lead to an obligation for cash compensation. The decisive factor—apart from the principle of entrepreneurial freedom—is that the property position of the shareholders is not so substantially impaired by the delisting as to make compensation necessary. Withdrawing from the exchange does not constitute expropriation of the share; it remains part of the shareholder’s assets, even though the market value may decrease and tradability may be restricted.
Reasoning of the BGH
The Federal Court of Justice primarily relies on the consideration that there is no statutory claim to compensation for delisting in the German Stock Corporation Act. Nor can such a claim be derived analogously from comparable company law situations. The decision refers to the individual responsibility of shareholders in investment decisions and emphasizes that delisting qualifies as an interference with membership rights, but the law does not require special compensation.
Distinction from other structural measures
In contrast to interventions such as squeeze-outs or the implementation of domination and profit transfer agreements—where actual shifts in asset value or voting rights occur—the core position of the shareholder remains intact. According to the BGH, the restriction on the fungibility of shares following a delisting is to be accepted, as long as there is no statutory regulation to the contrary.
Impact on companies and shareholders
Consequences for issuers
From the perspective of listed companies, the decision provides planning security and gives them the opportunity to terminate the listing of their shares without the mandatory financial burden of a cash compensation offer. This enables greater flexibility of action, especially in situations where listed status is no longer of strategic advantage to the company.
Consequences for shareholders
For investors, the decision entails a restriction of protection when a company withdraws from the regulated market. In the event of a delisting, they must accept that their shares may become less liquid and decrease in market value, without automatically receiving financial compensation. However, their ownership status, and thus all further shareholder rights, remain unchanged.
Key assessment aspects and perspectives
Legislative framework and reform options
The decision reveals a gap in the statutory system, as there is still no explicit regulation for dealing with the interests of shareholders in the event of delisting. Discussions regarding statutory codification or adjustments of protection mechanisms continue. This means that the legal situation in this area remains a potential field for further legislative development.
Practical relevance and need for action
Market participants should always be aware of the current legal situation and appropriately assess its impact on structural decisions and portfolio strategies. The subject is particularly relevant for investors holding stakes in companies with low market capitalization or limited stock exchange ties.
If there are uncertainties in the assessment or implementation of a delisting, or regarding the rights of shareholders, it is advisable to seek consolidated review and support from legal experts. For further questions regarding the legal treatment of withdrawal from the stock exchange and the related rights and obligations, the Rechtsanwalt at MTR Legal are available for a personal consultation.
