Definition and legal foundations of the share system
Das Share system is a legal term closely related to the organization and operation of stock corporations (AG). In German stock corporation law, the share system describes the statutory and bylaw-based rules governing the issuance, management, and transfer of shares, as well as the associated rights and obligations of shareholders. The system provides the legal basis for the relationship between the stock corporation and its shareholders and forms a cornerstone of German corporate law.
Historical development of the share system
The concept of the share system developed alongside the establishment of the stock corporation as a corporate form in the 19th century. At that time, the need for a legally precise framework for the allocation and transferability of company shares was recognized. The development of the German Stock Corporation Act (AktG) in 1965, as well as prior versions of the law, led to the current design of the share system as a central element of shareholder participation, disposal, and property rights.
Legal foundations and statutory regulations
The share system is based on various provisions of the Stock Corporation Act (AktG), particularly the regulations on:
- Types of shares and share certificates
- Acquisition and transfer of shares
- Rights and obligations of shareholders
- Documentation of shareholdings and maintenance of registers
Subordinate regulations as well as numerous European legal provisions complement national law and influence the share system.
Types of shares within the share system
The share system distinguishes between various types of shares, each conferring different rights:
- Bearer shares (§ 10 (1) AktG): Transferable securities whose holder is deemed the shareholder.
- Registered shares (§ 10 (2) AktG): Transferability is linked to registration in the share register.
- Ordinary shares: Confer full voting rights.
- Preference shares (§ 12 AktG): Associated with special proprietary rights, but often without voting rights.
These types determine the specific design of a company’s share system.
Issuance of certificates and securities custody
Shares can be administered as individual certificates, global certificates, or in securities deposit accounts. Custody and transfer generally occur in accordance with the German Securities Deposit Act and the provisions of the Stock Corporation Act.
Acquisition and transfer of shares
The transfer of shares is a central component of the share system. The respective requirements depend on the type of share:
- Bearer shares: Transfer by agreement and delivery, in accordance with § 929 BGB by analogy.
- Registered shares: In addition to agreement and delivery, registration in the share register (§ 67 AktG) is required to acquire shareholder rights.
- Restricted registered shares: Transfer is subject to the consent of the company.
Thus, the share system routinely defines not only the acquisition of ownership but also comprehensive corporate participation.
Good faith acquisition and market protection
The system protects, pursuant to § 68 AktG, the bona fide acquisition of individual certificates and the associated membership rights, provided the requirements of the BGB are fulfilled. This facilitates and secures securities trading.
Rights and obligations within the share system
The share system comprehensively regulates the rights and obligations of shareholders, which are divided into administrative, proprietary, and informational rights as well as participation duties.
Participation rights (membership rights)
The membership rights of shareholders are central components of the share system. These include in particular:
- Participation in the general meeting (§ 118 AktG)
- Voting right (§ 134 AktG)
- Right to contest general meeting resolutions (§ 245 AktG)
- Right to participate in dividend payments (§ 58 ff. AktG)
The exercise of these rights is generally dependent on registration in the share register and/or beneficial ownership of the share.
Information and disclosure rights
The share system grants shareholders comprehensive information and inspection rights, such as:
- Right to request information from the management board (§ 131 AktG)
- Inspection of annual reports and other documents (§ 176 AktG)
These rights are essential for shareholder oversight of management and strengthen corporate supervision as well as investor protection.
Duties of loyalty and obligations to act
In addition to rights, the share system also imposes obligations on shareholders, such as compliance with duties of loyalty towards the company, especially in cases of qualified majority holdings (e.g. majority shareholder).
Furthermore, the articles of association may stipulate ancillary duties, such as capital contribution requirements (§ 55 AktG).
Significance and function of the share system
The share system is a crucial instrument in German and European corporate law for the regulation of collective legal relationships between companies and shareholders. It ensures:
- Legal certainty in share trading
- Protection of shareholder rights
- Flexibility and tradability of shares
- Transparency and monitoring capabilities of shareholders
- Equal treatment of shareholders
Statutory reforms and recent developments
The share system is regularly adapted by legislative changes and reforms to respond to changing economic and legal conditions. Recent developments include the introduction of the electronic share register, adjustments in the context of the European Market Infrastructure Regulation (EMIR), as well as changes resulting from ARUG II.
Digitization and electronic shares
The digitization of company shares is a current issue. The Electronic Securities Act (eWpG) enables the issuance of electronic shares, whereby traditional physical possession and transfer of share certificates can be replaced by digital registers.
International influences
The German share system is heavily influenced by European law, for example by the Shareholder Rights Directive (SRD II), which aims to promote long-term shareholder engagement and transparency.
Differences from comparable systems
In contrast to many non-European corporate regimes, such as the US shareholder system, the German share system places greater emphasis on the equal treatment and protection of minority shareholders. Compared to the GmbH system (limited liability company), the share system provides broader regulations on transferability, transparency, and participation.
Summary
The share system is a central element of German stock corporation law and comprehensively regulates the organization, issuance, transfer, and management of shares, as well as the rights and obligations of shareholders. It ensures the functionality, transparency, and integrity of the stock corporation, forming the legal basis for share trading and shareholder participation. Strict statutory regulation and continual adaptation ensure the necessary stability and flexibility for companies and investors alike.
Frequently Asked Questions
What legal requirements must be observed when planning and implementing a share system?
Various legal requirements must be considered in the planning and implementation of a share system. Firstly, it must be ensured that all regulations on consumer protection, in particular the Act Against Unfair Competition (UWG), are observed. This means that information on participation conditions, chances of winning, as well as the duration and procedure of the action must be clear, transparent, and easily accessible to participants. Misleading advertising promises must be avoided. In addition, participants must not be unfairly disadvantaged. Data protection requirements, especially under the GDPR, require that the collection and processing of personal data be transparently presented and that proper consent be obtained. Depending on the design of the share system, specific requirements may also be relevant, for example from lottery or gambling law, if prizes are awarded at random. In individual cases, tax-related aspects as well as potential licensing and trademark protection rights must also be considered.
What information obligations exist towards participants in a share system?
A participant in a share system must, under German law, be fully informed about all relevant aspects of the action. This includes in particular the identity of the organizer, clear and complete participation conditions, the exact procedure, type, value and number of possible prizes, and the criteria for drawing or selecting winners. If certain conditions or restrictions apply to participation, such as age limits or a specific place of residence, these must be clearly communicated. Furthermore, information on the right of withdrawal or return must be provided, if legally required. If personal data are collected, participants must be informed about the type, scope, and purpose of data processing and their rights under the General Data Protection Regulation (GDPR).
What role does data protection law play in the operation of share systems?
Data protection law plays a central role in the implementation of share systems, as personal data of participants is usually processed. Those responsible must ensure that data collection is based on a lawful foundation and that data is collected for specific purposes without exceeding what is necessary. Above all, it is essential to provide transparent information about which data is processed for which purposes, to whom it may be disclosed, and how long it will be retained. The rights of data subjects – such as the right of access, rectification, erasure or restriction of processing – must be upheld. Explicit consent from participants may be required for data processing, especially if data is to be used for advertising purposes. Technical and organizational measures must also be taken to ensure an appropriate level of data protection.
What are the consequences of violations of the legal requirements for share systems?
Violations of legal requirements in share systems can have significant consequences. Infractions of competition law, such as misleading information or unfair advertising methods, may result in warnings, injunctive relief, or claims for damages. Competitors, consumer protection organizations, or the central office for combating unfair competition are authorized to pursue such violations. Data protection breaches under the GDPR can be sanctioned by supervisory authorities with substantial fines, depending on the violation amounting to several million euros or a percentage of annual turnover. In addition to civil claims by affected participants, criminal consequences may also arise, for example if there is unauthorized data processing or fraud.
To what extent is gambling law applicable to share systems?
Gambling law may become relevant if the share system has elements of a game of chance, particularly if payment is required for participation and winning depends mainly on chance. In such cases, the share system would require authorization and would have to meet the requirements of the Interstate Treaty on Gambling, including special license obligations and youth protection requirements. If, however, there is no payment (e.g., free participation), it may qualify as a prize draw, which does not generally fall under gambling law but is instead governed by other regulations, such as in competition and data protection law. A thorough review of each individual case is strongly recommended to avoid unauthorized gambling and criminal risks.
Do share systems have to observe special tax regulations?
Yes, share systems are subject to tax law requirements that may affect both the organizer and the participants. Prizes distributed as part of a share system may be subject to tax. The organizer may incur VAT liabilities, particularly if the action is a service provided for payment. For participants, received prizes may be taxable as other income unless an exemption applies. Non-cash prizes must be taxed at their market value. The organizer is obligated to maintain appropriate documentation and, where necessary, to provide the required tax records and certificates.
What special features from trademark or copyright law must be observed regarding share systems?
If a share system uses certain trademarks, company logos, or protected works (e.g., images, texts, videos), the corresponding protection rights must be observed. Without express permission, protected trademarks or works belonging to third parties may not be used. If, for example, a participant takes part in a creative competition and submits their own contributions, the usage rights to these contributions for the intended use must be regulated in the participation conditions. The organizer must ensure that no protection rights are infringed or unauthorized third parties are involved in use. This applies to national as well as international protection rights, depending on the distribution channel of the share system. Infringements may result in warnings, injunctions, or liability for damages.
