Definition and Legal Classification of Shareholders
The term shareholder refers to individuals or entities holding equity interests in companies, most often in the form of shares. Shareholders can be both natural and legal persons who become co-owners of a corporation through the purchase of shares or other company interests. The legal status of a shareholder is detailed in various statutory provisions, in particular in stock corporation law and capital market law.
Legal Foundations for Shareholders
Stock Corporation Act (AktG) and Relevant Provisions
In Germany, within the meaning of stock corporation law, a shareholder is the holder of shares in a stock corporation (AG) or a partnership limited by shares (KGaA). The principal provisions are primarily found in the Stock Corporation Act (AktG), which defines the fundamental rights and obligations of shareholders. The German Commercial Code (HGB) and special statutory regulations such as the Securities Trading Act (WpHG) also contain provisions regulating the influence and participation of shareholders.
Corporate Law Framework
In addition to stock corporation law, the corporate law framework plays an important role for shareholders, especially in other types of corporations, such as the Gesellschaft mit beschränkter Haftung (GmbH). While holders of shares in these companies are usually called partners (Gesellschafter), the term shareholder is frequently used in an international context or for certain company forms.
Rights and Duties of Shareholders
Participation Rights
Shareholders possess fundamental participation rights derived from their shares in the company. These include in particular:
Voting rights at the general meeting
Each shareholder is entitled to attend the general meeting and exercise their voting rights. Voting rights depend on the number of shares held. Typical resolutions passed at a general meeting include:
- Election and removal of supervisory board members
- Allocation of net profits (distribution of dividends)
- Discharge of the management board and supervisory board
- Amendments to the articles of association
- Capital measures (e.g. capital increase or reduction)
- Approval of company acquisitions or mergers
Information and Inspection Rights
Shareholders have the right to request information from the management board about matters of the company necessary for the proper assessment of agenda items (§ 131 AktG). There is also a right of inspection of certain company documents.
Right to Challenge Resolutions of the General Meeting
Resolutions of the general meeting can be challenged by shareholders in the competent court if they violate statutory or constitutional provisions (§ 243 AktG).
Property Rights
Key property rights of shareholders include:
- Right to profit participation (dividends)
- Entitlement to subscription rights in the event of new share issues
- Entitlement to a share of the liquidation proceeds in the event of dissolution of the company
Fiduciary Duties and Additional Obligations
Even though German law does not explicitly provide for a general fiduciary duty for shareholders, special obligations can arise especially for majority shareholders. Shareholders must comply with statutory and constitutional provisions and, in particular, must not harm the interests of the company or other shareholders in a manner contrary to good faith.
Distinction Between Types of Shareholders
Major Shareholders and Institutional Shareholders
Major shareholders (majority shareholders) and institutional investors (such as investment funds, insurers, or banks) exert a special influence on the company due to their significant shareholdings. This influence can affect strategic or operational corporate decisions. Special reporting obligations apply when certain thresholds are exceeded (§§ 33 ff. WpHG).
Minority Shareholders
Minority shareholders hold less than 50% of the voting rights but nonetheless enjoy legally protected minority rights. These include, for example, the right to convene a general meeting or the right to sue for breaches of shareholder rights.
Free Float
Free float refers to the large number of small shareholders whose stake in the company does not provide significant influence. Nevertheless, the rights and duties for this group are fully guaranteed.
Shareholders in the International Context
United States Corporate Law and UK Companies Act
In the Anglo-American sphere, such as under US corporate law or the UK Companies Act, the term shareholder likewise refers to the holder of shares. The fundamental rights and obligations largely correspond to European regulations, but there are differences, particularly regarding participation rights and the protection of minority interests.
Shareholder Value Principle
The term shareholder is closely linked to the shareholder value concept, which asserts that the primary goal of corporate management is to increase shareholder value. It is debated in different legal systems to what extent exclusive focus on shareholder value is permissible or mandatory.
Distinction from Stakeholders
Shareholders must be distinguished from stakeholders, whose representatives include employees, customers, creditors, and suppliers. While shareholders have direct ownership in the company, the term stakeholder encompasses all groups with a legitimate interest in the company’s development without necessarily having an equity stake.
Conclusion
The term shareholder precisely describes holders of equity interests in corporations with comprehensive, legally regulated rights and duties. The legal status of a shareholder is characterized by numerous protection mechanisms and participation rights at both the German and international levels. The specific form of these rights depends on the legal framework and the characteristics of the company but remains of central importance for corporate governance and management.
Frequently Asked Questions
What rights does a shareholder have under German corporate law?
Shareholders, referred to as Aktionäre in German corporate law (in the case of a stock corporation), possess a wide variety of rights regulated both in the German Stock Corporation Act (AktG) and, in part, in the company’s articles of association. The most important rights include voting at the general meeting, the right to request information from the management board, participation in profits, as well as pre-emptive rights in case of capital increases. Furthermore, shareholders have the right to proper convening and execution of the general meeting, the right to challenge resolutions of the general meeting in case of procedural or substantive errors, and various minority rights, such as convening extraordinary general meetings, requesting special audits, and initiating legal actions against board members (e.g., management or supervisory board). The right to access business records and balance sheets is also specified by case law. These rights serve to protect capital providers’ interests and ensure appropriate oversight of management.
What duties and liability risks might a shareholder have in Germany?
As a rule, shareholders of a stock corporation are not personally obliged to make additional payments beyond their original capital contribution or to be liable for the company’s debts (so-called separation principle). Liability is generally limited to the invested capital. However, exceptions exist: for example, the articles of association may stipulate additional payment obligations, though this is uncommon for listed companies. Liability becomes particularly relevant if a shareholder also holds a dominant position (e.g., as a majority shareholder) or acts de facto merged with the company (‘piercing the corporate veil’ in cases of unlawful influence). In group law constellations, especially within contractually bound groups, further liability risks may arise. In the context of insider trading and market manipulation, criminal and civil liability risks exist if the rules of the Securities Trading Act (WpHG) are violated.
How can a shareholder enforce their rights at the general meeting?
Shareholders can primarily exercise their rights at the general meeting, the central decision-making body of stock corporations. There they typically exercise their voting rights (e.g., regarding profit appropriation, discharge of management and supervisory board, capital measures, or amendments to the articles of association). To exercise these rights, a shareholder must register for the general meeting in due time and prove their shareholder status. During the meeting, shareholders have the right to ask questions to management and supervisory board and request information (§ 131 AktG). If the company fails to comply with these duties, a shareholder can enforce the provision of information through the courts or challenge the relevant resolution in court. To strengthen their interests effectively, shareholders can also form voting syndicates or appoint representatives (proxies/authorized representatives).
Under what conditions can a shareholder challenge resolutions of the general meeting?
Shareholders have the right to challenge resolutions of the general meeting if these violate the law or the articles of association, specifically in the event of procedural errors (e.g., improper convening, breaches of the right to ask questions), substantive errors (such as violations of capital maintenance requirements), or insufficient information provided to shareholders. The challenge must be filed with the competent regional court within one month of the resolution (§ 246 AktG). There are no minority quorums; every shareholder—regardless of the size of their stake—has this right. In cases of serious breaches of duty, resolutions can also be declared null and void (§ 241 AktG). It must be noted that abusive challenge actions are subject to strict requirements under stock corporation law to prevent so-called ‘predatory’ lawsuits.
How can a shareholder voluntarily leave a German stock corporation?
A direct withdrawal of a shareholder from the stock corporation is generally not provided for under German law, as shares are part of the freely tradable circulating capital. The usual way of ‘leaving’ is the sale of shares (transfer by assignment or via stock exchange), which generally does not require the company’s consent unless registered shares with limited transferability exist, for which approval may be needed. Extraordinary reasons for a shareholder’s withdrawal can be contractually regulated but are rare in stock corporations. In very few exceptional cases (e.g., squeeze-out procedures under §§ 327a ff. AktG or in the course of restructurings), a shareholder can be compulsorily excluded against cash compensation.
What rules apply to information obligations towards shareholders?
German stock corporations are subject to strict information obligations towards their shareholders, particularly before and during the general meeting. The company must provide shareholders in good time with all relevant documents, reports, and statements (e.g., annual reports, agenda, profit distribution proposals). During the general meeting, there is a statutory right to ask questions and receive information on items on the agenda (§ 131 AktG). Additional transparency requirements apply to listed companies, including publication of ad hoc notifications (§ 15 WpHG), directors’ dealings (§ 15a WpHG), and notification of voting rights (§§ 33 ff. WpHG). Violations of these obligations can give rise to claims for damages and fines. The Investor Protection Act and the MAR (Market Abuse Regulation) also set further disclosure requirements, for example regarding inside information.
How are shareholders’ voting rights exercised in the case of custody and capital measures?
When shares are held in custody by depositary banks for shareholders (so-called collective custody), these banks are obliged to properly inform shareholders about the general meeting and other capital measures and to enable them to exercise their rights. Voting is usually exercised for registered shares via a certificate of authorization, and for bearer shares via confirmation from the depositary banks. In the case of securities lending or other trust arrangements, contractual agreements determine who holds the voting rights. For capital measures such as subscription rights capital increases, banks inform shareholders and generally also implement shareholders’ decisions unless instructions to the contrary are given. To protect shareholders, banks are required to disclose conflicts of interest and act strictly on behalf of shareholders to ensure the lawful exercise of all rights.
