Germany has some forms of appraisal rights – depending on whether the squeeze-out method was used against minority shareholders, and what form that method took. German law offers three squeeze-out methods: one contained in the WPUG (German takeover law which implemented the European Takeover Directive and the squeeze-out right included in the Directive), another contained in the General Stock Corporation Act, and another contained in the German Transformation Act.
- The first squeeze-out right contained in the WPUG, which implements the Takeover Directive, allows a bidder who, after the launch of a takeover offer or mandatory offer, acquires 95% of the total issued share capital to acquire the remaining shares for fair consideration. In this case we are dealing solely with listed companies. There are detailed rules about the form and level of the compensation. The squeeze-out procedure is very detailed, with specific price requirements. The squeeze-out is carried by court order, thus making it more difficult to challenge.
- Another form of squeeze-out right is contained in the Stock Corporation Act. It applies to both listed and unlisted stock corporations (AG- Aktiengesellschaft). It is available to shareholders exceeding 95% of the share capital. The majority shareholder can acquire the remaining shares against payment of an appropriate compensation. The execution of the squeeze-out is decided by the general meeting of shareholders. Shareholders can challenge the resolution of the general meeting in court and also challenge the appropriateness of the compensation in court (this form of appraisal right would more closely resemble U.S. judicial appraisal proceedings).
- The final squeeze-out method is contained in the German Transformation Act, which was introduced in order to simplify parent-subsidiary mergers. A shareholder directly owning 90% or more of the share capital of the target company can implement a merger squeeze-out under the German Transformation Act. The target company is merged into its parent entity and the minority shareholders are squeezed out, requiring “adequate” cash consideration when the merger is completed. This more resembles the cash-out merger found in the US. There needs to be a shareholder resolution which can be challenged by shareholders.
**RKS thanks Dr. Alexandros L. Seretakis, Assistant Professor in Law at the Trinity College Dublin-The University of Dublin, for this post. Rolnick Kramer Sadighi LLP does not practice in Germany or the EU.