Delisting Made Easier: Federal Supreme Court on Change of Market Segment for Listed Companies

In a judgment in 2002 in re: Macroton, the Federal Supreme Court (Bundesgerichtshof) had held that the delisting of shares in a German stock corporation (Aktiengesellschaft) did require shareholder approval in an AGM. In addition, it did trigger the duty of the corporation itself or its majority shareholders to make a mandatory offer to buy out the minority shareholders. In a judgment in October 2013 that was published today, the Federal Supreme Court revisited that issue. Reversing its previous case law, the court held that a change of market segment, in the case at hand leaving the Regulated Market of the Berlin Stock Exchange and moving the listing to the Entry Standard (Open Market) of the Frankfurt Stock Exchange did not give rise to a claim of minority shareholders to be bought out in cash (angemessene Barabfindung).

In reaching this conclusion, the Federal Supreme Court applied a 2012 judgment of the Federal Constitutional Court (Bundesverfassungsgericht). In this case, the Constitutional Court had held that a delisting from the regulated market does not per se violate the shareholders’ property rights as guaranteed by the constitution (Schutzbereich des Eigentumsgrundrechts). As a matter of constitutional law, there was no requirement for the securities laws to provide for a mandatory offer in the case of a complete delisting. However, to the extent that the previous case law had provided for such a duty, on the other hand, this case law was not outside the boundaries of judicial law creation (richterliche Rechtsfortbildung). The Federal Constitutional Court had left to the ordinary courts to assess the current case law and to determine to what extent a change of market segment required mandatory offer. Some commentators had expected the Macrotron principles to be overturned, but there was uncertainty as to how the Federal Supreme Court would react.

The case it decided now gave the Federal Supreme Court the first opportunity to review the Macrotron principles in the light of the findings of the 2012 Constitutional Court decision. The court decided not to stick to its previous approach, as there was no constitutional requirement for a court-controlled cash buy-out. In addition, the ability of minority shareholders to trade their shares in other, perhaps less liquid, market segments did not impact their property rights to a degree that warranted compensation.

The case provides robust guidance on how to structure capital market transactions, providing for added transaction security – and it will make public take-overs not only easier, but arguably also cheaper.

 

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