Draft Bill of the "Zukunftsfinanzierungsgesetz"

On 12 April 2023, the German Ministry of Justice published a draft bill (Referentenentwurf) of the so-called "Zukunftsfinanzierungsgesetz" (ZuFinG), which provides, amongst others, for the introduction of multiple voting rights, electronic shares, a legal framework for special purpose acquistion companies (SPACs) and certain facilitations for capital increases, including amendments to the anti-dilution rules, on which this news alert shall focus.

Under the currently applicable rules of the German Stock Corporation Act (AktG), if new shares are issued at a discount and subscription rights of shareholders are exlcuded, the shareholder resolution approving the capital increase can be challenged in an avoidance proceeding, with the argument that the value of the contribution attributable to an issued share is inadequately low. This legal situation has long been criticized, because the effect of an avoidance proceeding is that the registration of the capital increase in the commercial register, which is a prerequisite for the effectiveness of the capital increase, is barred. Therefore, the draft bill of the ZuFinG suggests a fundamental change of this concept. Instead of granting shareholders the ability to challenge the shareholder resolution, shareholders whose subscription rights have been excluded shall have the ability to pursue a claim for cash compensation against the company in an appraisal proceeding. The cash compensation claim bears annual interest of 5% above the applicable base rate. Conversely, the company has a compensation claim against the shareholders who have subscribed to the new shares and who benefit from the subscription right exclusion.

Where the shares are listed on a regulated market, the draft bill provides that the value of the shares shall not be determined by a valuation, but shall be equal to their stock exchange price, i.e. the 3-months VWAP preceding the first publication of the decision to issue the new shares. Exceptions shall apply where certain minimum transparency or liquidity reqirements are not satisfied. Also, according to the draft bill, a compensation claim is excluded if the issue price is not significantly lower than the stock exchange price. If the draft bill will be passed in its current form, it remains to be seen how courts will look at cases where the shares of an issuer are only listed on an open market (Freiverkehr) instead of a regulated market. In any case, the suggested approach of basing the fair value for shareholder compensation only on the stock market price seems to underscore the trend in appraisal proceedings in the context of domination agreements and squeeze-outs where courts increasingly tend to focus on VWAP instead of a valuation.