Activist Shareholders
Freedom of Action and Limits

March 2009
Finanzplatz
Robert Weber

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In the last season of shareholders' meetings, activist shareholders such as hedge funds attracted attention in connection with stock-exchange-listed companies. Such shareholders are often accused of putting the future of the company at risk in favour of short-term profits and of acting against the will of the less active majority. Though activist shareholders focus selectively on details of the strategic orientation of the company or on excessively weak development of the share price as central themes. The current situation of crisis in the financial markets, with sinking sales and falling share prices, may further encourage the phenomenon of shareholder activism.

Activist shareholders typically acquire minority holdings beneath the 30% threshold from which they would have to make a compulsory offer to the other shareholders. But even with these minority holdings, the German Stock Corporation Act (Aktiengesetz (AktG)) gives activist shareholders generous room for manoeuvre. For example, they can – especially from a holding of 5% – demand from the company's board of directors that an extraordinary shareholders' meeting be called with their own resolution subjects. In addition to this, they can have their own items placed on the agenda for resolution at a shareholders' meeting that has already been called, not only from a holding share of 5% but even from a share of as little as 500t EUR of the capital stock (§ 122 para. 1 and 2 AktG).