Why Germany needs shareholder reform

Author: | Published: 1 Feb 2005

In late 2004, Germany's largest department-store operator, KarstadtQuelle, was ailing. The company's finances urgently needed restructuring. The company risked bankruptcy without an increase in capital by more than €500 million ($655 million) combined with an additional credit line of €1.75 billion from 16 banks. The crisis spiralled out of control after a small group of just six shareholders representing only 0.24% of the entire stated capital took legal action to challenged the shareholders' resolution to increase the stated share capital of the corporation urgently required to rescue the company. KarstadtQuelle was forced into lengthy negotiations it could ill-afford before finally reaching a settlement with the minority shareholders to move forward with the desperately needed restructuring.

Too much of a good thing

The KarstadtQuelle case once again highlighted shortfalls under German stock corporation law that mean just one minority shareholder can hold a company to ransom and even ruin a company,...