5.6 Legal Aspects of Equity Provided by Shareholders 175tives^176 and the Directive on statutory audits.^177 Those standards are complemented
by Member States’ national accounting requirements.^178 (c) Shareholders use their
voting rights at general meetings and will be disclosed information before each
meeting or at the meeting. For example, depending on the governing law, share-
holders decide on questions relating to legal capital, structural change, and ap-
pointments to the board. (d) Whether shareholders have a right to selective disclo-
sure of information depends on the governing law. For example, shareholders
have wider rights to ask for the disclosure of information in a German limited-
liability company compared with an English company (Volume I).
Shareholders can have decision rights, which consist of initiation rights or veto
rights or both. Depending on the decision and the governing law, even minority
shareholders can use their voting rights as veto rights to block decisions initiated
by others such as majority shareholders or the board (Volume I).
To a large extent, shareholders’ enforcement rights depend on the governing
law. One of the factors influencing the rights of a shareholder to enforce sanctions
against other shareholders or the representatives of the company in the event of
breach of the legal framework that governs the company’s affairs is the nature of
that legal framework. Where that legal framework is based on law, as in Germany
and continental Europe, shareholders may have wider legal rights to enforce it
(there is simply more to enforce). Where it is not based on law, shareholders are
likely to have less effective legal rights to enforce it (there is less to enforce).
For example, it has traditionally been easier for shareholders of a German limited-liability
company to enforce sanctions against the company or its board members (the duties of
board members are mainly based on statutory company law) than it has been for
shareholders of an English or US limited-liability company (these duties are largely based
on articles of association and all powers have usually been vested in the board).^179 – On the
other hand, class actions are easier in the US than in Europe. It is also worth noting that the
City Code has gained statutory force.^180
Management of shareholders’ rights. The firm can manage the scope of share-
holders’ rights in various ways.
Generally, the firm can manage shareholders’ rights by using the discretion
available to the firm under the applicable company law. The firm may regulate
those rights in its statutes (articles of association). However, the amendment of
statutes requires the consent of shareholders and may be contrary to the interests
of a shareholder block. It is therefore easier to use that discretion before the
(^176) Directive 78/660/EEC on the annual accounts of certain types of companies (Fourth
Company Law Directive). Directive 83/349/EEC on consolidated accounts (Seventh
Company Law Directive).
(^177) Directive 2006/43/EC (Directive on statutory audits).
(^178) For example, § 242 HGB and § 264(1) HGB (“HGB-Abschluss”).
(^179) For party autonomy in corporate rule-making, see Mäntysaari P, Comparative Corporate
Governance. Shareholders as a Rule-maker. Springer, Berlin Heidelberg (2005) Chap-
ters 4.1.4 (English company law) and 5.1.4 (German company law).
(^180) Sections 942 and 943 of the Companies Act 2006.