184 5 Equity and Shareholders’ Capital
shares (section 10.3). For example, a listed company may float shares in a
subsidiary on the capital market, or a private equity fund may exit a company by
means of an IPO.
Shareholders’ rights. The rights attaching to shares in a listed company are
usually based on the same company law principles as the rights attaching to shares
in a privately-owned public limited-liability company. The rights attaching to
shares in a listed company have, to some extent, been approximated by EU
company and securities markets directives, the purpose of which is to protect
shareholders, minority shareholders, creditors and the market in general.
As in privately-owned public limited-liability companies, shareholders have
formal powers relating to legal capital and structural change. The Second Com-
pany Law Directive provides for the equal treatment of shareholders who are in
the same position.^213 The Second Directive also provides that any increase in the
subscribed capital must be decided upon by the general meeting^214 and that the
pre-emption rights of existing shareholders may not be restricted or withdrawn
without the consent of the general meeting.^215 There are similar provisions on the
reduction in subscribed capital. The Second Directive is complemented by the
Third Directive, which provides that a merger requires the approval of the general
meeting of each of the merging companies,^216 and the Sixth Directive, which con-
tains a similar provision on the division of companies.^217 The Takeover Directive
complements the Second Directive by providing for “squeeze-out” rights of the
majority shareholder and “sell-out” rights of minority shareholders in the context
of takeover bids.^218
Apart from voting at general meetings, shareholders tend to have restricted
formal powers to enforce remedies against the company or its managers in the
event of breach of law or the company’s statutes. Some rights nevertheless exist.
For example, shareholders of a listed German AG enjoy slightly more efficient statutory
remedies than shareholders of a listed English plc; even individual shareholders have a
right to contest resolutions of the general meeting under German law.^219 Since those resolu-
tions are normally based on proposals submitted by one of the two statutory boards or both
of them, a shareholder may, at the same time, indirectly contest acts done by the two statu-
tory boards.
Discretion of the board. As in a private limited-liability company (see above), the
firm can manage constraints created by mandatory legal capital rules.
For example, the firm can increase the discretion of the board by ensuring that:
the company’s legal capital may be changed within the limits of a minimum and
maximum capital without amending its statutes; the number of the company’s
(^213) Article 42 of Directive 77/91/EEC (Second Company Law Directive).
(^214) Article 25(1) of Directive 77/91/EEC (Second Company Law Directive).
(^215) Article 29(4) of Directive 77/91/EEC (Second Company Law Directive).
(^216) Article 7 of Directive 78/855/EEC (Third Company Law Directive).
(^217) Articles 5–6 of Directive 82/891/EEC (Sixth Company Law Directive).
(^218) Article 15 of Directive 2004/25/EC (Takeover Directive).
(^219) See §§ 245 and 249 AktG.