• Shareholders have numerous rights
• Number of duties manageable
After the sharp increase in the number of stockholders in 2020, people’s interest in stocks, mutual funds and ETFs stabilized in 2021. According to the Deutsches Aktieninstitut (DAI), around 12.1 million people in Germany still have either shares, share funds or share-based ETFs in their portfolios. This means that around every sixth person, i.e. 17.1 percent of the population aged 14 and over, remains involved in the stock market. This roughly corresponded to the previous year’s level (2020).
The DAI attributes this continued interest to the good stock market development in 2021, among other things. The stock savers’ positive stock market experiences motivated them to stay on the ball. In addition, low interest rates, rising inflation and high real estate prices made equities attractive compared to alternative investments.
Shareholder Rights
Owning shares entails various rights and obligations, which are regulated in the German Stock Corporation Act and are now to be examined in more detail here:
The most important right is probably the right to vote, ie as a shareholder you can have a say in certain future developments – eg acquisitions, capital increases or the appropriation of profits. The shareholders also exert further influence, for example, by electing representatives for the supervisory board, appointing the auditor or withdrawing their confidence in the management board. The extent of voting rights is determined by the number of shares held.
In order for shareholders to be able to exercise this right, every German listed company holds a general meeting (AGM) once a year. On this occasion, shareholders are not only allowed to exercise their voting rights, but also, if they have registered in writing in advance, to ask questions. So you have a right to information. This right also means that public limited companies (AG) are obliged to inform their shareholders once a year about the company’s economic situation.
Incidentally, shareholders do not have to travel to the Annual General Meeting in person to exercise these rights. Anyone who finds participation in the general meeting too complicated and too expensive can assign their voting rights to an authorized representative, such as their bank or an investor protection association. If provided for in the company’s Articles of Association, shareholders can also exercise their voting rights by postal vote.
In addition, shareholders have various property rights. This includes – insofar as a dividend is distributed – in particular the right to a share in profits in accordance with one’s own shareholding. However, property rights also include a general subscription right in the event of a capital increase or the right to liquidation assets.
It should be noted, however, that holders of preferred stock, unlike common stock, do not have voting rights. As compensation for this, they receive certain privileges in the distribution of profits and the liquidation of a stock corporation, which are specified in detail in the articles of association of the respective stock corporation. These special rights usually include a higher dividend, the so-called preferential dividend.
Shareholder Obligations
In turn, one of the duties of a shareholder is that he makes a corresponding contribution to the share capital, which basically only means that he also pays for the subscribed shares. In addition, he still has the statutory duty of loyalty. This requires a shareholder to take the interests of the company and the other shareholders into account – for example, he may not enrich himself at their expense.
In addition, there is the obligation to notify under stock exchange law when acquiring larger shares in a listed company. If relevant thresholds – the smallest is 3 percent – are reached for the voting rights, the shareholder must notify both the company and the Federal Financial Supervisory Authority (BaFin) of this. This is to ensure transparency and equal treatment of investors and the functioning of the market.
Finally, a company can impose additional obligations on its shareholders in special cases. This includes, for example, a blocking period (lock-up period) after an IPO, during which the shares may not be sold by the shareholder. This is intended to prevent short-term profit-taking and the resulting price slumps.
Editorial office finanzen.net
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