Frank Schröder

Frank Schröder
Director, Head of Marketing & Communications

Büro Dusseldorf
+49 211 6901-1200

Update: Related Party Transactions and the implementation of the Second Shareholders' Rights Directive in German stock corporation law

BTadvice 2020-Q1

On November 29, 2019, the German Federal Council adopted the Act implementing the Second European Shareholders' Rights Directive in German stock corporation law. The law just recently came into force on January 1, 2020. All public stock corporations established under the German Stock Corporation Act (Aktiengesetz) as well as their managing directors and officers are well advised to pay full attention to the relevant legislative changes when conducting transactions between related parties, i.e. legal entities and individuals ("Related Party Transactions").

Some of the new legislative situation's cornerstone details to be taken into account are as follows:

  1. The new provisions in German stock corporation law - i.e. all legislative changes affecting the execution of Related Party Transactions - apply immediately without restriction, i.e. since the law came into force on January 1, 2020.
  2. The threshold value relevant for the entire new catalogue of obligations’ activation is 1.5 percent (of the sum of fixed and current assets according to the most recent annual or consolidated financial statements), instead of the 2.5 percent threshold originally envisaged for this purpose.
  3. Related party transactions, which are, however, carried out in the ordinary course of business and at arm's length, are considered to be completely exempt from the new catalogue of obligations under Articles 107 and 111a to 111c of the German Stock Corporation Act.

The adjustment of already existing internal procedures - including the aforementioned aspects of the amendments to the law - as well as the first-time implementation of such processes in the company’s day-to-day business is recommended for every listed stock corporation - in particular for those regularly conducting Related Party Transactions in excess of the adopted catalogue of obligations’ threshold value.