Mon, Jan. 19, 2004

Bill To Facilitate Shareholder Suits

SW - Washington.   On January 19, 2004, the Federal Ministry of Justice (Bundesjustizministerium) proposed a new law to facilitate shareholder suits brought against the management board and the supervisory board of a corporation. The proposed law is designed to broaden minority rights of shareholders.

As prerequisite for a suit, a shareholder would need to have a minimum amount of shares of one percent of the basic capital or shares of an actual trading value of 100,000 Euro. The rights of shareholders in the general meeting, however, would be restricted. As a measure to prevent frivolous shareholder suits, claims for damages would have to be certified in an admission procedure in order to proceed to trial.

As as a balance to the extension of shareholder rights, the proposed law suggests to accord discretion to the management board as long as the business decision is made on an informed and diligent basis. Moreover, liability is restricted to gross negligence and intent. An example for a case when liability is not excluded is the event that a member of the management board of a bank publicly provides information about the creditworthiness of a client, and the bank, in consequence, is exposed to claims for damages.

The Federal Ministry of Justice is planning to go forward with the legislative project before the summer break.

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