Delisting Rules in the Context of Corporate Governance – Can the Protection of Shareholders be Effected by a Competition of Listing Rules or are State-made Provisions Required?
In Germany, the delisting of stock corporations from the stock exchange has been subject to an intense legal discussion within the last 15 years. Is a resolution by the shareholder meeting required beforehand or is a simple management decision to delist sufficient? As the investor is losing the opportunity to conveniently sell his stocks, do we need a protective statutory provision? E.g.: Is the company obligated to pay adequate consideration as it is the case in European Takeover provisions? Or do we at least need a lock wait between the decision of the management to delist the company and the execution of the delisting, in which shareholders can sell their stocks? For a long time, Germany had no statutory rules regarding a delisting besides the varying regulations of each stock exchange. After the competition between the eight German stock exchanges lead to problematical results as we saw a “race to the bottom”, the Federal Court of Justice (FCJ) improved investor protection and ruled on the Corporate Governance aspects of a delisting as well. The FCJ later overruled this judgement. Since the German legislator feared a steep plunge of the stock price after the announcement of an upcoming delisting, he recently decided to strengthen investor protection by regulating the delisting. However, he denied the right of the shareholder meeting to decide. The lecture will discuss this development in Germany, compare it with the delisting rules in other countries and will try to place this discussion in the context of Corporate Governance as an example of the debate between a soft-law-approach based on the competition of listing rules and a paternalistic, state-made solution.