Last Updated on May 29, 2021 by LawEuro
Stock Corporation Act (Laws / Regulations of Germany)
Chapter 3
Measures serving the reduction of capital
Subchapter 1
Ordinary capital reduction
Section 222
Pre-requisites
(1) A reduction of the share capital may be resolved upon only by a majority amounting to at least three quarters of the share capital represented at the time such resolution is adopted. The by-laws may stipulate a greater majority ratio of capital and may impose further requirements.
(2) Where several classes of stock exist of shares with voting rights, the resolution adopted by the general meeting shall require the consent of the stockholders of each class of stock in order to be valid. The stockholders of each class of stock are to adopt a separate resolution regarding such consent. Subsection (1) shall apply to such separate resolution.
(3) The resolution is to specify the purpose for which the reduction is being performed, namely whether parts of the share capital are to be repaid.
(4) In the case of companies with par-value shares, the reduction of the share capital shall require the nominal amount of the shares of stock to be reduced. Inasmuch as the portion of the reduced share capital allocated to the individual share of stock would fall below the minimum amount pursuant to section 8 (2), first sentence, or subsection (3), third sentence, the reduction shall be implemented by way of a merger of the shares of stock. The resolution adopted must state the nature of the reduction.
Section 223
Application for entry in the register of the resolution
The management board and the chairman of the supervisory board are to file an application for entry of the resolution as to the reduction of the share capital in the Commercial Register.
Section 224
Entry into force of the capital reduction
Upon the resolution as to the reduction of the share capital having been entered in the register, the share capital shall have been reduced.
Section 225
Protection of creditors
(1) Security is to be provided to those of the creditors whose claims have arisen prior to publication of the notice as to the resolution having been entered in the register, provided they come forward for this purpose within six (6) months of the notice, unless they are able to demand satisfaction of their claims. This right is to be indicated to the creditors in the publication by notice of the respective entry. Those creditors shall not be entitled to demand provision of security who are entitled to preferred satisfaction of their claims, in the event of insolvency, out of covering funds that were created for their protection pursuant to the stipulations of the law and that are monitored by the state.
(2) Payments may be made to the stockholders on the basis of the reduction of the share capital only once six (6) months have lapsed since notice of the entry in the register was published and after those creditors who have come forward in due time have been granted satisfaction or provided security. A release of the stockholders from the duty to make contributions shall not enter into force prior to the point in time specified, nor shall it enter into force prior to those creditors having been granted satisfaction or provided security who have come forward in due time.
(3) The right of creditors to demand provision of security is independent of whether payments are made to the stockholders on the basis of the reduction of the share capital.
Section 226
Invalidation of shares of stock
(1) Where shares of stock are to be merged by way of being exchanged, by stamping the share certificates, or by some other procedure, in order to implement the reduction of the share capital, the company may declare invalid those shares of stock, the certificates of which were not produced to it in spite of a corresponding call having been made. The same shall apply to share certificates that have been so produced, the number of which is not at least equivalent to the number required for the replacement by new share certificates and that are not available to the company to be realised for the account of the parties involved.
(2) The call to produce the share certificates shall include a warning that they may otherwise be invalidated. The invalidation is subject to the pre-requisite of the call having been published by notice in the manner stipulated in section 64 (2) for the period of grace. The invalidation shall be effected by notice in the company’s publications of record. The notice shall designate the invalidated shares of stock such that it is readily apparent from the notice whether or not a share of stock has been invalidated.
(3) The company is to sell the new shares to be issued by way of replacing the invalidated shares without undue delay for the account of the parties involved at the stock exchange price and, should no stock exchange price exist, the company is to sell the shares of stock at public auction. If a public auction at the company’s seat does not hold out reasonable prospects of success, the shares of stock are to be sold at a suitable location. The time and location of the sale at public auction as well as the items to be sold at same are to be published by notice. The parties involved are to be notified separately; the notification may be refrained from if it is not expedient. The publication by notice and the notification must be issued at least two (2) weeks prior to the sale at public auction. The proceeds are to be paid out to the parties involved or, should a right to deposit exist, to be so deposited.
Section 227
Application for entry in the register of the implementation
(1) The management board is to file an application for entry in the Commercial Register of the fact that the reduction of the share capital has been implemented.
(2) The application for entry in the register, and entry in same, of the reduction of the share capital having been implemented may be tied to the application for entry in the register, and entry in same, of the resolution adopted as to the reduction.
Section 228
Reduction below the minimum nominal amount
(1) The share capital may be reduced to an amount below the minimum nominal amount stipulated by section 7 if this amount is once again reached by a capital increase that is resolved upon concurrently with the capital reduction and in the context of which no contributions in kind have been specified.
(2) The resolutions shall be null and void if they, and the implementation of the increase, have not been entered in the Commercial Register within six (6) months following the resolution having been adopted. The period shall be tolled for as long as an action for avoidance or an action for annulment is pending. The resolutions and the implementation of the increase of the share capital should be entered in the Commercial Register only jointly.
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