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Squeeze-out

Are most of your company’s shares held by a single owner? Are the costs of listing on the stock exchange no longer proportional to the benefits? In the form of squeeze-outs, the legislator has given companies an instrument for forcing minority shareholders to transfer their shares to the majority shareholder against their will. The prerequisite for a squeeze-out is that the majority shareholder holds at least 95 per cent of the shares and that a squeeze-out of the minority shareholders was decided at the annual stockholders meeting. The procedure is based on §§327a–327f of the AktG and can be implemented by both a public limited company (AG) and a partnership limited by shares (KGaA).

The shareholder must be paid a reasonable sum in compensation, typically as cash compensation. Additionally, the stockholder can be offered shares in other companies. The BGH has issued a very detailed statement on assessing the compensation amount as this has typically been a matter of dispute between the majority and minority shareholders in the past. The fair market value of the share is authoritative here. Initially, the share price must be considered for calculating the compensation sum. However, the share price is typically not particularly meaningful due to the low trading volume of the share. In these cases, the majority shareholder tasks an auditor with an evaluation of the company as per IDW S1. The appropriateness of the compensation is then verified by an independent auditor to be appointed by the court. Minority shareholders who consider the compensation to be too low are entitled to seek arbitration. BDO has experience from many squeeze-outs; we are happy to support you in the role of an evaluator or as an independent auditor.

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