Response to consultation on joint Guidelines for the prudential assessment of acquisitions of qualifying holdings
Go back
The size of the holding should be calculated solely by attributing capital and voting rights using the control criterion. We understand this to mean the question of whether control over the target undertaking can actually be exercised via the chain of cascading holdings.
The control criterion can be used to sensibly limit the number of persons subject to the notification obligation. Insofar as the target undertaking is subject to influence from other quarters, this can be captured via the additional criterion of significant influence.
By contrast, if the multiplication criterion (Option B) is used, in which only the indirect holdings in the target undertaking are calculated, we see the danger that qualifying holdings in the financial sector in excess of 10% will have to be notified even though it may not actually be possible to exercise control. Where the acquirer has a complex corporate structure, a large number of companies that, in practice, cannot exert any influence on the target undertaking would be included in the notification obligation. We wish to stress that these target undertakings would also not even have to be reported as equity investments under the current accounting rules. Equity investments are interests held in undertakings amounting to at least 20% of the nominal capital. This means that it may not be possible to even identify an equity investment in a target undertaking from publicly available sources.
In addition, German law does not offer any legal basis for a right on the part of the person subject to the notification obligation to obtain information from a minority interest (generally less than 50% of the voting shares) where the latter intends to acquire a qualifying holding in a target undertaking. As a result, the reporting requirements may not be met in full by a person subject to the notification obligation whose qualifying holding in the target undertaking is held via a minority interest.
Furthermore, the ability to obtain information via the target undertaking is significantly impeded by the provisions of German company law (cf., among other things, section 53a of the German Stock Corporation Act (AktG) “Equal Treatment of Shareholders” in conjunction with section 131(4) of the AktG “Shareholders’ Right of Information”) where a minority interest in the form of a listed stock corporation intends to acquire a qualifying holding in the financial sector. It is not only the minority interest that intends to directly acquire the shares that is obliged to submit a notification but also the shareholder of the minority interest, since this shareholder would indirectly hold a qualifying holding in the financial sector as a result of the proposed acquisition. Information acquired as a result of a supervisory board mandate by e.g. senior managers of the person subject to the notification obligation may not be passed on to the shareholder (cf. section 116 sentence 2 of the AktG “Duty of Care and Responsibility of Members of the Supervisory Board”).
If the approach chosen were to be based on calculating the capital, we believe that the number of notifications would increase substantially. Due to the fundamental difficulties relating to the procurement of information on the target undertaking, the persons subject to the notification obligation would inevitably risk infringing the notification obligation in those cases in which the shares are held indirectly via minority interests, since the lack of information would mean that the relevant notifications of their intention could not be submitted to the supervisors responsible for the target undertakings, or could not be submitted in time. We object strongly to this. Moreover, it is not clear how exactly the combination of calculation and control is to be implemented.
Question 2. Do you consider the level of detail used in the draft Guidelines to be appropriate?
We think that, on the one hand, the level of detail e.g. in Annex I is extremely high. The existing exceptions should be extended further; for further details, see our remarks on Question 1). On the other hand, the list of indicators used to determine whether significant influence exists (see Question 1, II. 1. b) is too general; to this extent, greater detail or more concrete specification would be desirable.Question 3. Which approach identified above do you consider to be the most appropriate, Option A or Option B? Please explain your answer.
We are in favour of Option A (control). An indirect qualifying holding should only exist if the indirect acquirer has control via the acquirer.The size of the holding should be calculated solely by attributing capital and voting rights using the control criterion. We understand this to mean the question of whether control over the target undertaking can actually be exercised via the chain of cascading holdings.
The control criterion can be used to sensibly limit the number of persons subject to the notification obligation. Insofar as the target undertaking is subject to influence from other quarters, this can be captured via the additional criterion of significant influence.
By contrast, if the multiplication criterion (Option B) is used, in which only the indirect holdings in the target undertaking are calculated, we see the danger that qualifying holdings in the financial sector in excess of 10% will have to be notified even though it may not actually be possible to exercise control. Where the acquirer has a complex corporate structure, a large number of companies that, in practice, cannot exert any influence on the target undertaking would be included in the notification obligation. We wish to stress that these target undertakings would also not even have to be reported as equity investments under the current accounting rules. Equity investments are interests held in undertakings amounting to at least 20% of the nominal capital. This means that it may not be possible to even identify an equity investment in a target undertaking from publicly available sources.
In addition, German law does not offer any legal basis for a right on the part of the person subject to the notification obligation to obtain information from a minority interest (generally less than 50% of the voting shares) where the latter intends to acquire a qualifying holding in a target undertaking. As a result, the reporting requirements may not be met in full by a person subject to the notification obligation whose qualifying holding in the target undertaking is held via a minority interest.
Furthermore, the ability to obtain information via the target undertaking is significantly impeded by the provisions of German company law (cf., among other things, section 53a of the German Stock Corporation Act (AktG) “Equal Treatment of Shareholders” in conjunction with section 131(4) of the AktG “Shareholders’ Right of Information”) where a minority interest in the form of a listed stock corporation intends to acquire a qualifying holding in the financial sector. It is not only the minority interest that intends to directly acquire the shares that is obliged to submit a notification but also the shareholder of the minority interest, since this shareholder would indirectly hold a qualifying holding in the financial sector as a result of the proposed acquisition. Information acquired as a result of a supervisory board mandate by e.g. senior managers of the person subject to the notification obligation may not be passed on to the shareholder (cf. section 116 sentence 2 of the AktG “Duty of Care and Responsibility of Members of the Supervisory Board”).
If the approach chosen were to be based on calculating the capital, we believe that the number of notifications would increase substantially. Due to the fundamental difficulties relating to the procurement of information on the target undertaking, the persons subject to the notification obligation would inevitably risk infringing the notification obligation in those cases in which the shares are held indirectly via minority interests, since the lack of information would mean that the relevant notifications of their intention could not be submitted to the supervisors responsible for the target undertakings, or could not be submitted in time. We object strongly to this. Moreover, it is not clear how exactly the combination of calculation and control is to be implemented.
Question 4. Would you propose a different test for assessing whether a qualifying holding is being acquired indirectly? Please explain your answer.
We consider the control criterion to be a sensible approach to determining the acquirer of an indirect qualifying holding subject to the notification obligation. Additionally, we would refer in this context to our answer to question 3.Upload files
Comments GBIC JC-CP-2015-003.pdf
(84.3 KB)