Rethinking the control threshold in German takeover law

The mandatory bid regime under the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz - WpÜG) rests on an empirical premise that no longer corresponds to contemporary shareholder participation patterns in German listed companies. § 29(2) WpÜG defines control through a typified threshold of 30% of voting rights based on the assumption that a participation of 30% would, in most cases, confer a majority at shareholders' meetings. This would enable shareholders to replace the supervisory board and influence the company's strategy without having to convince the remaining shareholders. An empirical analysis of shareholder participation rates in Germany demonstrates that this assumption no longer holds. Even when only considering companies without a controlling shareholder, a shareholder with 30% of voting rights would have possessed a voting majority in fewer than one third of the observed meetings. The current control threshold of § 29(2) WpÜG is set too low relative to the empirical assumptions underlying its introduction. If the legislator intends the takeover law concept of control to approximate typical voting majorities at shareholders' meetings, a threshold of one third of the voting rights-as is set, e.g., in Switzerland-would correspond more closely to present participation patterns.