Freitag, 16. November 2018

Request to amend the agenda for the Annual General Meeting on April 23rd, 2009 pursuant to sec. 122 (2) German Stock Corporation Act (Aktiengesetz - AktG)

The Consumer Protection Agency for Investors (VzfK) represents many shareholders of Volkswagen AG. In view of current events, the VzfK intends to request amendments to the agenda of the forthcoming Annual General Meeting on April 23rd, 2009 pursuant to sec. 122 (2) German Stock Corporation Act (AktG) as follows:

Appointment of a special representative pursuant to sec. 147 (1) and (2) sentence 1 German Stock Corporation Act (AktG) to assert damage claims against major shareholders and their responsible board members, as well as responsible members of the Board of Directors (Vorstand) and the Supervisory Board (Aufsichtsrat) of Volkswagen AG pursuant to sec. 317, 318, 117, 93, 116 German Stock Corporation Act (AktG), jointly and severally liable with regard to the non-utilization of authorized capital pursuant to sec 4 (4) and (5) of the Volkswagen articles since October 2008.

We call on other shareholders to join this request. For this purpose it is necessary that you give the VzfK this power of attorney and that your bank conveys us this bank confirmation.




Media reports, e.g. Frankfurter Allgemeine Zeitung (FAZ) of November 8th, 2008 headed „Alle verlieren, weil einer nicht fair spielt“ (“All lose, because one does not play fair”), uncovered dubious methods used by Porsche Automobil Holding SE („Porsche“) in its intransparent grab for power at Volkswagen Aktiengesellschaft (“VW”), which artificially boosted the share price of VW stock. The Board of Directors and the Supervisory Board of Volkswagen have not utilized the high share price and the extremely high demand for VW ordinary shares caused by intransparent option deals conducted by Porsche to earn billions by accessing the authorized capital provided for by the statutes. Therefore, the boards did not act in the company’s interest. The billions passed up could have been used to secure VW and to anti-cyclically expand its market position during the current global economic crisis and the particular slump in the automotive industry. The general meeting shall therefore be able to appoint a special representative to assert claims for compensation against board members and major shareholders as earnings in the billions through the utilization of authorized capital have not been generated. Any factual reasons, which required the non-utilization, are not recognizable in the slightest.

Assertion of damages in the billions

VzfK and many shareholders believe that the Board of Directors and the Supervisory Board deliberately and in breach of their fiduciary duties did not utilize the extraordinary stock market prize of VW ordinary shares to carry out a capital increase provided for by the statutes. The company’s interest demanded the utilization of the exceptional share price caused by Porsche’s derivative games as well as sufficient demand for VW ordinary shares despite the global bear market. Porsche’s press release at the end of October, disclosing its access to 74 percent of VW ordinary shares via direct holdings and cash settled options, let the price of VW ordinary shares skyrocket, peaking over € 1,000. The price explosion distorts the DAX 30 (blue chip stock market index consisting of the 30 major German companies) to this day (see the German newspaper Die Welt of February 19th, 2009, “Die irre VW-Aktie verzerrt den Dax bis heute” - the crazy VW shares distort the DAX up to now) and affects all other investors. Porsche utilized the price explosion to exercise its cash settled options and generated profits in the billions. Members of the VW Board of Directors seized the opportunity as well and generated € 25 million of speculation gain – 10 percent of which is supposed to be donated to charities generously. To benefit all shareholders, however, the boards of VW could have obtained liquidity and strengthened the equity base of VW; they could have eliminated the distortions induced in the major stock indices. The boards were even obliged to do so. VW itself would have been able to sanitize VW stock from the image of being a gambler’s investment.

Sec 4 (4) of the Volkswagen articles authorizes the management board – with the consent of the Supervisory Board - to increase the share capital until April 21st, 2009 by issuing new shares once or repeatedly up to a nominal amount of € 400 million. Shareholders must obtain a subscription right. Hence, 156,250,000 VW ordinary shares might have been issued. In November 2008, VW ordinary stock was always quoted above € 300, up to € 46,875 billion could have been generated trough a capital increase at an offering price of € 300. Even at an offering price of only € 200 per ordinary share, up to € 31.25 billion could have been obtained.

Sec. 4 (5) of the Volkswagen statutes enables the Board of Directors as well as the Supervisory Board to issue up to 35,156,250 voting shares until May 2nd, 2011. Prior resolution of the General Meeting is not necessary; subscription rights of shareholders can be barred. More than € 10 billion could have been generated at an offering price of € 300 per share. At an offering price of only € 200, up to € 7 billion could have been obtained at least.

Even with a substantial placement discount billions of Euros could have been collected at the beginning of the most serious crisis in the automotive industry in decades, the end of this crisis not being predictable. A capital increase satisfies the escalated demand for VW voting shares. All shareholders and employees would benefit from the revenues, stock trading of VW voting shares would get back to normal. The revenues attained by a capital increase could

  • avoid availment of unnecessary and blemishing government aid for the VW-Bank at the expense of tax payers; VW itself could raise sales by attractive funding support;
  • sustain the highly qualified staff without short-time work;
  • fund further research in pioneering and alternative technologies to emerge as a winner of the crisis;
  • facilitate acquisition of stock in ailing automotive component suppliers such as Continental or Schaeffler to ensure the supply of key components;
  • attain interesting assets in competing competitors such as Opel, Saab, or even BMW or Daimler subject to anti-trust clearance to participate in the ongoing shakeout and thereby consolidate its own position in the market;
  • maintain comfortable liquidity and capitalization to provide flexibility during the crisis and thus secure a competitive advantage over all competitors worldwide.

All these measures would benefit VW, i.e. preferred and ordinary shareholders, employees and taxpayers. There are simply no good reasons not to utilize the authorized capital. The claim for government aid proves that VW has difficulties to refund itself due to the economic downturn. During the last six months, VW was probably one of the few companies in the world that would have been able to place a capital increase on reasonable terms. Therefore, the Board of Directors and the Supervisory Board could not and cannot exercise any discretion to conduct a capital increase. Discretion might only be exercised with regard to the terms and conditions, e.g. the amount of increase or the offering price. Despite earlier calls on corporate action by large investors (see manager-magazin online of December 18th, 2008, „Großanleger drängen auf Kapitalerhöhung” – major investors press for capital increase), the VW boards did not initiate any corporate action nor did they even comment on these calls in public.

The boards missed a unique opportunity to raise up to € 46 billion (subscription rights granted), respectively more than € 10 billion (subscription rights barred) through a capital increase. Only major shareholders can be interested not to seize even a small profit out of a limited capital increase. Due to its extensive option games and the shortage of VW ordinary stock induced by these deals, Porsche intended to benefit merely by itself. Furthermore, the two current major shareholders apparently did not want their voting shares to be diluted by a capital increase. Nevertheless, such or similar motives must be irrelevant for the boards resolving about a capital increase. The Board of Directors and the Supervisory Board must align themselves only with the interests of VW. Particular interests of major shareholders must be ignored. Any infringement by the members of the boards makes them liable for damages, sec. 93, 116, 318 German Stock Corporation Act (AktG). Major shareholders or their representatives, who pursue their own interests to the detriment of VW, are jointly and severally liable, sec. 317 and 117 German Stock Corporation Act (AktG).

Independent special representative required

VzfK strongly recommends the appointment of a special representative for the enforcement of claims for damages related to the incurred disadvantages and damages. The minority right to appoint a special representative in accordance with sec. 147 AktG is based on the legislative view that based upon experience it cannot be expected that the Board of Directors asserts claims for damages against major shareholders or board members of its own company. Experience also shows, that neither the competent bodies nor auditors’ control, the auditors having an economic interest to be mandated for future audits or for lucrative consulting services in group companies, can safeguard the rights and interests of the minority shareholders effectively. The special representative on the other hand exercises the interests of the company objectively; he acts in the interests of all shareholders as he is not subject to any conflicts of interest.

The appointment of a special representative at DIS AG is a successful example. The special representative reported at the general meeting in 2007 that the Board of Directors had acted in the interest of the major shareholder and to the other shareholders’ detriment and thus had caused a concrete threat to the assets of the company. Although the boards of DIS AG always stressed the legality of the relevant measures in the past, and the auditors did not object to the related party report (Abhängigkeitsbericht), DIS AG and its major shareholder practically acknowledged the negative effects of the measures almost immediately after the investigation of the special representative by recognizing broad compensation obligations of the major shareholder. This example shows the importance of a special representative, particularly as an objective supervisory body in dependent companies.

Pursuant to sec. 147 German Stock Corporation Act (AktG) the appointment of the special representative requires a majority at the annual general meeting. However, the decision in the extraordinary general meeting is not unattainable as major shareholders are barred from voting in case claims for damage are raised against them, sec. 136 German Stock Corporation Act (AktG). Thus, for us, the minority shareholders, a very realistic and feasible way to appoint a special representative exists. Only if minority shareholders actively defend their interests and exercise their statutory minority rights, they can protect themselves against the scrupulous exercise of power by the major shareholders, who act on the basis of their stake in ordinary shares without any domination agreement as unique “owner” of the company.

The special representative has broad powers to further investigate the factual background of the damage claims and is required to enforce those in court. Therefore, disadvantages incurred due to the non-use of the authorized capital pursuant to Sec. 4 (4) of the statutes up to April 21st, 2009 can be enforced in the interest of the company and its minority shareholders. Claiming damages from major shareholders, from their representatives and from the responsible Board members of VW might also remind competent boards to act in the interests of all shareholders in the future. Decisions about the utilization of authorized capital acc. to sec. 4 (5) of the Volkswagen Statutes, being in force until May2nd, 2011, might be made in accordance with the law, the competent bodies’ personal liability discarding particular interests of major shareholders.

195,313 VW shares required for motion; many commitments already received

The amendment to the agenda of the general meeting requires 5 percent of the statutory capital of the company or the proportionate amount of € 500,000, sec. 122 (2) German Stock Corporation Act (AktG). The minimum quorum required by law equals 195,313 VW shares. Attention should be paid to the fact that preference shares are equal to ordinary shares in order to meet the required quorum. The supporting shareholders must have possessed the shares for at least three months though.

So far, the VzfK has received proxies or equivalent commitments from numerous shareholders. In other cases the VzfK was able to organize the required quorum for general meetings in this way. VzfK is confident that it will succeed at VW, too. Therefore we ask all shareholders of VW to support the amendment of the agenda for the next ordinary general meeting. Appropriate powers of attorneys shall be sent to the VzfK; a sample is available at the webpage.