The Act Implementing the Shareholder Rights Directive II (ARUG II) came into force on January 1, 2020. The regulations on related party transactions (RPT), applicable in companies listed on the regulated market, have been in force without any transitional provisions since January 1, 2020 – reason enough to take a closer look at these regulations and provide an overview of some important points.
A transaction with related parties requires the prior approval of the Supervisory Board if the economic value of the transaction alone or together with transactions carried out within the current financial year exceeds 1.5% of the sum of fixed and current assets.
If several transactions are aggregated, only the transaction that exceeds the 1.5 % threshold requires approval. Previous transactions below the threshold do not require approval.
In practice, difficulties arise when calculating the 1.5 % threshold. The explanatory memorandum to the Act states: “Transactions for which approval has already been granted are not to be taken into account in the aggregation process. The aggregation then begins anew until the end of the fiscal year“. This would mean that only the transaction exceeding the threshold would be subject to approval, but not the next transaction if its value in itself is below the 1.5 % threshold. This does not seem compatible with the wording of Section 111b of the German Stock Corporation Act. According to this, the decisive factor is whether the economic value “together with the transactions carried out within the current financial year” exceeds the threshold. If one were to apply this wording, one would conclude that the next transaction is also subject to approval, even if its value in itself does not reach the threshold of 1.5 %. There is therefore currently a lack of clarity in a point that is very important in practice.
Further information on this topic can be found in the February 2020 issue of HV-Magazin: https://www.goingpublic.de/wp-content/uploads/epaper/2020_01_HV-Magazin/#30