The disclosures required under takeover law as specified by sections 289(4) and 315(4) of the Handelsgesetzbuch (HGB – German Commercial Code) are presented in the following.
On December 31, 2008, the share capital of Volkswagen AG amounted to €1,024,405,726.72 (previous year: €1,015,233,400.32); it was composed of 294,920,207 ordinary shares and 105,238,280 preferred shares. Each share conveys a notional interest of €2.56 in the share capital.
Shareholder rights and obligations
Shareholders have pecuniary and administrative rights. The pecuniary rights include in particular the right to participate in profits (section 58(4) of the Aktiengesetz (AktG – German Stock Corporation Act)), to participate in liquidation proceeds (section 271 of the AktG) and preemptive rights on shares in the event of capital increases (section 186 of the AktG). Administrative rights include the right to attend the Annual General Meeting and the right to speak there, to ask questions, to propose motions and to exercise voting rights. Shareholders can enforce these rights in particular through actions seeking disclosure and actions for avoidance.
Each ordinary share grants the holder one vote at the Annual General Meeting. The Annual General Meeting elects shareholder representatives to the Supervisory Board and elects the auditors; in particular, it resolves the appropriation of net profit, formally approves the actions of the Board of Management and the Supervisory Board, resolves amendments to the Articles of Association, capitalization measures, authorizations to purchase treasury shares and, if required, the conduct of a special audit; it also resolves premature removal of Supervisory Board members and the winding-up of the Company.
Preferred shareholders generally have no voting rights. However, in the exceptional case that preferred shareholders are granted voting rights by law (for example, when preferred share dividends were not paid in one year and not compensated for in full in the following year), each preferred share also grants the holder one vote at the Annual General Meeting. Furthermore, preferred shares entitle the holder to a €0.06 higher dividend than ordinary shares (further details on this right to preferred dividends are specified in Article 28(2) of the Articles of Association).
The Gesetz über die Überführung der Anteilsrechte an der Volkswagenwerk Gesellschaft mit beschränkter Haftung in private Hand (VW-Gesetz – Act on the Privatization of Shares of Volkswagenwerk Gesellschaft mit beschränkter Haftung) of July 21, 1960 contained in the version amended in 1970 included various provisions in derogation of the Aktiengesetz (AktG – German Stock Corporation Act), for example on exercising voting rights by proxy (section 3 of the VW-Gesetz), on majority requirements (section 4(3) of the VW-Gesetz) and on restrictions on voting rights (section 2(1) of the VW-Gesetz) when resolutions are adopted by the Annual General Meeting. Furthermore, it included provisions governing the right of the German federal government and the State of Lower Saxony to appoint shareholder representatives (section 4(1) of the VW-Gesetz) to the Supervisory Board. The Articles of Association of Volkswagen AG also include similar provisions.
On October 23, 2007, the European Court of Justice (ECJ) ruled that the Federal Republic of Germany had breached its obligations under Article 56(1) of the EC Treaty (restrictions on the movement of capital) by retaining section 4(1) and section 2(1) in conjunction with section 4(3) of the VW-Gesetz applicable at that time.
Following this ruling by the ECJ, the Federal Republic of Germany was obliged in accordance with Article 228 of the EC Treaty to remedy its breach of Community law. In December 2008, the German legislature accordingly lifted the restrictions on voting rights (section 2(1)) and the rights to appoint shareholder representatives (section 4(1)) in the VW-Gesetz. The European Commission, however, is of the opinion that the majority requirements included in section 4(3) of the VW-Gesetz should also have been revoked.
As the Articles of Association of Volkswagen AG include provisions that conform to the wording of the three provisions of the VW-Gesetz reviewed by the European Court of Justice, Porsche Automobil Holding SE proposed a motion at the Annual General Meeting of Volkswagen AG held on April 24, 2008 that these rules be deleted. Hannoversche Beteiligungsgesellschaft mbH proposed an alternative motion that only the rights to appoint shareholder representatives and the restrictions on voting rights be deleted. Neither motion was approved by the required majority at the Annual General Meeting, not least because each of the parties proposing the motions voted against the motion proposed by the other party. Although the Supervisory Board then resolved at the meeting it held on September 12, 2008 to delete the rights to appoint shareholder representatives and the restrictions on voting rights from the Articles of Association, the commercial register responsible for Volkswagen AG at the Braunschweig Local Court refused to enter this resolution in the commercial register. At the time of printing this Annual Report, the Regional Court in Braunschweig, which is responsible for such matters, had not ruled on the objection filed by the Company to this decision.
Along with Porsche Automobil Holding SE, the State of Lower Saxony, Hannoversche Beteiligungsgesellschaft mbH and various other shareholders, Volkswagen AG has instituted a number of legal proceedings to determine the extent to which the aforementioned provisions in the Articles of Association were deleted at the Annual General Meeting held on April 24, 2008 and/or at the meeting of the Supervisory Board held on September 12, 2008. On November 27, 2008, the Regional Court in Hanover decided that the ruling dated October 23, 2007 by the ECJ did not include the requirement for greater majorities to adopt special resolutions at Annual General Meetings (section 4(3) of the VW-Gesetz) as also being in breach of the EC Treaty. Even if such a breach had been declared, the Regional Court doubted whether this meant that the requirement for greater majorities to adopt special resolutions at Annual General Meetings, as stipulated in the Articles of Association (article 26(2) of the Articles of Association), would not be effective. The Court ruled that the motion proposed by Hannoversche Beteiligungsgesellschaft had been approved. The action brought by Porsche Automobil Holding SE to obtain a ruling that the motion it had proposed at the time had been approved was, however, rejected. Both rulings are now subject to appeal. The Higher Regional Court in Celle, acting as court of appeal, had not given its ruling at the time of printing of this Annual Report.
Shareholdings exceeding 10% of voting rights
Composition of the Supervisory Board
The Supervisory Board consists of 20 members, half of whom are shareholder representatives elected by the Annual General Meeting. The other half of the Supervisory Board consists of employee representatives elected by the employees in accordance with the Mitbestimmungsgesetz (German Codetermination Act). A total of seven of these employee representatives are Company employees; the other three employee representatives on the Supervisory Board are representatives of the trade unions. The Chairman of the Supervisory Board, generally a shareholder representative on the Supervisory Board who is elected by his Supervisory Board colleagues, has a casting vote in the Supervisory Board, in accordance with the Mitbestimmungsgesetz (German Codetermination Act).
Statutory requirements and requirements of the Articles of Association with regard to the appointment and removal of Board of Management members and to amendments to the Articles of Association
The appointment and removal of members of the Board of Management are governed by sections 84 and 85 of the AktG, whereby members of the Board of Management are appointed by the Supervisory Board for a maximum of five years. Board of Management members may be reappointed or have their term of office extended for a maximum of five years in each case. In addition, Article 6 of the Articles of Association states that the number of Board of Management members is stipulated by the Supervisory Board and that the Board of Management must consist of at least three persons.
Powers of the Board of Management, in particular concerning the issue of new shares and the repurchase of treasury shares
According to German stock corporation law, the Annual General Meeting can, for a maximum of five years, authorize the Board of Management to issue new shares. It can also authorize the Board of Management, for a maximum of five years, to issue convertible bonds on the basis of which new shares are to be issued. The Annual General Meeting also decides the extent to which shareholders have preemptive rights for the new shares. The highest amount of authorized share capital or contingent capital available for these purposes is determined by Article 4 of the Articles of Association of Volkswagen AG, as amended.
Opportunities to acquire treasury shares are governed by section 71 of the AktG. At the most recent Annual General Meeting in Hamburg on April 24, 2008, the Board of Management was authorized, in accordance with section 71(1) no. 8 of the AktG and with the consent of the Supervisory Board, to acquire ordinary shares and/or non-voting preferred shares of Volkswagen AG on one or more occasions, up to a maximum of 10% of the share capital – i.e. up to a maximum of 39,660,097 shares – via the stock market or by way of a public purchase offer to all shareholders. This authorization came into effect on October 20, 2008 and applies until October 24, 2009. Details on the issue of new shares and their permitted uses may be found in the Notes to the Volkswagen Consolidated Financial Statements in chapter .
Material agreements of the parent company that take effect in the event of a change of control following a takeover bid
On June 14, 2005, a banking syndicate granted Volkswagen AG a syndicated credit line initially amounting to €12.5 billion until June 2012, which was reduced to €10.0 billion in 2007. In the event of an individual shareholder gaining control of Volkswagen AG (as defined in the EU Merger Regulation), the agreement grants each of the members of the syndicate the right to terminate their portion of the credit line prematurely.
Once Porsche Automobil Holding SE had announced such an increase in its equity interest in September 2008, a number of syndicate members took advantage of their right to terminate their portion of the credit line, which accordingly reduced to €7.8 billion. Agreement was reached with the remaining syndicate members whereby they have the right to terminate their portion of the credit line with immediate effect in the event of a control and profit transfer agreement being signed between Porsche Automobil Holding SE and Volkswagen AG and to require repayment of any amounts drawn down. In view of the significance of the signing of such an intercompany agreement, it was appropriate to agree such a right of termination.