## Facts

- A German stock corporation operated a lumber business and a harbor operation; the harbor division later represented roughly 80% of the company’s total assets and the most valuable part of its business.
- The charter was amended to authorize forming subsidiaries and transferring operations to them; the board stated the amendment was intended to enable a spin-off of the harbor business into a newly formed entity.
- Without a shareholder meeting resolution, the management board formed a wholly owned subsidiary (a partnership limited by shares) and transferred the entire harbor operation (assets and liabilities) to the subsidiary as a contribution in kind, receiving all subsidiary shares in return.
- A minority shareholder sued seeking (i) a declaration that the transfer was void/impermissible, (ii) an order compelling re-transfer of the harbor business, and (iii) declaratory relief requiring the corporation to obtain its own shareholder approval (by the same qualified majority required for comparable measures) before taking certain measures at the subsidiary level, including subsidiary capital increases.
- The trial and appellate courts dismissed the action; on further review, the high court affirmed in part and reversed in part, granting limited declaratory relief as to future subsidiary capital increases.

## Issues

1. Whether corporate management must obtain a shareholder meeting decision for management measures not expressly assigned to shareholders by statute when the measure constitutes a severe interference with shareholders’ rights and interests (e.g., outsourcing the company’s most valuable business to a wholly owned subsidiary).
2. Whether an individual shareholder may obtain declaratory relief that a board measure is void/impermissible for lack of required shareholder involvement, including prospective declarations governing future subsidiary measures such as capital increases.

## Decision

- The court held that, exceptionally, management is obliged to submit certain fundamental management measures to the shareholder meeting when they severely interfere with shareholders’ rights and interests.
- The court rejected the shareholder’s claims seeking nullity/invalidity of the completed transfer and re-transfer of the harbor business.
- The court granted limited declaratory relief requiring the corporation to obtain shareholder meeting approval, by the majority required for a comparable measure at the parent level, before implementing capital increases in the wholly owned subsidiary (even if the subsidiary’s statutes authorized such increases), and to refrain from implementing them without such approval.
- The court recognized the admissibility of a shareholder’s declaratory action to challenge management acts allegedly taken beyond competence due to missing shareholder involvement.

## Legal Principles

- Although management generally runs the corporation independently, shareholder meeting involvement may be required for exceptional management measures that deeply affect shareholders’ rights and interests.
- A transaction’s economic and governance effect, including the scale of value shifted and the resulting reduction of shareholders’ direct influence (through interposition of a subsidiary), can trigger this exceptional shareholder-approval requirement even if the measure is not formally categorized as a statutory “structural” transaction.
- The statutory allocation of shareholder competences is not treated as exhaustive for all restructuring scenarios where management could otherwise bypass shareholder participation through group structuring.
- Shareholders may pursue declaratory relief to obtain a judicial determination that a management measure is impermissible for lack of required shareholder approval, and may obtain forward-looking declarations where future measures pose comparable interference risks.
- The doctrine does not create a general shareholder right to participate in ordinary management; it applies only to particularly weighty interventions.

## Conclusion

The court created an exception to management autonomy: when a restructuring effectively shifts the company’s core value into a subsidiary and substantially alters shareholders’ position, management may be required to obtain shareholder approval; while the completed transfer was not unwound, the parent was ordered to secure shareholder approval before implementing subsidiary capital increases that could further affect shareholder interests.


Holzmüller, 83 BGHZ 122 (BGH 1982)