Non-voting preference shares under section 12a AktG: cumulative dividend preference, the one-third cap and restoration of voting rights after arrears.
Non-voting preference shares combine a preferred participation in profits with a voting exclusion that can apply for a period of time. Under section 12a AktG, the preference must provide for payment of arrears. Apart from voting rights, the preference shares carry the rights that arise from the share for every shareholder. Two statutory limits are central: these shares may make up no more than one third of the share capital, and an unpaid preference arrear restores voting rights when it is not paid alongside the full preference for the following year. The articles of association, the issue resolution and the profit allocation resolutions must therefore use the same class and payment logic.
The preference under section 12a AktG is payable in arrears. If the preference amount is not paid or is only partly paid for a financial year, an arrear arises. The company should record that amount for each year separately. A general statement that a dividend is outstanding does not provide enough detail for the next distribution review.
The following year requires two figures to be considered together: the full preference for the new year and the arrear from the prior year. The arrear is cleared only when it is paid in addition to the full preference for the current year. The profit allocation resolutions and actual payment flows should show which amount satisfies which part of the claim.
The annual accounts, profit allocation resolution, dividend calculation and payment record belong in one file for the arrears review. If there are several preference issues or different issue dates, the schedule should also identify the affected shares. This makes it possible to determine whether an arrear has been fully cleared.
If the arrear is not paid in the following year alongside the full preference for that year, section 12a(2) AktG gives the preference shareholders voting rights. Those rights continue until the arrears are paid. The legal consequence therefore follows the actual development of the arrear and the payments made.
Before a general meeting, the company should check the arrears position both when the meeting is called and before resolutions are adopted. The attendance and voting lists must reflect the relevant share class. The meeting materials should also show which preference shareholders have voting rights at that point in time.
Payment of an arrear changes the voting position for the arrear that has been cleared. A partial payment requires an allocation to the relevant arrears and a separate check that the full current preference has also been paid. The records should show the amount and date of each step in this transition.
The review should bring together the current articles and all amendments, the issue resolution, the preference share terms and the share register. Add the annual accounts, profit allocation resolutions, dividend calculations and payment records. For a capital measure, compare the previous and new capital structure as well.
The review follows four questions: What preference amount was due for each year? What amount was resolved and actually paid? Which arrear remained after payment? Did the following year pay the old arrear in addition to the full current preference? This sequence shows whether voting rights are excluded or may be exercised again.
A resolution adopted with an inaccurate voting list can create a separate dispute. The article on a full shareholders’ meeting without notice concerns a different corporate situation, yet it illustrates the importance of participation, the resolution subject and proof. For an AG, the voting entitlement of preference shareholders must remain traceable from the arrears schedule.
The voting exclusion can be provided for under section 12a AktG for preference shares with a cumulative profit preference. If an arrear is not paid in the following year alongside the full preference for that year, the preference shareholders have voting rights until the arrears are paid.
Section 12a(2) AktG limits the issue to up to one third of the share capital. The specific calculation must bring together the share capital, number of shares, nominal value and the planned preference share class.
Voting rights return when the preference amount for one year was not paid or was only partly paid and the arrear is not paid in the following year in addition to the full preference for that year. The rights continue until the arrears are paid.
For non-voting preference shares, start with a yearly schedule showing the preference amount, payment, arrear and later payment. Then compare the articles, issue resolution, profit allocation resolutions and payment records using the same terms and amounts. The schedule should also show whether the one-third share capital cap is respected.
For a legal review, prepare the articles, share terms, share register, annual accounts, resolution minutes and payment records. We can classify the arrears claim, assess the current voting position and identify which documents should be adjusted before the next resolution. New articles and legal updates are available through BRANDaktuelle Rechtsnews.
Review and structure GmbH articles with Brandauer Rechtsanwälte in Austria.
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