08-07-2026 Article

New challenge to the simplified exclusion of subscription rights – retroactive dividend entitlement called into question?

A capital increase by a listed German stock corporation (Aktiengesellschaft) out of authorised capital with a simplified exclusion of subscription rights is a proven model. Since 1994, listed stock corporations have been able to carry out capital increases excluding subscription rights with legal certainty, provided that clearly defined requirements are met. Where the relevant authorised capital is available, a limited amount of equity capital can thereby be raised on the capital market within a matter of days, enabling to cover short-term capital requirements to be covered and to use favourable market conditions. Pursuant to section 186(3), sentence 4 of the German Stock Corporation Act (AktG), this requires the new shares to be issued against cash contributions and the issue price of the new shares not to be materially below the stock market price. The volume of such a capital increase was originally limited to 10 % of the existing share capital. This statutory rule does not require a substantive justification for the exclusion of subscription rights, since the wording of the statute expressly provides that the exclusion is “in particular” permissible where these requirements are met. The Future Financing Act (Zukunftsfinanzierungsgesetz – ZuFinG) even increased the permissible amount to 20 % of the share capital at the end of 2023.

Statutory rules governing dividend entitlement

Under the wording of the statute, however, the dividend entitlement attaching to new shares issued in a capital increase is a complex matter. The new shares are intended to carry only a pro rata entitlement for the current financial year, depending on the date and amount of the contribution made. That entitlement is to be calculated by reference to an advance dividend of 4 % of the contribution paid. The articles of association or, where applicable, the resolution on the capital increase may, however, provide otherwise. Existing shareholders whose share of the aggregate dividend is thereby reduced are protected by their subscription rights. Where subscription rights are excluded, their interests are deemed to have been adequately taken into account by the requirements governing the exclusion of subscription rights. It is nevertheless disputed in the legal literature whether this applies without restriction to retroactive dividend entitlement for a financial year that has already ended.

Market practice

In practice, new shares regularly carry retroactive dividend entitlement. This is because, in a listed stock corporation, new shares can generally be placed successfully with investors only if they are fungible (i. e. interchangeable) with the existing shares and can be sold at any time in liquid trading on a stock exchange. This applies in particular where subscription rights are excluded on a simplified basis, since the placement price for the new shares may not be materially below the stock market price of the shares already issued. Such a placement price can be achieved only if the new shares have the same rights and characteristics as the existing shares. The same considerations apply where the capital increase takes place at a time when the shareholders’ meeting has not yet resolved on the distribution of profit for a financial year that has ended and, consequently, on the relevant dividend distribution.

The decision of the Higher Regional Court of Munich

In a decision dated 28 May 2026, the Higher Regional Court (Oberlandesgericht – OLG) of Munich held that a capital increase was not registrable where it was resolved on the basis of authorised capital with a simplified exclusion of subscription rights and provided for the new shares to carry a retroactive entitlement to profits for a financial year that had ended. The shareholders’ meeting had not yet resolved on the appropriation of the profit for that financial year.

In the Court’s view, this constellation did not provide existing shareholders with sufficient protection against the impairment of their rights; a claim for damages would not suffice for this purpose. In particular, the Court criticised the fact that the interference with the existing shareholders’ entitlement to profits was compensated neither by a subscription right with respect to the new shares nor otherwise. The management board resolution on the capital increase also gave no indication that the objective justification for the exclusion of subscription rights had been examined. The management board must undertake that examination when exercising an authorisation to carry out a capital increase out of authorised capital and must weigh the interests of the company and the existing shareholders in relation to the exclusion of subscription rights and the proposed retroactive dividend entitlement.

The successful parallel case in Munich

It is noteworthy that, almost in parallel with the case underlying the Higher Regional Court’s decision, the commercial register in Munich registered a capital increase out of authorised capital with a simplified exclusion of subscription rights and dividend entitlement for the new shares in respect of a financial year that had ended. The difference between the two cases is that, in the successful case, the management board resolution contained a brief statement explaining why the management board considered the exclusion of subscription rights necessary and proportionate. It referred to a prompt strengthening of the equity capital base with a view to planned investments.

Summary and assessment

The decision of the Higher Regional Court of Munich is surprising not only because it conflicts with market practice and the long-standing practice of many commercial registers. It also disregards the fact that the legislature expressly declared the exclusion of subscription rights to be permissible “in particular” where the requirements of section 186(3), sentence 4, AktG are met. Accordingly, up to the statutory cap, initially 10 %, any uncertainty as to whether the exclusion of subscription rights required sufficient objective justification had been deliberately put to rest. In the ZuFinG, the legislature even increased the permissible amount of such a capital increase with a simplified exclusion of subscription rights to 20 % and confirmed the “established practice”, particularly where authorised capital is used. Unfortunately, the Court’s decision also fails to address the economic prerequisites for a successful short-term placing of shares on the capital market and the need for the new shares to be fungible with the shares already traded on the stock exchange.

In practice, this means:

A capital increase resolved on by the shareholders’ meeting with retroactive dividend entitlement (a so-called direct resolution) should not be problematic.
Likewise, even in light of the Higher Regional Court of Munich’s decision, a capital increase out of authorised capital with retroactive dividend entitlement for the new shares should be registrable if the shareholders are granted their statutory subscription rights.
In the case of a capital increase out of authorised capital with a simplified exclusion of subscription rights, the management board resolution on the capital increase should set out sufficient objective reasons for excluding subscription rights and balance those reasons against the interests of existing shareholders, particularly where the new shares are to carry a retroactive dividend entitlement.
The proposed capital measure, in particular the resolutions to be adopted by the corporate bodies, should be co-ordinated with the competent commercial register fairly in advance.

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