4 ms·

And the only public shares are the weak voting ones, so in order for the lawsuit winner (or the state for taxes) to reap their returns they lose the voting powe

And the only public shares are the weak voting ones, so in order for the lawsuit winner (or the state for taxes) to reap their returns they lose the voting power of the shares. I see a lot of the newer IPO'd companies using this type of scheme.

deleted 5y ago
[deleted]
KirillPanov 5y ago
Do you mean to say that the family-owned shares lose their extra voting power when transferred? A bankruptcy judge would not hesitate to void this clause if those shares were being transferred by virtue of bankruptcy seizure.
- Xylakant 5y ago
  I’ve seen that in multiple founding contracts for private companies and no lawyer ever flagged that. I doubt a judge will collect it. The mechanism is usually called Einziehung der Geschäftsanteile, basically the remaining shareholders can force-collect the shares of the bankrupt shareholder. A suitable compensation is required. See for example this random reference (German) https://kuhlen-berlin.de/glossar/einziehung-von-gesch%C3%A4ftsanteilen-der-gmbh https://kuhlen-berlin.de/glossar/einziehung-von-gesch%C3%A4f... The shares immediately loose all voting rights in that process. The reason is to prevent a potentially hostile party from entering the shareholder group. Edit: Here’s a better reference with an example what such a clause in the companies charter could look like: https://gmbhg.kommentar.de/Abschnitt-2/Einziehung-von-Geschaeftsanteilen https://gmbhg.kommentar.de/Abschnitt-2/Einziehung-von-Gescha...
- fxtentacle 5y ago
  No, it's actually common, at least in Germany. You can have a clause that allows the other shareholders to force someone out if they argue that it is necessary to retain the stability of the company. You have to pay the forced-out investor for his/her shares, though.