Administrative fine proceedings

Intentional or negligent violations of the obligations under sections 33 (1) and (2), 38 and 39 of the WpHG are administrative offences under section 120 (2) no. 2 (d) and (e) of the WpHG. The relevant fines for individual offences are up to two million euros. A higher administrative fine that may not exceed the higher of ten million euros or five per cent of the total revenue of the most recent financial year of the legal entity or association of persons can be imposed on legal entities.

Loss of rights under section 44 of the WpHG

Under section 44 sentence 1 of the WpHG, rights attached to shares held by the party subject to the notification obligation are disapplied for the period during which the notification obligations are not met. This does not apply to claims under section 58 (4) of the AktG (claim to net retained profits) and section 271 of the AktG (claim to liquidation surplus) if the failure to file the notification was unintentional and this was subsequently remedied. The loss of rights also extends to voting rights attributed to the party subject to the reporting requirement under section 34 of the WpHG. The previous restriction to the attribution criteria set out in subsection (1) nos. 1 and 2 of section 34 of the WpHG was withdrawn. Under section 44 (1) of the WpHG, the loss of rights therefore applies to all attribution criteria in section 34 of the WpHG. The background to this is that TDIII does not make a distinction by attribution criteria and the previous distinction for the loss of voting rights appeared arbitrary in practice, because the attribution criteria used to attribute voting rights to the party subject to the notification obligation were sometimes a matter of chance (for example in the investment business, where holding or attribution of voting rights under sections 33 and 34 (1) no. 1 or no. 6 of the WpHG depends merely on the legal form chosen for the collective investment undertaking, without any materially relevant differences).

Under section 44 (2) of the WpHG, the loss of rights also extends, in application of section 44 (1) of the WpHG mutatis mutandis, to violations of notification obligations in the case of instruments relating to shares with voting rights attached. The loss or rights is limited to the actual party subject to the reporting requirement under sections 38 and 39 of the WpHG. The violation of the notification obligation and hence the loss of rights under section 44 of the WpHG ends with a proper notification of the instruments held or, if the instruments have expired, by their exercise or lapse.

For cases in which the violation of the notification obligation under section 33 of the WpHG relates to the amount of the shareholding, the new section 44 (1) sentence 3 of the WpHG inserted by the Risk Limitation Act provides for tougher penalties. This states that the loss of rights is not limited to the period up to fulfilment of the notification obligation, but is rather, in the case of the intentional or grossly negligent violation of notification obligations, extended to a period of six months thereafter. This is designed to prevent a situation in which shareholders who fail to comply with the notification obligations are able to build up a shareholding unnoticed between two general meetings, without being penalised by the loss of voting rights, if the party subject to the reporting requirement subsequently files the notification just before resolutions are adopted by the general meeting. Under section 44 sentence 4, however, sentence 3 of section 44 does not apply if the difference in the amount of the voting rights disclosed in the preceding incorrect notification is less than 10 per cent of the actual holding of voting rights, and there has been no failure to file a notification that the holding has reached, exceeded or fallen below one of the thresholds referred to in section 33 of the WpHG. Sentence 4 excludes minor violations from the penalty of losing rights for six months in the event of failure to notify the holdings of voting rights. In the case of minor differences of less than 10 per cent of the correct holding of voting rights, parties subject to the notification obligation are able to publish a correction without triggering the tougher penalty in sentence 3.