ECJ Ruling Goes Against VW

Volkswagen have today fallen foul of the European Court of Justice after they passed resolutions to hinder external foreign shareholders from building up any substantial equity stake, with the move contravening European Union law.

The company, which serves a global market as a virtual household name, had purported to prevent any single shareholder from utilising more than 20% of total voting rights, as a fixed ceiling regardless of the true size of equity stake - a move which the court said today actively hindered investment from foreign businesses.

The court today also dismissed entrenched rights for the German authorities to appoint board members to the VW board of directors as a protectionist measure to ensure its contribution to the German economy, on grounds of fundamental EU principles.

At present, the authorities of Lower Saxony own over 20% equity of the company with disproportionately strong voting rights as compared to other shareholders, which the court today ruled was contrary to the interests of the European Union and company law policy.

Despite the set back, it is thought that the authorities will maintain their stake as at present in the German automobile manufacturer and indeed will now boast similar voting rights to their equity stake.

Analysts have now suggested that major shareholder Porsche may look to increase its stake in VW following the announcement, in order to consolidate its interests in the mainstream car manufacturer. Porsche have refused to speculate on whether or not it will in fact make a move to buy over the outstanding shares in the company.

Porsche’s board of directors are scheduled to meet on 12 November, at which point it is likely to become clearer as to whether the Italian sports car manufacturer will make further steps towards increasing its stake.

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