A paper by Daniel Moeritz (LL.M. '09), a former Arthur T. Vanderbilt Scholar, has been cited by a German lawmaker looking to reform ownership disclosure in Germany. The paper, “Equity Derivatives, Economic Ownership, and Hidden Voting Power,” which will be published in Germany in the forthcoming Zeitschrift für Vergleichende Rechtswissenschaft (Journal of Comparative Law), includes a reform proposal that deals with problems of hidden ownership created by equity derivatives and similar devices. Mathias Middelberg, a German lawmaker and member of the financial committee of the German Parliament, has recommended implementing this proposal as a response to several recent occurrences in Germany.

From March 2008 to May 2008, Schaeffler Technologies, a privately held supplier for the automobile industry, built up an economic stake of about 36 percent of the stock of Continental, Germany’s biggest automobile supplier and then member of the prestigious DAX-30-Index, without disclosing its stake to the market. Similarly, Porsche built up hidden ownership of Volkswagen during a takeover attempt. These stalking measures have led to a public outcry in Germany. Assuming that lawmakers all over the world had good reasons for creating a system of ownership disclosure in the first place, Moeritz tried in his paper to prevent future abusive tactics without creating unnecessary burdens on other value-enhancing transactions. He proposed a 10 percent threshold to trigger a disclosure regime for economic ownership, thereby counting both direct holdings and long positions. German treasury secretary Wolfgang Schaeuble has recently announced plans to present a proposal to tackle this issue.

Posted April 30, 2010