The state of Lower Saxony has threatened Porsche with an old and little-known law that relates back to the privatisation of Volkswagen.
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State president Christian Wulff told Financial Times Deutschland he would seek to enforce an old ‘declaration of guarantee’.
Wulff said that if the European Union were to overturn the terms of the new Volkswagen law, which grants Lower Saxony a right of veto in major decision-making related to VW, it would seek to enforce a 50 year old so-called ‘declaration of patronage’.
When Volkswagen was privatised in 1959, the state guaranteed to maintain a state minority interest. Otherwise the national government would be obliged to buy up shares and increase the state shareholding to above the 25% threshold that is normal for a shareholder’s right of veto, reported dpa. The state of Lower Saxony currently has a 20.3% shareholding.
The European Court of Justice ruled last year that the Volkswagen law breached European rules on the free movement of capital, because it limited voting rights of any large shareholder to a maximum of 20% of the total. The German government has revised the law but it still gives Lower Saxony a power of veto over major decisions. In normal company law a shareholder must have 25% voting rights to have a power of veto.
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By GlobalDataPorsche currently has a 31% shareholding but plans to raise this to 50% before the end of this year.
The European Commission has threatened Germany with high fines if it does not comply with the ECJ ruling. Berlin has two months to answer the claims.
