Shareholder Structure

What is the shareholder structure?

Shareholder structure (German: Gesellschafterstruktur) refers to the legal composition of the group of shareholders of a company. Also in use are the German terms Beteiligungsstruktur and Eigentümerstruktur (ownership structure) and, less precisely, Gesellschaftsstruktur (company structure). It answers which natural persons and companies hold shares, in what amount and whether directly or via holding companies. This includes the voting rights and special rights and any encumbrances on the shares. In a trust arrangement (Treuhand), someone holds shares in their own name for another person; in a pledge, they serve as security for a loan. With a usufruct (Nießbrauch), a third party receives the income without being the owner.

For a GmbH (German limited liability company), only a person entered in the shareholder list filed with the commercial register counts as a shareholder in relation to the company (Section 16 (1) of the German Limited Liability Companies Act, GmbHG). The cap table, the ownership table, builds on this list. It supplements it with the economic view including virtual shares, options and convertible loans, that is, loans that can later be converted into shares. The shareholder structure is reviewed in every funding round and every due diligence. It determines who controls the company and how quickly it can decide. It also determines who must be reported in the transparency register, the official register of the natural persons behind a company, and whether it counts as a small or medium-sized enterprise (SME).

Building blocks of the shareholder structure

• Founders: hold their stake directly or through a personal holding GmbH. Gains from a later sale of shares are 95% tax-exempt at the level of the holding under Section 8b of the German Corporation Tax Act (KStG). If the holding is created only afterwards, by the founders contributing their shares to it in exchange for new holding shares, multi-year tax lock-up periods usually apply (holding structure).
• Investors: venture capital funds, business angels, family offices and corporate investors (corporate venture capital). Smaller holdings are often pooled in an investment vehicle (angel syndicate), which then appears as one shareholder in the list.
• Employees: holders of virtual shares (ESOP in the form of a VSOP) are not shareholders and do not appear in the shareholder list. Genuine employee shareholdings are often held through a separate holding company so that the group of shareholders remains manageable.
• Trust and encumbrances: A trustee appears in the list, the settlor for whom they hold the shares does not. Pledges and a usufruct over company shares cannot be seen from the list and must be disclosed separately.
• Transfer restrictions and special rights: The articles of association can make transfers subject to consent (Section 15 (5) GmbHG) and grant individual shareholders special rights, for example a right to appoint a member to the advisory board.

Majorities, blocking minorities and ability to decide

Shareholder resolutions require a majority of the votes cast, and each euro of a company share carries one vote (Section 47 (1) and (2) GmbHG). Amendments to the articles of association and capital increases require three quarters of the votes cast (Section 53 (2) GmbHG). Anyone who holds more than 25% of the votes, with full attendance, therefore has a blocking minority, that is, can prevent any amendment to the articles of association and any capital increase. Two blocks of 50% each lead, in the event of disagreement, to a deadlock in which no simple majority is reached.

Besides the percentages, practical ability to decide matters. Under the statutory rule, every shareholders' meeting must be convened by registered letter with a notice period of at least one week (Section 51 (1) GmbHG). Resolutions without a meeting need, absent a different rule in the articles of association, the consent of all shareholders. In a capital increase, everyone who takes up new shares must declare this in a notarially recorded or notarially certified declaration of acceptance (Section 55 (1) GmbHG). A group of 30 directly participating very small shareholders turns every funding round into an organisational project that can take weeks.

Special attention is required for inactive legacy shareholders, for example former co-founders with a substantial stake who no longer work in the company. They no longer contribute to value creation, but their votes are needed for qualified majorities. At the same time, their stake reduces the share available for retaining the active team. Usual solutions are a buy-back by the founders, a sale to new investors as part of the round (secondary sale) or a voting agreement (Stimmbindung).

Shareholder structure and the transparency register

Under the German Anti-Money Laundering Act (Geldwäschegesetz, GwG), every GmbH must actively report its beneficial owners to the transparency register. A beneficial owner is any natural person who directly or indirectly holds more than 25% of the capital shares or controls more than 25% of the voting rights. The same applies to persons who exercise control in a comparable way (Section 3 (2) GwG). For holdings through holding companies, what matters is control over the chain; trust arrangements and voting agreements can also be relevant to the information. If no natural person meets the conditions, the managing directors are deemed fictitious beneficial owners.

Banks, notaries and other obliged entities compare the entry with their own findings and report discrepancies. After every funding round it must therefore be checked whether founders or investors have crossed the threshold upwards or downwards. Violations of the reporting obligation are subject to fines.

Significance for investors, due diligence and SME status

In due diligence, the chain of shares is traced without gaps since the founding: deed of incorporation, assignments, capital increases and all shareholder lists. It is also checked whether the contributions have been paid in full, because the acquirer of a share is liable alongside the transferor for outstanding contributions (Section 16 (2) GmbHG). An incorrect list is not a mere formal defect. A third party acting in good faith can even acquire a share from someone who is only in the list but does not hold it (Section 16 (3) GmbHG). This requires that the list has been incorrect for at least three years or that the incorrectness is attributable to the true holder. In addition, no objection may be attached to the list.

Investors also look at the founders' stake after the round, at the extent of inactive stakes and at whether the number of shareholders keeps future rounds and an exit manageable. For funding programmes and state aid, SME status counts. Under the EU definition, the employees and financial data of companies that hold 25% or more are attributed proportionately, and in full above 50%. Exceptions apply within set limits for certain groups of investors such as venture capital companies and business angels. A corporate investor with a larger stake can therefore change the status.

Worked example: shareholder structure before and after a Series A round

The shareholder list of a software GmbH shows share capital of EUR 40,000. The holdings of the two founders hold 14,000 shares each, a departed co-founder 4,800 shares, eight business angels together 7,200 shares. In a Series A round, an investor takes up new shares for a stake of 20% after the round.

• Stake before the round: founder holdings 14,000 / 40,000 = 35% each, legacy shareholder 12%, business angels 18%
• New shares for 20% after the round: 40,000 × 20 / 80 = 10,000 shares, share capital afterwards EUR 50,000
• Stake after the round: founder holdings 14,000 / 50,000 = 28% each, legacy shareholder 4,800 / 50,000 = 9.6%, business angels 7,200 / 50,000 = 14.4%, investor 20%
• Founders together: 56%, that is, a simple majority but no three-quarters majority
• Amendments to the articles of association: founders and investor reach 76%, founders and business angels only 70.4%, and only with the legacy shareholder 80%
• Blocking minority with full attendance: each founder holding alone with 28%; investor and legacy shareholder together with 29.6%

The example shows that the inactive legacy shareholder, with 9.6%, can together with the investor block amendments to the articles of association. In the transparency register, the founders remain beneficial owners with an indirect 28%, provided they control their holdings alone. If a further round dilutes them to 25% or less, the report changes. For SME status, the investor with 20% stays below the 25% threshold; the founder holdings with 28% each, by contrast, must be included in the test as participating companies.

Distinctions: shareholder structure, cap table and shareholder list

• Cap table: the economic overview of shares and share-like rights, usually also on a fully diluted basis. The shareholder structure describes the legal position.
• Shareholder list: the document filed with the commercial register showing shareholders, nominal amounts and percentage holdings. The shareholder structure additionally covers holding chains, trusts, encumbrances and voting agreements.

Common mistakes

• Shareholder list not updated. Where no notary has been involved, the management must file a new list after every change; if it fails to do so, it is liable to those affected and to creditors for the damage (Section 40 (3) GmbHG).
• Shares promised orally. Commitments to early employees or advisers that were never implemented turn up in due diligence as unresolved claims.
• Transparency register not kept up to date. If a round changes the percentage holdings, the report remains incorrect without an update.
• Inactive legacy shareholders without a solution. Without a buy-back, voting agreement or sale, a stake without any work contribution remains a permanent part of every majority calculation.

Frequently asked questions

Who files the shareholder list?

If a notary was involved in the change, for example in an assignment or capital increase, the notary files the new list (Section 40 (2) GmbHG). In all other cases, the management is responsible (Section 40 (1) GmbHG).

From what stake does a shareholder have a blocking minority?

From more than 25% of the votes cast, because amendments to the articles of association and capital increases require three quarters of the votes cast. If other shareholders stay away from the vote, a smaller stake can also suffice.

Are employees with virtual shares in the shareholder list?

No. Virtual shares establish only a contractual payment claim against the company. They appear in the cap table, not in the shareholder list and not in the transparency register.

How can the shareholder structure of a GmbH be found out?

Through the commercial register. There, the current shareholder list of every GmbH can be retrieved online, free of charge since 2022; it names shareholders, nominal amounts and percentage holdings. If a holding company is a shareholder, its own shareholder list leads one level further. Outsiders may inspect the transparency register with its beneficial owners only where they have a legitimate interest. Neither register shows encumbrances or virtual shares.

How is a shareholder structure presented?

As a structure chart and as a table. The chart shows each company with its shareholders and percentages, through holding companies down to the natural persons. The table, usually the cap table, lists shares, voting rights and the fully diluted percentages including options and convertible loans. In the data room, both belong alongside the current shareholder list.

The Roemer Capital view

At the start of every mandate, Roemer Capital carries out a reconciliation: the shareholder list filed with the commercial register against the cap table, the deeds and the entry in the transparency register. Roemer Capital records discrepancies, open commitments and inactive legacy shareholders and discusses with the company and its law firm how they are to be cleared up before investors or buyers are approached.

For the planned round, Roemer Capital calculates the structure after the investment: stake of the founders, majorities and blocking minorities, effect on SME status. This makes it clear before the term sheet at what level of stake majorities shift and what concessions on voting rights the founders are thereby making.