No significant effect on small investors from potential dividend clawbacks
In today’s ruling, the Munich I Regional Court concluded that the annual financial statements of Wirecard AG as at 31 December 2017 and 31 December 2018, together with the resolutions on the appropriation of profits adopted for those years, are null and void. It therefore upheld the action filed by the insolvency administrator in November 2020 in its entirety.
In the reasons for the judgement, which have already been issued, the court concurs with the insolvency administrator’s submission that the annual financial statements are null and void due to a breach of section 256 (5) sentence 1 no. 1 of the German Stock Corporation Act (AktG), because asset items in both balance sheets had been significantly overvalued. The insolvency administrator’s action was primarily based on the fact that trust assets, which according to Wirecard AG were supposed to result from the so-called TPA transaction, did not actually exist, leading to significant overvaluations in Wirecard AG’s balance sheet.
In this respect, the Munich I Regional Court states that there are strong grounds to believe that the trust assets never existed or at least did not exist to any significant extent. This was evidenced by the bank statements submitted by the claimant. However, the outcome would be no different even if it were based on the submission from Dr. Markus Braun, who joined the legal dispute as an intervening party, as the Munich I Regional Court explained in its press release of 5 May 2022.
The nullity of the annual financial statements and the resolutions on the appropriation of profits for the years 2017 and 2018 means that the basis for the dividend payment to the shareholders for those years also ceases to apply. Wirecard AG did not generate any profits in the financial years 2017 and 2018, in fact it made considerable losses.
Given this context, the question arises of how to deal with the dividends distributed for the years in question, which were paid out without legal grounds as they had not actually been earned. The nullity of the annual financial statements for the year 2016 has already been remedied prior to the insolvency due to the passage of time under section 256 (6) AktG. However, Wirecard AG only paid out €0.18 per no-par share for 2017 and €0.20 per no-par share for 2018. These dividends were mainly paid to major shareholders such as MB Beteiligungs GmbH, Dr. Markus Braun’s holding company.
Small and private investors will not be significantly affected in this respect: Wirecard AG paid dividends totalling 0.38 euros per share for 2017 and 2018. Assuming a share price of around 150 euros, an investor with stocks at a “stock market value” of 10,000 euros at the time would have to expect a repayment for the two years, if any, of 25 euros at most. Most private investors actually held a far smaller number of shares in their portfolios. Wirecard AG distributed dividends to its shareholders totalling around 22 million euros for 2017 and around 25 million euros for 2018 based on the null and void annual financial statements for 2017 and 2018.
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