Verbund share
A composite share ( paired share, siamese share or stapled stock ) is a share or a security that has the voting or dividend rights of two tax-legally separate but economically uniform companies, which have their registered office and tax domicile mostly in different countries a common security securitized .
backgrounds
Association shares are used to link two legally independent companies in a synthetic manner, so that the respective legal independence is retained to the extent that the previous shareholders continue to be shareholders of only one company. The main goal is to avoid multiple taxation of dividends paid across borders. Different constructions are possible depending on the relationship between the companies.
Since there is no fixed type of composite share or a "prototype", there are various design options for composite shares, and the legal aspects in particular are very complex. On the one hand, you can combine the voting share ( common stock ) with a participating share ( preferred stock ) of two companies from different jurisdictions . In addition, participation certificates can be used as a composite element instead of preference shares .
It is also conceivable to link the sale of voting shares to the sale of a share in the trust.
So far, this legal construct has hardly existed in Germany. Only in 1994 was there limited experience with Redland Plc. collected.
Equal order group
In a harmonized group, two companies are intertwined without one clearly dominating the other. This is particularly the case with international joint ventures . Verbund shares also play a key role here in controlling and optimizing dividend flows.
Subordinate group
In the case of a subordinate group, there is a parent company that dominates a legally independent subsidiary.
In this case, the owners of association shares usually receive voting rights in the parent company, but dividend rights in the subsidiary. The advantage of this construction is that the profits are not first transferred from the subsidiary to the parent company, but are distributed directly. This can have clear advantages for shareholders due to the avoidance of double taxation. At the same time, the shareholders often receive a subordinate dividend right to the parent company in the event that the subsidiary pays out too little dividend.
History & origin of the term
The term "stapled stock" literally means linked or bracketed parts. These terms describe the main property of Verbund shares , namely that 2 different share certificates are closely linked and are only issued together. The term "Verbundaktie" was used by Dr. Götz Böhmer, employee of Deutsche Bank AG, was one of the first to be introduced as part of an explanation of the legal structure in the Redland case.
As early as the late 1970s, the first "stapled stocks" emerged in the Anglo-Saxon region as a new form of participation in corporations .
For example, Verbund shares were used in the CLF Group and Yeoman Holdings.
In 1989, Verbund shares were used in the merger of the US drug manufacturer SmithKline Beckman and the British pharmaceutical company Beecham.
In the same year 1989, Verbund shares were issued between Eurotunnel plc and Eurotunnel SA.
In 1993, as part of the restructuring of the Rothmans group, group shares between Rothmans International and Vendôme were used.
When NYNEX Corporation and NYNEX CableComs were reorganized in 1995, Verbund shares were also used in preparation for an overseas IPO.
In the following year 1996, Verbund shares were used in the takeover of the British porcelain manufacturer Wedgwood by the Irish Waterford Glass.
In Germany, the first and so far only model in which Verbund shares were used was the merger of Redland plc with Braas GmbH in 1995. In this case, registered shares in Redland plc were sold to Braas together with profit participation certificates in the form of a collective certificate from the German Foreign Treasury Association (AKV ) securitized. Although group shares were also to be used in the merger of the German VIAG AG and the Swiss Alusuisse-Lonza Group AG, in the end the German authorities refused to give their consent, referring to an improper arrangement under Section 42 AO.
Benefits and Risks
The composite stock model has many advantages as well as some disadvantages. The advantages lie in the possible avoidance of multiple taxation and thus the maximization of the profit of the shareholders ( tax avoidance ). The great freedom of design that is offered in the construction of composite action also opens up positive room for maneuver. In this way, companies can be closely linked without incurring tax disadvantages or without completely abolishing their legal independence. Some legal restrictions when merging companies can also be circumvented in this way. At the same time, only a few organizational changes are necessary in such a company merger. From the shareholders' point of view, Verbund shares can e.g. B. be knitted in such a way that the dividend right continues to exist exactly on one company, since any negative dividend effects from the second company have no effect.
The greatest disadvantage of composite shares is the high complexity of these shares, which is very difficult to understand, especially for small investors. There is also potential for conflict with future decisions such as capital increases , as the complex structure makes it very difficult to treat all shareholders equally. Since association shares also regularly securitize rights that not all foreign securities depository banks permit, there are further risks here. In addition, Verbund shares, which are issued in addition to ordinary shares , draw part of the liquidity from the other class of shares, which makes trading more difficult. B. Index memberships are more difficult to achieve. In particular, a likely different price development of the different classes of shares is problematic, since the holders of the better developing class of shares could dominate and buy up the other class in the medium term.
literature
- Christopher Smith, Birgit Thalhammer: The composite share: A practical example of Stapled-Stock. (Booklets on international taxation, issue 113). Hamburg 1997, DNB 95106262X .
- Jens Bornscheid: Stapled Stock (Verbund shares). 1st edition. Verlag Peter Lang, Frankfurt am Main 2005, ISBN 3-631-53757-3 . (PDF)
- Wilhelm Haarmann: Linking holdings to secure the credit balance (stapled stock). In: Norbert Herzig (Hrsg.): Corporate income tax credits for cross-border cooperation. O. Schmidt, Cologne 1996, ISBN 3-504-25099-2 , pp. 41-57.
Individual evidence
- ↑ answers.com
- ^ Alfred Storck, Dividend Access Shares
- ^ Jens Bornscheid: Stapled Stock (Association shares). Peter Lang Verlag, 2005, p. 4 ff.
- ↑ zbi-immobilienfonds.de ( Memento of the original from March 17, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ↑ Cf. Diet / Lorenz: Dictionary for Law, Economics and Politics. Part 1: English-German. Munich 1990, p. 784.
- ↑ See Fritzgerald In: The Journal of Taxation. June 1979, p. 354 ff.
- ↑ As of summer 2008.
- ↑ See Jens Bornscheid: Staples Stock (Verbundaktien). Peter Lang Verlag, 2005, p. 22.
