German shareholders seek the opportunity to invest further funds even after losses

Small Investors in Germany Challenge Exclusion from Corporate Rescues

Photographer: Alex Kraus/Bloomberg

In Germany, individual investors who lost their holdings in companies facing financial collapse are voicing frustration over being barred from injecting new funds into these struggling firms.

Recently, companies such as battery producer Varta AG, automotive supplier Leoni AG, and communications technology firm Mynaric AG have all utilized StaRUG, a relatively recent legal framework, to reorganize their debts.

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In these restructurings, existing shareholders lost their investments and were not given the opportunity to purchase new shares when the companies sought additional capital. Instead, only major stakeholders or significant creditors were permitted to participate, leaving smaller investors feeling marginalized.

These decisions have sparked backlash on social media and prompted legal action from shareholder groups. Many minority investors are contesting their exclusion from potential business recoveries, with some—such as those involved with Varta—now appealing to Germany’s constitutional court for redress.

Restructuring professionals, however, are puzzled by these complaints, noting that investing in financially distressed companies is inherently risky, and most small investors had already lost their stakes.

“Buying into new capital rarely restores the value of previous investments,” explained Marlene Ruf, a restructuring partner at Milbank LLP in Munich. “In these scenarios, the original shares are typically worthless.” She cautioned that individual investors may overlook the risks, driven by hope of recovering their losses.

A Glimmer of Hope for Small Shareholders?

Supporters of minority investors argue they should have a chance to participate in any turnaround. They highlight BayWa AG, a conglomerate in agriculture and renewables, as a positive example: its restructuring plan allowed not only banks and large shareholders but also ordinary investors to contribute fresh capital.

“BayWa sends a strong, encouraging message,” said Holger Clemens Hinz, head of corporate finance at Quirin Privatbank. “From a stakeholder’s viewpoint, it makes sense to involve loyal shareholders who have stood by the company.”

BayWa’s Unique Approach

Despite BayWa’s inclusive strategy, it remains an exception. The company was in a stronger financial position than most StaRUG cases and adopted what it called a “StaRUG-light” approach—extending debt maturities without reducing creditor repayments, while preserving some equity value. This process mainly compelled a small group of resistant creditors to agree to the terms.

Germany implemented StaRUG in 2021 to help companies reorganize debts before formal insolvency. Unlike traditional bankruptcy, company management retains control and no external administrator is appointed. However, most firms using StaRUG are already on the brink of insolvency, leaving shareholders with little leverage as their investments are effectively wiped out.

These outcomes have raised concerns among equity market participants, who worry that repeated losses could further discourage German retail investors from buying stocks. The term “StaRUG” even topped the list of “most disliked words” in a 2024 survey by the Düsseldorf Stock Exchange.

Spotlight on Varta

“Shareholder dissatisfaction is mounting,” noted Rolf Deml, managing director of the exchange. “When investors see complete capital losses, as with Varta and Leoni, it erodes trust.”

Varta’s restructuring has drawn particular attention. Once valued at over €7 billion ($8.2 billion) due to its role as a supplier for Apple’s AirPods, the company was forced to reorganize in 2024 after accumulating heavy debts, paying large dividends, and making poor investment decisions.

Shareholders lost their stakes, and the new equity was distributed among creditors, a Varta customer (Porsche AG), and the original majority owner, Austrian industrialist Michael Tojner. Minority investors lost their legal appeals and are now seeking a constitutional court ruling.

Varta and Tojner declined to comment on the matter.

Legal and Constitutional Challenges

Markus Kerber, representing 130 Varta shareholders, argues that StaRUG’s effect on property rights conflicts with the German constitution. The constitutional court has yet to decide whether it will hear the case, and previously dismissed a similar complaint for lack of clear rights violations.

Tojner told Frankfurter Allgemeine Zeitung that including shareholders in the capital raise was impossible without audited financial statements and a prospectus.

Investor Discontent Persists

BayWa, by contrast, was able to issue a prospectus and raise equity from its shareholders, with its two largest owners—German and Austrian agricultural cooperatives—agreeing to cover any shortfall. Ultimately, the company achieved an 89% participation rate, raising around €179 million. BayWa declined to comment.

Nevertheless, Varta’s minority investors argue that a new company could have raised funds from them, making the lack of accounts irrelevant. However, the Stuttgart regional court dismissed their appeal, stating they failed to prove their alternative plan was viable.

For now, significant changes to StaRUG seem unlikely, as more companies turn to the process to avoid expensive insolvency proceedings.

“Losses suffered by individual shareholders are not a result of StaRUG, German lawmakers, or creditors,” said Milbank’s Ruf. “They are simply part of the risk inherent in equity investing.”

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