The Extraordinary General Meeting of Fresenius Medical Care took place on July 14, 2023.
The reason for this is the change of legal form of the company from a partnership limited by shares (KGaA) to a stock corporation (AG) with the name Fresenius Medical Care AG. The shareholders were able to decide for or against the change of legal form at the Annual General Meeting. They were also able to elect the four members of the Supervisory Board and decide on the election of the auditor and the Group auditor for the 2023 financial year as well as the auditor for the possible review of the half-year financial report for the 2023 financial year and other interim financial information. The new CFO Martin Fischer also introduced himself.
In which cases is an Extraordinary General Meeting convened?
An Extraordinary General Meeting is only convened if there is a special reason. In principle, Extraordinary General Meetings can be convened by the company's Management Board or by the company's shareholders.
A special occasion justifying the convening of an Extraordinary General Meeting exists, for example, if
- the loss of share capital is at least 50%
- Shareholders holding 5% of the company shares submit a motion for an Extraordinary General Meeting
- unforeseen and unexpected events occur that affect the company to such an extent that it is not possible to wait until the Annual General Meeting
- Mergers & Acquisitions are made
- a necessary capital increase must be undertaken
- a change of legal form is carried out
The Extraordinary General Meeting of Fresenius Medical Care is discussed in more detail below.
Even if one or more Extraordinary General Meetings are held, an Ordinary General Meeting must be held once a year regardless of this.
What requirements must be met for a change of name of Fresenius Medical Care AG & Co. KGaA into Fresenius Medical Care AG be fulfilled?
A so-called qualified majority of 75% of the share capital represented must exist for the change of legal form to be completed. Since Fresenius SE & Co. KGaA holds a share of 32.2% in Fresenius Medical Care AG & Co. KGaA, it can strongly influence the result.
A simple majority of over 50% is required for the election of the four Supervisory Board members and the auditor of the new company.
Why is Fresenius Medical Care changing from the legal form of a KGaA to an AG?
To answer this question, a comparison between the old and the new structure is sufficient.
Simplification of corporate governance
The MDAX Group does not yet have its own Management Board and its business is managed by its general partner. This in turn has a Management Board, a Supervisory Board and an Annual General Meeting. The company also has a Supervisory Board and an Annual General Meeting. After the change of legal form, the company will only have the three statutory bodies of a stock corporation. This means that in future there will be a Management Board, a Supervisory Board and a General Meeting. The company's change of legal form would result in a significantly simplified legal and de facto regulatory framework for the management and supervision of the company.
Improvement of decision-making processes
A lot of time and resources are currently being spent on aligning decisions at the level of the company and the FME Group with the interests of the Fresenius Group. Following the change of legal form of the company to a stock corporation, decisions can be made with a clearer focus on the company's own interests. Minimizing the need for coordination between the Fresenius Group and the FME Group would also free up management resources. This should lead to faster and more efficient decisions.
Increasing the influence of the shareholders as a whole on the composition of the company management
Until now, the company has been managed by the Management Board of the shareholder. This Management Board is appointed by the shareholder's Supervisory Board. The company's Supervisory Board, which was elected by the shareholders at the Annual General Meeting, has no influence on the election of the shareholder's Management Board. The members of the Management Board will be elected by the company's Supervisory Board after the change of legal form. During the company's Annual General Meeting, four of the six shareholder representatives will be elected to the company's Supervisory Board in future, giving the shareholders as a whole more influence on the management of the company.
Improving the independent determination of the company's financing strategy
In recent years, it has been necessary for the company to harmonize its decisions with the interests of the Fresenius Group. The change of legal form to a stock corporation would give the company more flexibility in this respect.
The potential disadvantages of the change of form
The change of legal form is expected to cost a total of 50-100 million euros. At 100 million, this would be 0.005% of Fresenius Medical Care's revenues in 2022. In addition, a downgrade of the Fitch ratings is expected. Fresenius Medical Care currently has a Fitch rating of BBB, which stands for "good credit quality". A downgrade to a BB rating, which stands for "speculative", could deter banks and investors.
What is the difference between today's Fresenius Medical Care AG & Co. KGaA and the future Fresenius Medical Care AG?
The existing KGaA structure allows Fresenius SE & Co. KGaA a controlling influence in the company, although it only holds around 32.2 % of the shares. The DAX-listed group Fresenius SE & Co. KGaA is the sole shareholder of the new company Fresenius Medical Care Management AG. Fresenius Medical Care Management AG is personally liable for Fresenius Medical Care AG & Co. KGaA.
The new corporate form of Fresenius Medical Care AG must by law have a Management Board, a Supervisory Board and its own Annual General Meeting. The rights of these three bodies are set out in the German Stock Corporation Act, the new Articles of Association and the Rules of Procedure of the Management Board.
It is already clear that the Supervisory Board of Fresenius Medical Care AG will elect the members of the Management Board of Fresenius Medical Care AG.
Further information provided to shareholders at the Annual General Meeting.
Fresenius addressed the targets for achieving the strategic objectives. One objective is to drive forward the increase in value as a leading company in the treatment of kidney diseases. Specific measures have been formulated to achieve this goal.
An improvement in structure through simplified governance and increased transparency in financial reporting. A more advantageous allocation of capital through disciplined financial policies and a focus on improving ROIC. In addition, an optimization of the corporate culture through the increased assumption of responsibility, a focus on sustainability and an increase in internal diversity, equal opportunities and inclusion.
Fresenius highlighted what it described as a "groundbreaking" study that showed a reduced mortality rate in people with kidney failure. Mortality in patients undergoing "high volume HDF treatment" was reduced by 23%. "We will continue to set the standard for the treatment of kidney disease."
It was also interesting that the Group's management boasted that Fresenius Medical Care's share price has risen continuously since October. However, this cleverly omitted the fact that in October it was at its lowest level since 2005 and had fallen sharply from its all-time high in 2018.
Conclusion
If one has confidence in the newly elected Supervisory Board members, the change of legal form may certainly appear to be largely positive. The new Fresenius Medical Care AG will have significantly more authority in the future and will no longer have to coordinate with the Fresenius Group. If one doubts its management abilities, the newly gained authority should not be seen as an advantage. From now on, the company will also be able to make decisions more quickly, which will certainly bring many advantages.
Author: Leo Krause
Leo Krause worked as part of his 4-week internship in the sales department at CapTrader in Düsseldorf. During this time, he took part in the Annual General Meeting of Fresenius Medical Care AG in digital form.