FlexCo – Conversion of corporate value shares into regular shares and vice versa?
With the introduction of FlexCo, a new form of equity participation was also codified into law: enterprise value shares (UWA). UWA established a legal framework—which had previously been lacking—specifically for employee participation, but also for other stakeholders. This form of ownership is generating significant interest, particularly among startups. However, there are some legal issues that must be clarified through case law, as demonstrated by a recent decision by the Supreme Court.
Enterprise Value Shares
FlexCo distinguishes between traditional shareholders and equity value participants. As a holder of an enterprise value share, one has a stake in net income and in liquidation proceeds. In addition, enterprise value stakeholders are entitled to certain information rights, the right to participate in general meetings, co-sale rights, and, under certain circumstances, repurchase rights. Voting rights and decision-making remain exclusively reserved for shareholders, even in a FlexCo. Enterprise value participants are entitled to a right of approval only if their rights are affected by a decision.
Enterprise value shares in a FlexCo may be issued only if this is provided for in the articles of association. Furthermore, the total amount of enterprise value shares may not exceed 25% of the common stock.
"Conversion" of corporate value shares into regular FlexCo shares
If enterprise value shares were issued in a FlexCo, they may be converted into (regular) shares in accordance with the special provision of Section 9(9) of the FlexKapGG. This requires the consent of all enterprise value shareholders. However, this conversion does not take place—as the term might suggest—directly, but rather through a two-step process: first, there is a capital reduction with respect to the enterprise value shares and their elimination from the share capital; thereafter, the share capital is increased by the corresponding amount, and the business shares are created through this capital increase. If the reduction and increase in share capital are of the same amount and there is neither a repayment nor a contribution of capital, the exemptions under § 9(9) FlexKapGG apply (thus, neither a call on creditors inherent in the capital reduction nor a review of contributions in kind is required for the capital increase). This is the actual advantage of the aforementioned “conversion” under the FlexKapGG.
Is it possible to convert the shares in FlexCo into equity shares?
No—says the Supreme Court in its decision of June 30, 2026, in Case No. 6Ob180/25a.
The FlexKapGG makes no mention of the conversion of shares into UWA. The Supreme Court recently addressed the question of whether this constitutes a loophole in the law for the first time and concluded that it does not.
The Supreme Court based its decision on considerations of transparency and creditor protection. In the Supreme Court’s view, creditor protection would be jeopardized if shares were converted into “weaker” equity interests without complying with the mandatory capital maintenance requirements.
The capital maintenance provisions and creditor protection enshrined in the GmbHG therefore also take top priority in the case of FlexCo.
