The German Federal Court of Justice (BGH) has invalidated Volkswagen's 2021 shareholder approvals related to a settlement over the diesel scandal, citing insufficient disclosure about waiving claims against managers and the need for clearer agenda items.

This ruling requires Volkswagen to reconvene its shareholders' meeting to properly approve the settlement, as the original approval was deemed legally invalid due to procedural shortcomings.

The court's decision also challenges the validity of a shareholder resolution approving a 270 million euro coverage settlement with directors and officers insurers, because the agenda failed to clearly specify that this settlement would release current and former board members from liability.

The ruling is seen as a significant step in strengthening shareholder rights, emphasizing the importance of transparency about managers' financial situations for informed decision-making.

While the court has clarified the procedural issues, it remains to be seen whether shareholders were genuinely inadequately informed, with further investigation by the lower court expected.

The decision could increase personal liability for former VW executives Winterkorn and Stadler, as the court questioned whether their assets were sufficiently considered during the original settlement approval.

The court underscored that shareholders had the right to be fully informed about Winterkorn and Stadler's financial circumstances, especially through questions during the meeting, to assess liability properly.

This ruling impacts VW’s planned special audit, as it affirms the need for scrutiny into management conduct and transparency of disclosures related to the settlement agreements, with shareholder groups advocating for a thorough review.

The court also criticized the adequacy of disclosures about the managers' financial situations, which is crucial for informed shareholder decisions, leading to the overturning of previous rulings and a case referral back to the appellate court.

Legal analysts view the decision as a challenge to VW’s previous management liability strategies, highlighting potential impacts on corporate governance practices and the importance of asset transparency.

The ruling emphasizes that the 2021 approval should have properly considered the managers' assets, not just their salaries, which could affect the validity of the settlement agreements.

Volkswagen is now engaging in discussions with involved parties, including insurers, to renegotiate and potentially reaffirm the settlement agreements, aiming to resolve issues stemming from the diesel scandal.

The company plans to reopen negotiations with insurers, emphasizing that the reasons for the original agreements still stand, though experts suggest disputes over manager liability remain unresolved.