The European Courts ruling that a German law shielding Volkswagen from foreign takeovers is illegal paves the way for Porsche to increase its stake in Europes biggest carmaker.
The court ruled that the so-called VW Law, dating from 1960, breaks European rules on the free movement of capital by restricting shareholders rights.
Under the law, more than 80 percent of shareholders votes are required to pass important company decisions. This means that a single shareholder with 20 percent of the vote can block them.
The European Commission believes that the state of Lower Saxony, which currently holds around 20 percent of VW stock, enjoyed special powers as a result of the legislation.
The VW Law gave Lower Saxony a blocking minority and, together with the German Federal Government, the right to two seats each on the 20-member supervisory board.
Since the Federal Government currently owns no VW stock, only the state of Lower Saxony uses this right. It has appointed two supervisory board members.
The European Commission says the privilege could dissuade foreign investors from taking stakes in VW and so the law hinders the free movement of capital with Europe.
Some industry observers say that the law has lent the company a degree of stability over the decades, allowing the firm to expand through acquisitions and to pursue its platform sharing strategies.
Others disagree. One analyst noted that Lower Saxony has been focused solely on safeguarding local jobs and the regional economy, rather than adhering to traditional shareholder tenets of increasing value and dividends.
It was supposed to be good for stability for the workers but I am not sure it has worked out that way, said an analyst at Natixis Securities.
Analysts now expect Porsche to increase its stake in VW to 51 percent from 31 percent.
The decision is expected to be taken at Porsches next scheduled supervisory board meeting on November 12, according to analysts at Lehman Brothers.