19. Capital, Reserves and Retained Earnings

Subscribed capital

BASF SE has only issued fully paid-up registered shares with no par value. There are no preferential rights or other restrictions.

The subscribed capital of BASF SE as of December 31, 2022, was €1,144 million, divided into 893,854,929 qualifying shares with no par value. The share capital and the number of shares decreased in 2022 due to the redemption of acquired treasury shares in connection with the share buyback program.

The subscribed capital as of December 31, 2021, was €1,176 million, divided into 918,478,694 shares.

Share buyback / treasury shares

By way of a resolution of the Annual Shareholders’ Meeting of May 12, 2017, the Board of Executive Directors was authorized to buy back treasury shares until May 11, 2022, in accordance with section 71(1) no. 8 of the German Stock Corporation Act (AktG). On April 29, 2022, the Annual Shareholders’ Meeting approved a renewal of the authorization to purchase treasury shares until April 28, 2027.

The buyback may not exceed 10% of the company’s share capital at the time the resolution was passed and can take place via the stock exchange, a public purchase offer addressed to all shareholders, or a public invitation to the shareholders to submit sales offers.

The Board of Executive Directors is authorized to redeem the shares bought back without a further resolution of the Annual Shareholders’ Meeting and to reduce the share capital by the proportion of the share capital accounted for by the redeemed shares. The Board of Executive Directors can also redeem the shares without reducing the share capital so that the proportion of the other shares in relation to the share capital is increased through the redemption. In that event, the Board of Executive Directors is authorized to adjust the number of shares in the Statutes.

In 2022, BASF purchased a total of 24,623,765 shares or 2.68% of the share capital through the buyback authorizations at an average price €53.83 per share. All repurchased shares were redeemed and the share capital was reduced accordingly. BASF did not hold any treasury shares as of the balance sheet date.

BASF’s expenditure in 2022 for the share buyback totaled €1,325 million. The amount was taken from other retained earnings and also reduced subscribed capital by €32 million. This reduction was reclassified to capital reserves. The share buyback authorization was not utilized in 2021.

Authorized capital

In accordance with the resolution of the Annual Shareholders’ Meeting on May 3, 2019, the Board of Executive Directors was authorized, with the consent of the Supervisory Board, to increase, until May 2, 2024, on a one-off basis or in portions on a number of occasions, the company’s share capital by a total of up to €470 million by issuing new shares against contributions in cash or in kind. In principle, shareholders are entitled to a subscription right. However, the Board of Executive Directors is authorized, with the approval of the Supervisory Board, to exclude shareholders’ statutory subscription rights in the cases specified in the authorizing resolution. The Board of Executive Directors is authorized, with the consent of the Supervisory Board, to lay down the further contents of the share rights and the details of the execution of the capital increase. The total shares issued on the basis of the above authorization with the exclusion of the shareholders’ subscription right in the case of capital increases in return for contributions in cash or in kind must not exceed 10% of the share capital at the time that this authorization comes into effect or – if this value is lower – at the time of its exercise. The proportionate amount of the share capital of those shares that are to be issued on the basis of conversion or option bonds granted during the term of this authorization under the exclusion of the subscription right, must be credited against the aforementioned ceiling of 10%. This authorization has not been exercised to date.

Conditional capital

The existing authorization passed by an Annual Shareholders’ Meeting resolution on May 12, 2017, to issue convertible bonds and/or bonds with warrants expired on May 11, 2022. At the Annual Shareholders’ Meeting on April 29, 2022, the Board of Executive Directors was again authorized, with the approval of the Supervisory Board, up to April 28, 2027, on a one-off basis or in portions on more than one occasion to issue bearer or registered convertible bonds and/or bonds with warrants or a combination of these instruments with or without maturity limitations with a total nominal value of up to €10 billion and to grant or impose holders and/or creditors of these debt instruments conversion or option rights for up to 91,847,800 registered shares in the company with a pro rata amount of share capital of up to €117,565,184 subject to the respective terms and conditions of the debt instruments. The debt instruments can be issued in exchange for contributions in cash, but also for contributions in kind, particularly shareholdings in other companies.

To hedge the subscription right to conversion and option rights issued under the authorization, the share capital was increased conditionally by up to €117,565,184 with the option of issuing a maximum of 91,847,800 new registered BASF shares. The conditional capital increase shall only be carried out to the extent to which holders of convertible bonds or warrants attached to bonds with warrants issued by the company or one of its subsidiaries up to April 28, 2027, under the authorization granted to the Board of Executive Directors, exercise their conversion or option rights and/or fulfill their conversion or option obligations, and provided that no other forms of fulfillment of delivery are used. The new BASF shares shall be issued at the conversion or option prices determined in each case in the terms and conditions of the debt instruments and/or the warrants in accordance with the above-mentioned authorization. The new BASF shares issued under this provision shall participate in profits from the beginning of the financial year in which they are issued. This authorization had not been exercised as of the end of the 2022 fiscal year.

Capital reserves

Capital reserves include effects from BASF’s share program, premiums from capital increases and consideration for warrants and negative goodwill from the capital consolidation resulting from acquisitions of subsidiaries in exchange for the issue of BASF SE shares at par value.

The proportion of share capital accounted for by the redeemed treasury shares in 2022 was reclassified to capital reserves.

Retained earnings

Retained earnings include earnings generated in the past and in 2022 by companies included in the Consolidated Financial Statements.

The acquisition of shares in companies that BASF already controls or that are included in the Consolidated Financial Statements as a joint arrangement is treated as a transaction between shareholders, as long as this does not lead to a change in the consolidation method. There were no material transactions of this type in 2022, as in the previous year.

In connection with the share buyback, the amount in excess of the nominal value was deducted from retained earnings. Upon redemption of the shares, the previously openly deducted amounts were offset against share capital and retained earnings. Additionally, the value of share capital accounted for by the redeemed shares was reclassified from retained earnings to capital reserves. This resulted in a total reduction of retained earnings of €1,325 million in 2022.

Legal reserves rose by €74 million in 2022 and by €57 million in 2021 due to reclassifications from retained earnings.

Payment of dividends

In accordance with the resolution of the Annual Shareholders’ Meeting on April 29, 2022, BASF SE paid a dividend of €3.40 per qualifying share from the retained profit of the 2021 fiscal year. With 903,468,202 qualifying shares as of the Annual Shareholders’ Meeting, this represented total dividends of €3,071,971,886.80. The remaining €856,529,452.43 in retained profits was allocated to retained earnings.