ON THE REMEDIES OF THE JUDICIAL PROTECTION OF RIGHTS OF A MINORITY SHAREHOLDER IN THE PROCEDURE OF COMPULSORY SHARES REPURCHASE

Section Law: Problems of modernization of economic legislation

Abstract

Based on the relevant law enforcement practice of economic courts, the article studies the problem of choice of proper and effective remedy of a minority shareholder in the procedure of compulsory shares repurchase. It is emphasized that the resolution of this problem shall be based on: 1) the understanding of the mandatory nature of the alienation of shares by a minority shareholder (economically weaker subject), stipulated in Article 65-2 of the Law of Ukraine “On joint-stock companies”, as an atypical contract construction for modern civil and economic legislation; 2) the protection of rights of a minority shareholder in the mandatory shares repurchase should be considered not only in the context of protection of their title, but also in a more broader context — as protection of their subjective corporate right, since the legal consequence of such a sale is not only the termination of their title in a strict sense, but also the termination of their corporate right in the subjective sense as the right of an individual to be a shareholder of a company (legal person). Mandatory sale by a minority shareholder of all shares belonging to them leads not only to the termination of their title in a strict sense, but also to the termination of their corporate right in the subjective sense as the right of an individual to be a shareholder of a company (legal person). Therefore, a minority shareholder in the relations of squeeze-out is entitled not only to receiving some “purchase” price for the mandatory (in essence, compulsory) alienated shares, but also to a fair compensation of loss of their corporate right, which includes proprietary, as well as non-proprietary (organizational) rights, and thus — also the loss of legal possibility to satisfy their investment interest by way of shareholding in a particular joint-stock company. A minority shareholder may seek in court the recognition of not only the right to compensation as such, but the right to compensation at the highest (fair, in terminology of Directive 2004/25/EU) price of share in the specific amount determined by the court. It is argued that the recognition of the claimant’s right to receive fair compensation for shares sold under compulsion is a proper and effective remedy of rights and legitimate interests of a minority shareholder. The issuer of shares shall be the defendant in the lawsuit for recognition of right to receive compensation by a minority shareholder for shares alienated under mandatory sale in accordance with Article 65-2 of the Law of Ukraine “On joint-stock companies”.


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Keywords

minority shareholder, mandatory repurchase of shares, remedy, fair compensation, recognition of right

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Published
2022-08-09