ALTERNA´s attorney-at-law and partner Annika Vait writes in the publication of Postimees, that in the light of the recent Supreme Court´s decision, there are many problems regarding  the protection of rights of minority shareholders. Regardless of the particular circumstances of the concrete dispute, it is important decision for all the shareholders of Estonian companies. In addition, it should seriously concern the legislator.

In the concrete court case that reached the Supreme Court (civil case no 3-2-1-89-14), the parties argued whether a majority of the shareholders are required to vote in favor for sustained profit distribution when the minority shareholders require it or not. The Supreme Court explained on the basis of the applicable Estonian Commercial Code that if the company´s articles of association do not provide a greater majority requirement, the decision will be taken by simple majority. This always leaves the possibility that the majority makes the decision based on their own interests and the minority shareholders are not able to claim that the majority would vote in their interests. Therefore, there is an issue of the adequate legal protection of minority shareholders in connection with the case stated above.

Estonian Commercial Code states different minority shareholders’ rights, which should enable them to participate in controlling of the company’s activities at least on a minimum degree. Legal business consulting practice however shows that quite often, in the case of a despiteful majority shareholder, the small shareholders’ rights and the opportunity to protect them rights are actually very limited.

Annika outlines and analyzes possible examples of despiteful behavior of  the majority shareholder, including the situation where despite the good economic results and lack of other obstacles, the majority decides not to pay dividends or pay them a very small scale or preventing carrying out special audit. In addition, Annika discusses factors that make leaving the owners´ circle difficult for small shareholders.

Annika implies that the legislator should take action to improve ensuring protection for minority shareholders’ rights as soon as possible, while not doing it in a hurry, but paying attention to all relevant aspects and interest groups (including the need to protect majority shareholders position and their rights). She also recommends that shareholders should agree in the terms of their mutual relations when entering in the circle of owners, but if this has not been done, it can also be done while being a shareholder already.

Full-length article is available here.


For further information please contact Annika by e-mail or by calling +372 680 6850.