The Estonian Supreme Court recently adopted two court orders (No 2-18-13213 and No 2-19-9918) that cast light on the exercise of shareholders’ information rights.
Under the Estonian Commercial Code, shareholders of a public limited company (aktsiaselts) have the right to receive information on the activities of the public limited company from the management board at the general meeting. Under the Law of Obligations, shareholders may also demand access to documents of the company, but only if the document has been prepared in the interests of the shareholder who wishes to examine the document or if the document sets out a legal relationship between such shareholder and the company or the preparation of a transaction between them. Therefore, the right to information of the shareholders of a public limited company is rather limited under law and in practice the information and document requests of minority shareholders are often rejected in case of conflicts between the shareholders.
According to the recent orders of the Supreme Court, the shareholders’ information right can, however, be improved by the articles of association. The Supreme Court clarified that the shareholders may derogate from the statutory rules on provision of information and set forth more extensive information rights in the articles.
In the specific case, it had been stipulated in the articles of association that the shareholders had the right to study the documents of the company and the Supreme Court opined that the shareholder who wishes to exercise such right does not need to demonstrate a justified interest (as would otherwise be the case) but such interest is assumed. The company may refuse to provide information and access to documents if provision of such information and documents could damage the company. Refusal must be motivated and merely the fact that the contracts requested include a confidentiality clause is not sufficient to refuse the provision of access.
The Supreme Court also gave some insight regarding specific information and document requests. The main aim of the shareholders’ information right is to receive information on the economic situation of the company as well as the items in the agenda of the general meeting. According to the court, the following information and documents need to be provided at shareholder’s request:
- management and supervisory board resolutions;
- information on agreements concluded with related parties;
- information on debts of contractual partners;
- information on items in the annual accounts;
- information on goods sold and brought during the economic year;
- information regarding the subsidiaries (at least to the extent that such information concerns the activities of the subsidiaries that are directly or indirectly related to the parent company).
To sum up the above, it is advisable (specifically for minority shareholders) to include a regulation on shareholders’ information rights in the articles of association of the company in order to ensure better access to the information and documents that are relevant for exercising the shareholders’ rights.
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Also, in Latvia the Supreme Court has recently clarified the right of a shareholder to access information. In the judgement SKC 49-2020 the Supreme Court reviewed a dispute between a minority shareholder and a public limited company (akciju sabiedriba) on the right of a shareholder to request information before the general meeting. Likewise, the court clarified whether a new shareholder may request the company to provide historic information that relates to a time period before the person became a shareholder.
Under Latvian Commercial Law the shareholders of a public limited company may request information during the general meeting in which case the information is provided to all the shareholders. Likewise, shareholders are entitled to receive information from the company ahead of the general meeting on the topics that are included in the meeting agenda. The right to receive information is thus tied with the general meeting and the law is silent on whether the shareholder may request information outside the general meeting.
In the specific case the minority shareholder wished to access historic minutes of the general meeting and requested the company to provide this information even before the general meeting was announced. In its judgement the Supreme Court ruled that the shareholder may request information on the agenda items of the general meeting only after the general meeting is announced. The Supreme Court also confirmed the correctness of a judgement passed by a lower instance court that the shareholder is allowed to request from the company information that relates to time period before the person became shareholder. However, most importantly, the Supreme Court admitted that the shareholder may at any time request the from the Company information and that such request does not need to be related to agenda items of the general meeting. In the view of the Court, in every such occasion the management of the Company must evaluate whether such information can be delivered to the shareholder.
Over the last few years Latvia has been working to improve the protection of minority shareholder rights. The Supreme Court judgement can be viewed as favourable to minority shareholders as it clarifies the provisions of the law on the right to access information.
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In Lithuania, shareholder's right to information is regulated by the Law on Companies. A new wording of Article 18 of the Law on Companies has become effective since the end of November 2017. This Article now stipulates that a company must, at a shareholder’s written request and not later than within seven days from the receipt of the request, provide the shareholder with access to and/or with copies corporate documents and certain financial statements of the company. The company must provide all the information requested by the shareholder (allow access and provide copies) regardless of the number of shares held by the shareholder in the company.
Before the amendment of the Law on Companies came into force, this right was vested only in a majority shareholder, and the law was silent about the shareholder's right to receive copies of documents.
Pursuant to the new wording of Article 18 of the Law on Companies, a company may refuse to provide a shareholder with access to and/or with copies of documents related to the company's commercial (industrial) secret, confidential information, except when the company's information is necessary for the shareholder to implement the mandatory requirements specified in other legal acts and the shareholder ensures the confidentiality of such information. The company must provide the shareholder with access to other information of the company and/or with copies of documents, if such information and documents, including those related to the company's commercial (industrial) secret and confidential information, are necessary for the shareholder to meet other legal requirements and the shareholder ensures the confidentiality of such information and documents (Article 18(1) of the Law on Companies). If the company refuses to provide such information, it has the burden of proving that the documents relate to its commercial (industrial) secret or confidential information.
Lithuanian case-law adheres to the rule that the companies may extend the rights of shareholders in their articles of association as compared to how such rights are regulated in the Law on Companies and other legislation, although the Supreme Court of Lithuania has not adopted a specific decision on the extension of the shareholders’ right to information in the articles of association. Nevertheless, we recommend that the company's articles of association include a provision on the mechanism for exercising the shareholders' right to information, always remembering that the articles of association may not restrict the statutory rights of shareholders.
Your contact: Specialist Counsel Dr Dalia Foigt-Norvaišienė email@example.com