Twitter Logo Youtube Circle Icon LinkedIn Icon

Publishing firms

Legal Developments worldwide

Constitutional Court Rules on Squeeze Out

May 2007 - Corporate & Commercial. Legal Developments by BABIC & PARTNERS Law Firm .

More articles by this firm.

According to recent press release, in February 2007 the Croatian Constitutional Court overruled the claim filed by minority shareholders of Siemens affiliate in Croatia. The minority shareholders requested the Constitutional Court to declare that rules on squeeze-out introduced into Croatian legal system under the 2003 Amendments to Companies Act are in violation of the Croatian Constitution. Under the disputed rules, shareholders' meeting may, at the request of the majority shareholder holding at least 95% of the shares, decide to transfer to such majority shareholder the shares held by minority shareholders, provided that the squeezed-out shareholders are paid appropriate compensation.

The minority shareholders of Siemens affiliate in Croatia argued that this rule, and consequently the decision of Siemens affiliate in Croatia on the squeeze-out, violates their right of ownership over shares guaranteed by the Constitution. According to the press, the Constitutional Court rejected such arguments based on the standpoint that a shareholder's right to hold shares is not the right of ownership but rather a right acquired by capital investment. Constitutional Court held that the rights acquired by capital investment are not diminished by squeeze-out as the minority shareholders are guaranteed the payment of compensation for the shares transferred.

 

The Constitutional Court was on the standpoint that the legislative policy behind the rules on the squeeze out was the protection of the majority shareholder from potential abuse of minority shareholder's right to appeal against decisions of the shareholders' meeting and thus delay their implementation and disrupt the company's operations.

 

Contributed by Marija Gregorić, Partner at Babić & Partners

 

 

BABIĆ & PARTNERS

Law Firm
Nova cesta 60/ 1st floor
10000 Zagreb, Croatia

Phone: +385 (0) 1 3821 124
Phone/Fax: +385 (0) 1 3820 451
E-mail: marija.gregoric@babic-partners.hr