Procedure of forced buyout of shares (squeeze-out) in corporate law of Ukraine

Abstract

In the context of new changes in corporate legislation this article examines the specifics of the implementation and protection of the minority shareholders’ right to demand fair compensation for the mandatory sale of their shares in case of transfering control over the company to other shareholders (participants).
 It is stated that implementing the right to mandatory buyback of shares by the owners of a controlling stake (more than 95 percent of ordinary shares), the problems arise concerning the violation of the right of the remaining minority shareholders to receive fair compensation for the mandatory sale of their shares.
 It is highlighted that issues on implementing the right to buy back shares at a fair price by controlling shareholders are caused by the flaws of Article 95 of the Law of Ukraine «On Joint Stock Companies» concerning involving a professional appraiser, that violates the general rules established by the legislation on limit prices.
 Involvement of the evaluation activity subject to the independent determination of the company shares’ value at the request of minority shareholders who own at least 5% of the shares (or 1% in the case provided for by Article 95 of the Law on Joint Stock Companies), in order to overcome obstacles to exercise the right to a fair price through the mandatory sale of shares. The rule on the need to involve an appraisal activity subject conducting an independent appraisal of the value of the company’s shares at the request of minority shareholders who own more than 5% of the shares (or 1% or more, if it is provided for in Article 95 of the Law on Joint Stock Companies) should be removed from the Law .
 The method, developed by judicial practice, to protect the right to receive a fair price for shares in case of transfering control is contained in Article 95 of the Law of Ukraine «On Joint Stock Companies». In accordance with clause 21 of this article, any shareholder who believes that the price of the mandatory sale does not meet the requirements established by clauses 5-7 of this article, has the right to demand from the plaintiff compensation for the fair value of the shares purchased for such requirements due to the court procedure.