Sole Shareholder Research Articles

ON THE ISSUE OF MANDATORY NOTARIAL CONFIRMATION OF DECISION-MAKING BY THE SOLE SHAREHOLDER

Since the issuing of Overview of judicial practice on some questions of usage legislation of business companies in 2019 by Presidium of the Supreme Court of Russian Federation remains unclear the possibility to spread the interpretation of the decision-making procedure of sole member of limited liability company to decisions of sole shareholder. The following article examines sources of legal regulation and existing legal positions of the mentioned problem and researches the mandatory of notarial certification of sole shareholder’s decisions.

Private Limited Company in Indonesian Positive Law: Elaborating The Basic Concept of Corporate Law, Comparison to Other Countries and Its Development

The concept of a private limited company was first introduced in the Job Creation Law which is different from the concept of a company in the previous regulation. It is important to dig deeper into the concept of a private limited company: is it possible for a company legal entity to only have a single shareholder or it must be established by a minimum of 2 (two) persons as shareholders? Therefore, this paper applied the normative juridical method, which is believed to be able to answer the aforementioned problem. This paper reviewed the concept of a private limited company juxtaposed with the concept of a company that was in effect before the Job Creation Act and elaborated on the development of company regulations in Indonesian Law. In conclusion, it is found that the basic concept of a private limited company (as a legal entity) can be established by 1 (one) person, as the founder and sole shareholder, that is, as long as the establishment of the company is authorized by the state. Furthermore, the development of company legal arrangements in Indonesian law shows that the law must be responsive to the development of society. This is evident from several changes in the regulation of company law in Indonesia to accommodate the needs of economic development in society.

Pembagian Harta Bersama Pada Saham Pendirian Perseroan Terbatas

Divorcement of husband and wife does not necessarily terminate all matters between both divorced parties, there are legal consequences to be considered, one of which is joint property that must be shared. Positive law in Indonesia does not yet fairly regulate distribution of joint assets in shares of Limited Liability Companies in the Decision of the Supreme Court number 80/Pdt.G/2020/PN.JKT.UTR. Following the case above, the author is interested to discuss: (1) How is the distribution of joint assets in shares of the establishment of a limited liability company? (2) What are the Legal Consequences for the Distribution of Joint Assets to Limited Liability Company Shares? This study uses normative research methods. Several conclusions can be drawn from the results and discussion. First, in case the company is established by husband and wife then divorced, one of them must sell their shares to another person within 6 months, if after 6 months the shares have not been transferred to another person, all losses or legal consequences of the company is the responsibility of either husband or wife, and if there is an interested third party, they can apply for the company dissolution to the local District Court. Second, that the assets of a limited liability company established by husband and wife, any losses as long as the shareholder is a sole shareholder, will be the responsibility of the sole shareholder and borne by the assets of the shareholder. As legal protection provided by the law of limited liability company on the legal consequence is that each limited liability company shareholder becomes sole because of the reduction in the company's shareholder, then the law provides a period of 6 months to sell part of its shares to other parties.

LIC Acquisition of IDBI Bank: The Corporate Marriage of Unfulfilled Promises

The insurance business model is fundamentally different from that of the banking business model. The Government of India (GoI) is the sole shareholder, both for Life Insurance Corporation (LIC) and Industrial Development Bank of India (IDBI); therefore, it made a business case for LIC’s acquisition of IDBI bank as a proposition for bailing out IDBI bank and then foray into bank assurance, giving LIC a unique footprint in the banking landscape. This case study highlights the rationale of this acquisition by evaluating synergies, economies of size and scale of opportunities, forward-backward integration of their products and services. This case study illustrates that forced corporate marriages, where the ownership is entirely with the GoI, both before and after the acquisition has its advantages, but on the flip side, has many disadvantages.

Notes: Confusion in the removal of directors by shareholders under the Companies Act 71 of 2008: Miller v Natmed Defence (Pty) Ltd

This note critically analyses the judgment in Miller v Natmed Defence (Pty) Ltd 2022 (2) SA 554 (GJ), in which the court ruled on the validity of the removal of a director by the company’s sole shareholder. Three issues were in contention: whether a shareholder must furnish the director with reasons for the proposed resolution to remove a director from office under s 71 of the Companies Act 71 of 2008; whether a shorter notice period for the shareholders’ meeting was legally acceptable; and whether the meeting that was held telephonically was valid. The court ruled that the director’s removal from office was valid and dismissed his request to be reinstated as a director. This note critically analyses the judgment and argues that the court misinterpreted some aspects of s 71 of the Act.

The Higher Regional Court of Frankfurt am Main Is the First European Court to Declare the Achmea Case a Landmark Decision with Significance for All Intra-EU BITS

In February 2021, the Higher Regional Court of Frankfurt am Main (Oberlandesgericht – “olg”), rendered a decision in the case between the Republic of Croatia (“Croatia”) as the applicant, and an Austrian bank incorporated as a joint stock company under Austrian law and a Croatian bank incorporated as a joint stock company under the laws of Croatia having the Austrian bank as its sole shareholder as the Respondents (“Respondents”). This decision concerns the incompatibility of an arbitration clause contained in the Agreement between the Republic of Austria and Croatia on the Promotion and Protection of Investments (“Austria-Croatia bit”)2 with EU law. Croatia successfully challenged the admissibility of an uncitral arbitration based on Article 9(2)(b) of the Austria- Croatia bit, initiated by the Respondents, by virtue of an application under Section 1032(2) of the German Code of Civil Procedure (Zivilprozessordnung – “zpo”). Croatia argued that Article 9(2)(b) of the Austria- Croatia bit was incompatible with EU law.

Disposal of the Interdiction on Being a Sole Shareholder in Several Limited Liability Companies (The Repeal of Art. 14 of the Companies Law No. 31/1990) – Who Does It Use?

The present article proposes a brief analysis of one of the most controversial amendments to the Companies Law no. 31/1990: the repeal of art. 14 or, in translation, the disposal of the interdiction on a natural or legal person on being a sole shareholder in several limited liability companies. Starting from the presentation of the route taken by the legislative proposal- which currently takes the form of Law no. 102/2020 for the amendment and completion of the Companies Law no. 31 / 1990-, presenting the reason for such a change, in the final part of the article we balance the nuances of enthusiasm, but also those of reluctance with which the doctrine and the business environment embraced the disposal of this interdiction.

From Profit to Polity: A U.S. Water Utility’s Transition to a Government-Shareholder Model

The Pennichuck Corporation, located in New Hampshire, U.S., provides a unique opportunity to explore the rare structural transition from investor-ownership to a government-shareholder model for a long-standing regional water utility. In early 2012, concluding a ten-year dispute, the City of Nashua leveraged its power of eminent domain to become Pennichuck’s sole shareholder not by a taking but by a stock purchase agreement transferring the entirety of the company’s regulated and unregulated assets. We draw on primary documentation and data to review the terms of the transaction and contrast the ex-ante and ex-post models. Utility operations and state economic regulation remained constant over the transition, thus controlling for their potential effects. Our descriptive analysis of time-series financial and other data provides evidence of outcomes, including the lower cost of capital and operations. This information-rich case illustrates the arduous process of public acquisition, calling into question the institutionalized policy asymmetry favoring private over public acquisitions, which undermines structural competition.

The Higher Regional Court of Frankfurt am Main Is the First European Court to Declare the Achmea Case a Landmark Decision with Significance for All intra-EU BITs

In February 2021, the Higher Regional Court of Frankfurt am Main (Oberlandesgericht– ‘OLG’), rendered a decision in the case between the Republic of Croatia (‘Croatia’) as the applicant, and an Austrian bank incorporated as a joint stock company under Austrian law and a Croatian bank incorporated as a joint stock company under the laws of Croatia having the Austrian bank as its sole shareholder as the Respondents (‘Respondents’). This decision concerns the incompatibility of an arbitration clause contained in the Agreement between the Republic of Austria and Croatia on the Promotion and Protection of Investments (‘Austria-Croatia BIT’) with EU law. Croatia successfully challenged the admissibility of an UNCITRAL arbitration based on Article 9(2)(b) of the Austria-Croatia BIT, initiated by the Respondents, by virtue of an application under Section 1032(2) of the German Code of Civil Procedure (Zivilprozessordnung – ‘ZPO’). Croatia argued that Article 9(2)(b) of the Austria-Croatia BIT was incompatible with EU law.

The paradoxes of Russian railways’ loan policy

Russian Railways is gradually increasing its loan debt, which reflects the general trend of the economy. But, taking into account the objective economic state of railway transport and its low profitability, the increase in the share of borrowed funds reduces the company efficiency. This contradicts the purpose of using the loan, the purpose of which is to increase the return on equity. While analysing the results of the transport industry, we regarded it as an infrastructure industry, whose goal is primarily to provide macroeconomic indicators, and the problems of making profit recede into the background. An important factor in the development of the Russian economy in consideration of its geographical location is the development of transport networks, in which the predominant (at present and in the future) one is railway transport. However, its technical state requires significant modernization, investments far exceeding its own resources. The state, as a sole shareholder of Russian Railways OAO, does not have the necessary financial resources to handle the modernization, so Russian Railways is turning to the capital market, even reducing profitability. Private capital is willing to invest its capital only in separate modernization projects that can provide an acceptable rate of return for them. This explains the borrowing of capital for modernization at a price far exceeding the return on equity. At present, economic losses are expected to be set off by future revenues and mainly by the multiplicative effect of the economic growth of the national economy and the resolution of geopolitical problems. The purpose of the article is to try to explain the loan policy of Russian Railways.

تجرید الشریک فى شرکة الشخص الواحد من المسؤولیة المحدودة دراسة مقارنة

سمح المشرع المصرى في عام 2018 بإنشاء شرکة الشخص الواحد. وقد کان هذا التعديل نتيجة لجدل قانونى محتدم بين مؤيدى مبدأ وحدة الذمة المالية وبين مؤيدى فکرة السماح بإنشاء شرکة الشخص الواحد کاستثناء على مبدأ وحدة الذمة المالية تشجيعا للتجارة والاستثمار. هذا وقد کان العامل الأساسى لدى مؤيدى مبدأ وحدة الذمة المالية هو الخشية من إساءة استخدام الشريک في شرکة الشخص الواحد لمبدأ المسؤولية المحدودة للإضرار بدائني الشرکة والغير. وقد ظهر مبدأ التجريد لمعالجة حالات إساءة استخدام مبدأ المسؤولية المحدودة ومضمون هذا المبدأ هو تنحية الشخصية المعنوية للشرکة بکل ما يستتبعه ذلک من تمتع الشرکة بذمة مالية مستقلة عن الشرکاء واعتبار الشريک مسؤولا مسؤولية شخصية عن ديون الشرکة. وبناء عليه تعالج هذه الدراسة مبدأ التجريد من المسؤولية المحدودة کضمانة لعدم إساءة استخدام مبدأ المسؤولية المحدودة في شرکات الشخص الواحد. وتبدأ هذه الدراسة ببحث أصول مبدأ تحديد المسؤولية في قوانين الشرکات المقارنة. ثم تتطرق هذه الدراسة إلى بحث الجدل القانوني حول السماح بإنشاء شرکة الشخص الواحد. وتبحث هذه الدراسة مبدأ التجريد من المسؤولية المحدودة في القانون الإنجليزى والأمريکي کمثالين لدول القانون العام والقانون الألماني کمثال على دول القانون الخاص الأوروبية وقوانين بعض البلاد العربية المختارة وهي دولة الإمارات العربية المتحدة ومصر. ثم تختتم هذه الدراسة ببيان أهم الضوابط التي تحکم مبدأ التجريد في القانون المصرى والمقارن. In 2018 the Egyptian legislator allowed the establishment of one- man companies. This new amendment was a result of heated legal debates between proponents of the doctrine of Unified Patrimony and the supporters of the view that called for the establishment of one-man companies as an exception of the doctrine of Unified Patrimony in the interests of trade and investment. The main concern of opponents of the establishment of one-man companies is the abuse of the limited liability by the sole shareholder in a one-man company to the detriment of the company’s creditors as well as third parties. Accordingly, the doctrine of piercing the corporate veil has emerged as a buffer to prevent the abuse of the doctrine of limited liability by allowing the court to disregard the separate personality of the company including the company’s separate patrimony and holding the partner personally liable for the debts of the company. This article addresses the doctrine of piercing the corporate veil as a safeguard to prevent the abuse of the corporate form in one-man companies. Accordingly, this study looks at the origins of the principle of limited liability under comparative company law. Then, the study looks at the legal debates that accompanied the establishment of one-man companies. The study further examines the doctrine of piercing the corporate veil under the English and American Law as examples of Common Law Countries, German Law as an example of a European Private Law country and finally, the stance of selected Arab Laws regarding the doctrine of piercing the corporate veil is examined using the United Arab Emirates Law and Egyptian Laws as examples. Finally, the study concludes by outlining the major principles governing the doctrine of piercing the corporate veil both under the Egyptian Law and Comparative Law.

Mutation of the CD28 Co-Stimulatory Domain Confers Enhanced CAR T Cell Function

An obstacle with continued clinical development of CAR T cells is the limited understanding of their biology and mechanisms of anti-tumor immunity. We and others have shown that CARs with a CD28 co-stimulatory domain drive high levels of T cell activation that also lead to exhaustion and shortened persistence. The CD28 domain includes 3 intracellular subdomains (YMNM, PRRP, and PYAP) that regulate signaling pathways post TCR-stimulation, but it is unknown how they modulate activation and/or exhaustion of CAR T cells. A detailed understanding of the mechanism of CD28-dependent exhaustion in CAR T cells will allow the design of a CAR less prone to exhaustion and reduce relapse rates. This led us to hypothesize that by incorporating null mutations of CD28 subdomains (Fig 1A) we could optimize CAR T cell signaling and reduce exhaustion. In vitro, we found mutated CAR T cells with only a functional PYAP (mut06) subdomain secrete significantly less IFNγ, IL6, and TNFα after 24hr stimulation compared to non-mutated CD28 CAR T cells, but greater than the 1st generation m19z CAR. Also, cytotoxicity was enhanced compared to non-mutated CARs (Fig 1B). Using a pre-clinical immunocompetent mouse tumor model, we found the mut06 CAR T cell treated mice had a significant survival advantage compared to non-mutated CD28 CAR T cells (Fig 1C). To examine exhaustion, we ex vivo stimulated CAR T cells with target cells expressing CD19 and PDL1 and found mut06 CAR T cells had increased IFNγ (42%), TNFα (62%) and IL2 (73%) secretion compared to exhausted non-mutated CD28 CAR T cells. This suggests that mut06 CAR T cells are more resistant to exhaustion. To find a mechanistic explanation for this observation we examined CAR T cell signaling. After 24hr stimulation with CD19 target cells mut06 CAR T cells had a significant reduction in pAkt compared to m1928z CAR T cells, which is a critical signaling mediator in the NFAT and NR4A1 transcription factor pathways. Additionally, mut06 had decreased p-NFAT compared to m1928z when examined by western blot. To determine how optimized CAR signaling affected T cell exhaustion we looked at 22 genes that are upregulated when NFAT is constitutively active and overlap with genes identified as important for T cell exhaustion. We found that most of the exhaustion related genes were upregulated in m1928z CAR T cells while they were decreased in m19hBBz. The mut06 CAR T cell gene expression pattern was more similar to m19hBBz with exhaustion related genes downregulated compared to m1928z (Fig 1D). To examine differences in the accessibility of exhaustion related genes we performed ATAC-seq and found NFAT (Nfatc1) and NR4A2 (Nr4a2) had lower chromatin accessibility profiles in mut06 compared to m1928z (Fig 1E). We also found that exhaustion related genes Havcr2 (TIM3), Pdcd1 (PD1), and Lag3 (LAG3) all had greatly reduced chromatin accessibility in mut06 CAR T cells compared m1928z. Overall, these genomic studies support our findings that mut06 optimizes CAR T cell signaling by lowering transcription factors that regulate exhaustion. Figure 1 Disclosures Li: ImmuneBro Therapeutics: Other: sole shareholder . Davila:Atara: Research Funding; Celgene: Research Funding; GlaxoSmithKline: Consultancy; Novartis: Research Funding; Anixa: Consultancy; Bellicum: Consultancy; Adaptive: Consultancy; Precision Biosciences: Consultancy.

Ownership structure and financial performance of Spanish port service companies

The Spanish port system represents approximately 20% of the transport sector’s GDP. We analyse the impact of ownership structure, in particular the family characteristics of Spanish port services companies, on profitability. Our study reveals that the ownership of these companies is highly concentrated, with more than 80% having a dominant shareholder, while over 60% are in the hands of a family, which in most cases is the only shareholder. Of the port services themselves, we find that the most profitable one is pilotage, with an average Return on Assets (RoA) of 26%, while the least profitable port service is cargo handling (7.8%); the rest have similar returns, ranging between 12 and 14%. In terms of the ownership-profitability relationship, the results lead us to conclude that companies with one sole or dominant shareholder are more profitable. We show that profitability declines when the sole shareholder is a member of the family. We also find that companies in which the family maintains ownership in second or successive generations are more profitable than those of the first generation. These results suggest that the existence of other, non-family, shareholders reduces the negative influence of the family, and that the alleged greater degree of professionalization of managers in second and successive generations contributes to improving the results of family businesses. We believe our results are applicable to other family businesses outside the port domain.

The Outer Limits of Realization: Weiss v. Stearn and Corporate Dilution

The United States Supreme Court’s 1924 Weiss v. Stearn decision involved a classic case of corporate dilution. In that case, a corporation (“Oldco”) transferred its business to a new corporation (“Newco”) in a transaction in which the Oldco shareholders surrendered all their stock for 50 percent of the stock of Newco (and cash). The transaction diluted the proprietary interest of the Oldco shareholders from 100 percent to 50 percent. Because the Oldco shareholders surrendered control of the enterprise, the 50 percent interest they received in Newco was fundamentally different from the 100 percent interest they had owned in Oldco. Nevertheless, the Court held that the receipt of the Newco shares was not a taxable event (a “realization event”) to the Oldco shareholders. The Court reached this result by ignoring the dilution that occurred in the case.In 1991, the Supreme Court resurrected the Weiss v. Stearn decision in the Cottage Savings case. There, the Court relied on Weiss v. Stearn to establish that the exchange of property triggers a realization event only if the property received is “materially different” from the property surrendered. Once again, the Court ignored the dilution that occurred in Weiss v. Stearn. As a result, Supreme Court jurisprudence sheds no light on the question of whether corporate dilution can trigger realization.Corporate dilution is a common phenomenon. It can result from an actual exchange of proprietary interests, like the transaction in Weiss v. Stearn. It can also occur when a shareholder does not physically transfer shares. For example, if a sole shareholder of a corporation sells 50 percent of her stock to a third party, the diluted 50 percent interest she retains is as different from the 100 percent interest she previously owned, as were the interests in Weiss v. Stearn. Notwithstanding the pervasiveness of dilutive transactions, no significant scholarship addresses the impact of dilution on realization.This Article explores the fundamental question of when corporate dilution should trigger realization. By virtue of the “material difference” standard that emerged from Cottage Savings, the transaction in Weiss v. Stearn should be treated as a realization event. Specifically, the loss of control that resulted from the Stearn transaction left the original shareholders with a materially different interest in the enterprise. More significantly, the material difference standard should be extended to treat realization as occurring in an equally dilutive transaction that does not entail a physical transfer of the diluted interest. As long as a material difference exists, the shareholder should be treated as engaging in a “deemed exchange” of the 100 percent interest for the 50 percent interest, thereby triggering a realization event. Now that nine decades have passed since the Stearn decision was rendered, it is high time for the impact of dilution on realization to be clarified.

Ochberg v CIR: No “benefit” to the benefactor

This article analyses the South African case of Ochberg v CIR, which dealt with the question whether shares issued by a company to Ochberg, who was, for all intents and purposes, the sole shareholder, in consideration for services rendered and an asset provided to the company, constituted “income” in terms of the definition of “gross income” in section 7(1) of the Income Tax Act No. 40 of 1925 (as it then applied). Ochberg’s contention was that he had received no benefit from the additional shares issued as the value of all the shares issued had been the same both before and after the issue of the shares. Accordingly, there had been no increase in his wealth and thus no income had been received. The majority decision (two of the five judges dissenting) of the Appellate Division of the Supreme Court held that the shares were “income” and had to be valued at their nominal value. The article first provides a glimpse into the life of Isaac Ochberg, who was a substantial benefactor to charitable causes. It then presents a thematic analysis of the four separate judgments set down in the case, and finally, discusses certain tax principles arising from the judgments. In conclusion, the article considers to what extent Ochberg benefited from the transaction in terms of the Haig-Simons model of taxation and the economic reality of the transaction. The lasting value of the decision is demonstrated with reference to citations of Ochberg v CIR in a number of more recent landmark cases.

EFFECTIVE COMPANY AND CORPORATE LEADERSHIP IN THE NIGERIAN COMMERCIAL BUSINESS TERRAIN IN THE 21ST CENTURY: A MYTH OR REALITY?

The principal objective in the formation or incorporation of companies is to foster the spirit of entrepreneurship, business enterprise, efficiency, generation of employment with a view to enhancing economic welfare of the people and for the social and economic development of the society. In addition, it is a general principle of law under Nigerian jurisprudence that a company is not birthed until its certificate of incorporation (hereinafter COI) is issued by the Corporate Affairs Commission (hereinafter referred to as CAC). The brain child or the people behind every company before it comes into existence are called the promoters, who in any case, eventually still own or become first directors, subscribers or shareholders of the company. The promoter under CAMA enters what is referred to as pre-incorporation contracts on behalf of the yet-to-be formed company. Under the law, when the company finally comes into existence, the contract done on its behalf may or may not be ratified by the company through its directors. However, under section 18(2) of CAMA, 2020, one person may now form or incorporate a company and become the sole shareholder or director as against section 20(2). With this present position under section 18(2) of CAMA, will corporate governance and leadership be a reality or a myth? The research questions in this article are: when the company eventually comes into existence after the issuance of COI, how will the company be managed or administered under section 18(2)? will the leadership of the company bring the desired goals of establishing a company with a one man show? in corporate governance, are there lessons to learn by corporate and/or company leaders in the present Nigerian business environment?

Companies Held Not to Be Associated by Family Relationship

This case note summarizes the determination of the Rajasthan High Court, and the preceding rulings by the Commissioner of Income Tax – Appeals and the Income Tax Appellate Tribunal, in Jaipur Silver Jewels P. Ltd v. Commissioner of Income Tax, that two companies are not associated enterprises simply because (i) the sole shareholder of one company is the sister-in-law of the director of the other company, and (ii) premises occupied rent free by one company are owned by the brother of the director of the other company.

Joint stock companies having the local government as sole shareholder – some practical remarks in the case of Romania

As a general rule, a joint stock company is based on a contract, therefore at least two shareholders are necessary to establish such a business entity. A sole shareholder joint stock company has an exceptional character, because it can be founded only by the state or by the local government. In the Romanian jurisprudence recently several important problems were raised regarding the operation of sole shareholder joint stock companies, therefore a detailed analysis of the court cases dealing with the representation of the interests of the sole shareholder and with judiciary control over the activity of such companies seems pertinent.

Catch and Release

Catch and Release

Attribution in Company Law

In Bilta (UK) Ltd (in liquidation) v Nazir (No 2), the Court of Appeal held that the ex turpi causa defence was inapplicable by refusing to attribute the fraud of the directors and the sole shareholder to the company in connection with the company's claim against them and third party co-conspirators. It is significant that the court has not only clarified the law in relation to attribution, but it did so by rejecting the majority's reasoning and endorsing the dissenting judgment in the House of Lords decision in Stone & Rolls (in liquidation) v Moore Stephens (a firm). This article evaluates the decision in Bilta by critically examining the fundamental principles and policies that apply to the three distinct circumstances under which corporate attribution should or should not take place.