Shareholder Exit in Estonian Private Limited Companies: Proposals of the Company Law Revision Working Group

Authors

  • Andres Vutt
  • Margit Vutt

DOI:

https://doi.org/10.12697/JI.2021.30.16

Keywords:

company law, Estonian law, minority shareholder, shareholder exit, shareholder expulsion

Abstract

Private limited companies are small, closed companies in which, as a rule, there are few shareholders. Regrettably, conflicts arise between shareholders that cannot be resolved in such a way that the persons in dispute remain shareholders, since protracted litigation reduces the value of the company and may lead to the closing of the business. For resolving such situations, several countries have made provisions in their laws for the possibility of shareholder exit.

Current Estonian law does not provide for shareholder exit. The law regulates only a shareholder’s expulsion, but this remedy is not widely used in practice, since its scope is so limited. This mechanism cannot be used for solving the problems in most cases. There are some other possibilities for shareholder exit, but they are merely theoretical and have not been proved in case law.

A review of Estonia’s company law commenced in 2016, and the working group presented its proposals for amending the relevant laws in 2019. One proposal made by the revision working group was to bring into the law provisions governing shareholder exit. Under the proposals made, shareholder exit would be possible only for a valid reason and as ultima ratio. The right to claim for exclusion of a shareholder is held by any shareholder(s) having at least 50% of the votes. If a shareholder is excluded from the company, the court has to determine the compensation to be paid to the departing shareholder, taking into account the rules on capital maintenance.

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Published

2021-10-13

How to Cite

Vutt, A., & Vutt, M. (2021). Shareholder Exit in Estonian Private Limited Companies: Proposals of the Company Law Revision Working Group. Juridica International, 30, 140–151. https://doi.org/10.12697/JI.2021.30.16

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Articles