{"id":37220,"date":"2019-05-19T12:55:46","date_gmt":"2019-05-19T09:55:46","guid":{"rendered":"https:\/\/koumentakislaw.gr\/articles\/exagora-metoxon-meiopsifias\/"},"modified":"2019-06-10T08:11:32","modified_gmt":"2019-06-10T05:11:32","slug":"buy-out-the-minority","status":"publish","type":"post","link":"https:\/\/koumentakislaw.gr\/en\/articles\/buy-out-the-minority\/","title":{"rendered":"Minority Shareholders. Part C: The right of the majority to buy-out the minority"},"content":{"rendered":"

Minority <\/strong>Shareholders<\/strong><\/h2>\n

Part C: The right of the majority shareholder\u00a0to buy-out the minority shareholder<\/h2>\n

1. Preamble<\/strong><\/h3>\n

I have always been a strong believer that \u201cJustice\u00a0is\u00a0nothing but\u00a0the advantage of the\u00a0stronger\u201d. I could easily claim this quote\u2019s paternity if not: (a) Plato had not beaten me to it (just twenty-four centuries ago) in his work Republic (:\u201cListen\u2014I say that justice is\u00a0nothing but\u00a0the advantage of the\u00a0stronger\u201d) and (b) if that quote was not all over the internet.<\/p>\n

Plato, as proven through the course of history, wasn\u2019t wrong. This specific position Plato took has proven to be true in general \u2013 in inter-state relations, in exercising public authority, in family and personal relations\u2026 the list goes on! Especially when it comes to intra-company relations, this general principal has even been endorsed by legislators. An example could be the power given to the majority over the minority. Notwithstanding the many restrictions of that authority introduced in the Greek S.A. law, the great power held by the majority is without question.<\/p>\n

The opinions of the minority and the positions it takes are not always attractive. Sometimes, not even tolerated. Especially when a company is (or appears to or is anticipated to be) flourishing or when the minority is trying to force its rights (or the rights it thinks it has).<\/p>\n

The shareholders holding, on their own or with others, between 50% and 95% of an S.A.\u2019s shares cannot simply decide that \u201cit\u2019s high time we rid of the minority shareholders\u201d. There are of course ways to act -within or outside the law- in such a manner that could push to that direction. But if a shareholder is holding a percentage of 95% or higher over a company\u2019s shares, they do have the right to directly exercise all the rights the Greek law gives them, in article 47 of law 4548\/2019.<\/p>\n

We have already referred to the (legal) request a minority shareholder can make to be bought-out of a company by either the company itself or by the majority shareholder, as well as the relevant requirements and procedure (read related articles “Minority shareholders. Part A: The claim of redemption of their shares by the S.A.<\/strong><\/span><\/a>” and\u00a0 “Minority shareholders. Part B: Claim for buy-out by the majority shareholders<\/strong><\/span><\/a>“). In this article, we will study the obligation imposed on the minority shareholder to be bought-out by the majority shareholder (to be squeezed out). This provision seems and is directly opposing to the principle of freedom of contract (article 361 of the Greek Civil Code) and the right to economic freedom, as stated article 5 paragraph 1 of the Greek Constitution.<\/p>\n

 <\/p>\n

2. The right of the majority shareholder to buy-out the minority shareholder<\/strong><\/h3>\n

2.1 The requirement for the majority shareholder to be holding at least 95% of the company\u2019s shares <\/strong><\/h4>\n

In the case of a private S.A., (as far as public S.A.s are concerned, the rules of public offerings apply, supplemented by the Greek law of S.A.s), the first and most crucial requirement refers to the percentage over the company\u2019s shares held by the majority shareholder. The relevant provision of the Greek law of S.A.s (article 47 of law 4548\/2018) strictly refers to the shareholder holding at least 95% of the company\u2019s shares. Needless to say, this percentage of 95% is calculated as a percentage of the nominal value of shares held over the overall nominal value of all the company\u2019s shares. It is irrelevant whether a shareholder is holding 95% or more of the ordinary or of the preferred shares of the company. What is only important is the percentage of the company\u2019s shares held.<\/p>\n

2.2 Requirement for at least 95% of the company\u2019s shares to be held by one shareholder<\/strong><\/h4>\n

The right to force a buy-out on a minority shareholder lies only with the shareholder holding at least 95% over an S.A.\u2019s shares who accumulated that percentage after the company was established. In case a majority shareholder covered from day one (at the stage of the establishment of the S.A.) at least 95% of the company\u2019s share capital is not entitled to force a buy-out. In other words: the majority shareholder who set up the company and at that time was holding at least 95% of the company\u2019s shares is not entitled to force a buy-out over the minority shareholder at any time.<\/p>\n

It is important to stress that this specific provision provides only one shareholder with the right to force a buy-out. So we have to rule out the possibility of a cooperation-occasional or not- amongst two or more shareholders in order to gather up amongst all of them the percentage of 95% of a company\u2019s shares in order to force a buy-out on the minority shareholders.<\/p>\n

Let\u2019s remember what happens when you take a look from the \u201cother side\u201d, where non-such restriction applies: the minority shareholder holding 5% or less of the company\u2019s shares has the right (article 46 paragraph 1) to request to be bought out by the shareholder holding at least 95% of the company\u2019s shares. As we already examined (see related article<\/strong><\/span><\/a>), when calculating the percentage held by the majority shareholder, we count in the shares held by their related parties (ascendants, descendants, spouses, live-in partners and related legal entities). But in the case we are examining in this article, the law requires for only one shareholder to be holding at least 95% of the company\u2019s shares.<\/p>\n

We of course have to note that when the majority shareholder is a legal entity (e.g. a holding company or any other kind of company with more than one shareholders) holding at least 95% of the company\u2019s shares, this legal entity will be considered as one shareholder, no matter how many persons are holding said shareholders shares. In that same spirit, when calculating the percentage held by the majority shareholder, we have to count in the shares that they are holding as a security for their claims, but whose ownership they have.<\/p>\n

2.3 Time Limit<\/strong><\/h4>\n

The right given to the majority shareholder (holding at least 95% of the company\u2019s shares) to force a buy-out is subject to a five-year limitation period. This five-year period starts the moment the majority shareholder accumulates at least 95% of the company\u2019s shares. After the lapse of this five-year period, the aforementioned majority shareholder no more has the right to force a buy-out on the minority shareholder.<\/p>\n

Needless to say, the law does not force the majority shareholder to notify (when the five-year time starts counting, that is when:) the moment the percentage they hold over the company\u2019s shares reaches or exceeds that of 95%.<\/p>\n

2.4 The procedure leading to the buy-out<\/strong><\/h4>\n

The majority shareholder that wishes to buy-out one or more minority shareholders has to submit the relevant request to the competent court (article 47 par. 2 of law 4548\/2018). The latter will rule whether the requirements set by law are met. If the majority shareholder\u2019s action is upheld, the court will rule on a just and equitable price per share, as well as on the specific terms the buy-out will be implemented. In order to determine the price per share, the court will take into consideration the value of the company. The majority shareholder will provide the court with an independent expert report (article 47 par. 2 and article 17 par. 3 of law 4548\/2018) which in most cases is conducted by either two chartered accountants or an audit firm. When conducting the report, said experts are given access to all the company\u2019s financial data by the company\u2019s B.O.D.. This expert report, although required by law, does not bind the court.<\/p>\n

2.5 The obligation to deposit the financial compensation in a Credit Institution<\/strong><\/h4>\n

Following the publication of the ruling of the court and in case the request filed by the majority shareholder is allowed, the latter has to deposit the financial compensation owed, as determined by the court, to a Credit Institution in the name of the shareholder being bought out. Said deposit will take place only after their identities of the beneficiaries are confirmed. In case six months after said deposit go by without them (the shareholders being bought out) withdrawing their compensation, the Credit Institution reserves the right to \u201ctransfer\u201d the sum to the Deposits and Loans Fund.<\/p>\n

2.6 Public Declaration<\/strong><\/h4>\n

In order to exercise their right to buy-out the minority shareholders, the majority shareholders have to make a public declaration (published on the HELLENIC\u00a0BUSINESS\u00a0REGISTRY). This declaration will have to include (article 47 paragraph 4):<\/p>\n