Head of FBK Legal Corporate Practice on the Rights of Minority Shareholders

Profile magazine publishes an opinion column of the head of FBK Legal Corporate Practice Alexander Ermolenko. The author is reviewing the initiative of The Ministry of Economic Development, which is providing to minority shareholders more rights regarding receiving information and documents from a joint stock company. Law makers also suggest introducing a “special auditor” institute: any shareholder with a more than 10% block of shares can demand an unscheduled audit of the company. “What makes the novelties revolutionary is that the shareholders can make such demands not only in terms of the joint stock company itself, but in terms of its accountable entities as well”, Mr. Ermolenko notes.

As the author emphasizes, at the first glance, the suggested measures are positive, as the struggle of minority shareholders with abuse in quasi joint stock companies is familiar to everybody, while additional control from minor shareholders may have good impact on the company finance. However there is the turn side as well. “Corporate law is a double-edged tool, so a law-maker is always to choose one of the principles: protecting interests of the principle shareholders providing stability to the company operations (often to the detriment of the minor shareholders), or protecting interests of minority shareholders increasing transparency and control (meanwhile making the company dependant on a person with one share)”, the author notes.