Source: https://www.juridicainternational.eu/index.php?id=14585
Timestamp: 2019-04-20 17:09:08+00:00

Document:
The effectiveness of a legal provision serves as demonstration of its actual impact in the society, as well as whether that specific provision can be implemented in practice. *2 Law is effective only if it is possible to enforce it. Connected with this principle is a succinct maxim often applied in Anglo-American jurisprudence: For every right, there’s a remedy—a statement derived from the Latin concept of ubi ius ibi remedium. *3 Accordingly, law needs remedies—opportunities established for the benefit of an entitled person to eliminate the negative consequences of the violation of an obligation that occurred with respect to him or to prevent the realisation of such consequences.
This article aims to investigate the specific nature and objectives of shareholders’ remedies under company law and the approaches employed by different legal systems and countries to the systematics of shareholders’ remedies. The paper will also provide an assessment of the regulation of this particular issue under Estonian law.
However, one certainly cannot claim that remedy as an independent legal concept is something characteristic solely to the Germanic law of obligations. The term can be found in the Principles of European Contract Law *9 , whose Article 8.101 (1) provides that whenever a party does not perform an obligation that is set forth in the contract and the non-performance is not excused, the aggrieved party may resort to remedies. These are remedies under contract law, and their systematics proceeds from the violation, providing for which remedies are available. Likewise, Chapter 3 of Book III of the Common Frame of Reference *10 contains regulation of remedies for non-performance.
The dilemma under company law lies in the fact that, on the one hand, any company, in order to operate, needs a stable environment. The managers of a company need to act independently within the limits of the powers conferred upon them and to have a guarantee that, under normal circumstances, there will be no interference in the day‑to‑day economic activities of the entity they manage. On the other hand, there is a risk of abuses because of conflicts between the management board and the shareholders, characteristic especially of companies with fragmented holdings, as well as conflicts between the majority and minority, which are burdensome for those companies with one strong majority shareholder and a number of minority shareholders. *12 Contradictions may also develop, and proper remedies are necessary in the case of closed limited companies in which the shareholding is evenly split between two shareholders or between two homogenous interest groups who, whilst having similar interests and acting together, compete with each other. *13 Thus it can be seen that the requirements imposed on the catalogue of remedies under company law are more diverse.
A remedy under company law is, it may be said, a legal measure whose objective is to eliminate or prevent the negative consequences of violations committed by subjects in company law (such as a company, members of its directing body, or shareholders). However, a remedy under company law may, in equal measure, be directed toward the prevention of future violations.
While the legal literature discusses protection of the shareholders, the emphasis has differed: in America, it has been on protection of shareholders as a class, in contrast to Europe, where the focus is on the protection of minority and small shareholders. These approaches have been conditioned by the differences between the relevant capital markets—compared to the USA, Europe (in particular, continental Europe) features considerably more limited companies that are controlled by a majority shareholder. *17 Majority interest has been the basic principle guiding company law. However, as Finnish researcher Seppo Kinkki has explicitly stated, the existence of minority protection is the very reason for which a person, instead of just giving his money to a random stranger, would invest it in a limited company. *18 In fact, Japanese jurist Eiji Takahashi has posited minority protection to be the paramount task of modern company law. *19 Whilst a majority shareholder should be able to protect his rights by voting, the minority shareholder does not have that option.
The shareholder, being the original owner of the investment, will, according to the legal principle of casum sentit dominus *20 , generally bear the risks inherent to the company. *21 However, according to that principle, the owner bears only the so-called risk of accidental destruction *22 , while for errors of the management clearly beyond the scope of the business judgement rule *23 , the liability shall be borne by the person who made such an error. This means that the shareholder carries a risk to lose his investment should the business fail. Where the directing bodies have acted in keeping with the business judgement rule—i.e., when they have observed the due-care obligation of a prudent entrepreneur—any consequences of loss of assets invested in the company by the shareholders shall be borne by those shareholders if the business fails. However, if the directing bodies have not exercised due care in management, the shareholders need not bear the negative consequences and the members of management must compensate for the damages they have caused. Such is the principle of casum sentit dominus as expressed in the structure of a limited company as a legal entity.
A remedy available to a shareholder under company law is, in the broadest sense, any right vested in a shareholder to prevent a planned violation or to respond to a violation already committed in the company (by taking action to clarify the violation; demand the elimination of the consequences of the violation, restoration of the original situation, or claim damages; etc.). In this sense, among the remedies a shareholder can exercise are also the right to call a general meeting when the management board has not summoned a general meeting after receiving a demand from the shareholders (set forth in § 292 (2) of the Commercial Code *24 ), the right to demand a special audit (see § 330 (2) and (21) of the CC), claims related to merger and winding-up procedures, and other remedies. *25 In a narrower sense, the remedies available to a shareholder may be understood primarily as claims directed toward the elimination of the consequences of violations, of which contestation of the resolutions of the general meeting or directing bodies and compensation for damages are the primary ones.
In comparison to remedies under the law of obligations, for which the objective is to eliminate a violation arising from an obligation, the objectives of the remedies available to a shareholder under company law are somewhat broader. The objective of remedies under company law are not necessarily limited to the enforcement of a particular, purely subjective right (such as compensation for damages); rather, they are targeted at protecting the interests of the company as a whole—catering to reasonable resolution of conflicts within the company, alleviating discord between majority and minority shareholders, preventing abuse by directing bodies, or creating an adequate and flexible system to address the consequences of violations already committed. This logically gives rise to the question of whether remedies under company law should be always and in any event guaranteed to each individual shareholder or whether it makes sense to establish in certain cases some specific majority vote requirements.
The existence of any remedy is justified by the right whose enforcement the corresponding remedy purports to serve. A concrete remedy can be viewed from two angles—firstly, from that of the right protected and secondly from the perspective of violation as consequence. The question is of whether individual shareholders (or a minority holding a certain number of votes) should have the possibility of controlling only the resolutions adopted at a general meeting, by contesting the resolutions that are unlawful or adopted in violation of the rules of procedure, or they should also be granted the same right of control over the activity of the directing bodies, vesting in the shareholders, inter alia, the right to bring charges against the members of the directing bodies to remedy a violation or to compensate for damage. *33 On the topic of democracy in company law, the literature notes that it is not so much democracy of shareholders as it is democracy of the shares, meaning that the general emphasis leans toward building the catalogue of other legal options on one’s proportion of property rights. *34 The principles of company law do, however, accept to a certain extent the right of the shareholders to control the activities of the directing bodies, and, despite the general rule that the majority decides, it is deemed necessary to protect the rights of the minority against abuse by the directing bodies and the majority shareholder.
In creating a catalogue of remedies for shareholders under company law, one should take into account more factors than merely the need to restore someone’s subjective right that has been violated. In addition to the interests of shareholders, the interests of a company as a social whole and those of its other interest groups must be born in mind as well as the need to launch changes vital to the shaping of a secure investment environment and the normal operation of the company. It should also be considered that the system of measures should be developed in a balanced and proportionate way.
In summary, it can be stated that the affording to shareholders of remedies under company law is a rather significant issue of legal regulation; the only question concerns the objectives sought and whether or not such measures are consistent with the general legal and economic environment of the state.
The systematics of the shareholders’ remedies in the United Kingdom are reflected in the consultation paper prepared by the Parliament-commissioned Law Commission (Shareholder Remedies Consultation Paper, hereinafter ‘SRCP’). *47 The document analyses the rights of shareholders as well as the main types of existing remedies and their application. Shareholders’ remedies are accorded a rather broad meaning, and distinction is made among personal actions of shareholders, derivative actions *48 , unfair prejudice remedies (in German, Beeinträchtigung), and additional remedies arising from the law. *49 The main remedies the paper deals with are the shareholders’ derivative actions and unfair prejudice remedies. The last of the remedies mentioned here, also called oppression remedy, allows the minority to contest any abuse of the minority rights and also contest acts damaging the company generally. This remedy has been treated as an effective measure also in Canadian corporate law, into which it was incorporated in 1983. *50 Such a remedy was already in place in the law of the UK as far back as in 1948, and before the corporate-law reform of 2006, it was regulated by Articles 459–561 of the Companies Act. The Companies Act in effect since 2006 *51 also provides for such remedy; namely, Article 994 specifies that a member of a company may apply to the court, by means of a petition, for an order on grounds that the company’s affairs are being, or have been, conducted in a manner that is unfairly prejudicial to the interests of members generally or that an actual or proposed act or omission of the company is, or would be, so prejudicial. The persons whose rights are affected may represent all or only some of the shareholders, but in order for them to bring charges, the condition necessary is that at least the rights of the petitioner have been violated.
This remedy is considered to be a complex and flexible legal option that can be exercised by the court to assess the various aspects of the company’s business operations and simultaneously resolve different types of disputes. *52 A. Reisberg has called this measure a substitute for a derivative action and referred to the fact that British courts continue to be more keen to process such actions than derivative actions. *53 The SRCP too indicates that this is an important procedural alternative to a derivative action. Part 9 of the SRCP analyses the instances wherein the unfair prejudice remedy is used the most, among which are exclusion from management, failure to provide information, increase of the share capital issued, alteration of articles of association, diversion of company business and ‘misappropriation’ of assets *54 , excessive remuneration or non-payment of dividends, and mismanagement (SRCP, 9.33–9.44).
If we proceed from the classification according to which shareholder actions are divided into actions aimed at correcting resolutions and so-called defence actions, it becomes clear that Estonian corporate law focuses on the opportunity granted to a shareholder to contest the resolutions of a general meeting or directing bodies. Both the General Part of the Civil Code Act *62 (hereinafter ‘GPCCA’) and the Commercial Code distinguish, in the case of contested resolutions of a general meeting, between invalidation of resolutions and nullity of resolutions. In respect of public limited companies, the special provision made in § 302 (1) of the CC applies. Under this provision, on the basis of an action filed against a public limited company, a court may revoke a resolution of the general meeting of shareholders that is in conflict with the law or the articles of association. Pursuant to subsection 3 of the same section, a shareholder who did not participate in the general meeting may demand the revocation of the resolution. A shareholder who did participate may demand revocation only if said shareholder’s objection to the resolution has been entered in the minutes of the general meeting. Thus, the law does not require that a shareholder necessarily prove that a resolution violates his rights (a violation may be objective), but, instead, it directs the shareholder to take proactive measures and at least have his objection recorded in the minutes. The purpose of such regulation is to reduce the opportunities to file protection actions.
An action to establish nullity of a resolution is provided for in § 3011 (1) of the CC, under which the resolution of the general meeting of shareholders is void if it violates a provision of law established for protection of the creditors of the associated public limited company or for reasons of other public interest, if it is contrary to good morals, if the minutes of the general meeting that passed the resolution have not been notarised in the manner prescribed by law, or the procedure for calling a meeting was violated in the calling of the general meeting that passed the resolution. Nullity of a resolution may be relied upon in court proceedings through filing of an action or objection. At the same time, reliance in legal practice on the nullity of a resolution requires that a court have previously established such nullity (see the second sentence of § 38 (2) of the GPCCA).
As regards those persons who are entitled to demand that a court establish that a resolution of the general meeting is void, the law does not list the subjects who have such rights of contestation. Subsection 3011 (3) of the CC just sets out that nullity of a resolution may be relied upon in court proceedings by filing an action or objection.
Therefore, the protection of the rights of shareholders is defective in the Estonian context, because often measures such as contesting resolutions made by the directing body of the company, requesting information, commissioning a special audit, or employing other preventive measures are of no avail in defending against the abuse perpetrated by the directing bodies or the majority shareholder, while, on the other hand, the compulsory dissolution of the company would be either impossible or disproportionate because of the extremity it involves, or simply not desirable. *72 The author of this article is of the opinion that not enough attention has been paid in Estonian law to the areas where most of the problems are expected to occur: abuses by the majority at the expense of the minority, influencing the directing bodies and thereby causing damages for the company, and creation of flexible (additional) measures to enforce actions for compensation of damage. Models are plentiful in the laws of other countries, and closer analysis of such models as well as identification of the problems we face in practice will allow us to develop our law in the direction we want.
The objectives of remedies under company law are multifaceted, covering not just the elimination of the negative consequences of violations committed by subjects in company law (companies, members of directing bodies, shareholders, etc.) or the prevention of the arrival of such consequences. They are also directed at the avoidance of further violations and initiation of restructuring within the company as needed, as well as at the protection of the interests of the company as a whole and at reasonable resolution of internal conflicts.
Different countries have tackled the matter of shareholders’ remedies at differing levels. During a recent reform, the United Kingdom developed, in the preparatory state of the reform, a consultation paper that provides an in-depth analysis of the various forms of shareholders’ remedies. Likewise, French and Belgian practitioners of jurisprudence are actively discussing the subject of shareholder actions and more interest is being shown in the so-called defence actions and their enforceability (actions for compensation for damages). In German legal literature too, though this area has not been addressed systematically to any great extent, increasingly more writings have been published on the topic of potential actions for compensation of damage. However, in contrast, shareholders’ remedies have not been systematically developed in Estonia.
On the basis of the above reasoning, the author of this article concludes that this domain of company law needs to be analysed in Estonia and that related regulations should be reviewed. The starting point should be to map out the typical circumstances of violations on the basis of our judicial experience as well as the experiences of other countries as to situations that involve a greater risk of violations (e.g., mergers, divisions, take-over proceedings, excessive remuneration of members of directing bodies, and also cases wherein a legal entity has been penalised for a crime by means of a fine but there is no functioning mechanism of recourse against the members of the directing bodies). After this, the current laws and judicial practice should be analysed from the standpoint of the effectiveness of remedies (with assessment of their enforceability and also procedural aspects, as well as, for instance, the alternatives provided in protection measures under public law). The problems should be compiled in a coherent manner, and the necessary amendments to the law should be formulated on the basis thereof in consideration of issues of suitability for the general legal and economic backdrop.
*1 This article was published with support from ESF grant No. 7297 “Theoretical Bases of the Harmonisation of Main Institutes of Civil Law in Europe and Its Impact on Civil Law and Legislation in Estonia”.
*2 A. Aarnio. Õiguse tõlgendamise teooria (Theory of Interpretation of Law). Tallinn 1996, p. 77 (in Estonian).
*3 About this principle, see, e.g., T. A. Thomas. Ubi Jus, Ibi Remedium: The Fundamental Right to a Remedy under Due Process. – San Diego Law Review, November 2004 (41). Available at SSRN http://ssrn.com/abstract=564302 (23.03.2009); J. Kahn. The Search for the Rule of Law in Russia. – Georgetown Journal of International Law 2006 (37) 2. Available at SSRN http://ssrn.com/abstract=1011822.
*4 T. Rauscher et al. (Hrsg.). Münchener Kommentar zur Zivilprozessordnung mit Gerichtsverfassungsgesetz und Nebengesetzen. 3. Aufl. München 2004. Vorbemerkung zu den § 511 ff., margin No. 1–3.
*5 E. Andresen. Õigusvastaste tagajärgede kõrvaldamine ja kahju hüvitamine riigivastutusõiguses (Elimination of Unlawful Consequences and Compensation for Damage in Sate Liability Law). – Juridica 2006/3, p. 160 (in Estonian).
*6 M. Kloepfer. Saksamaa tulevase keskkonnaseadustiku mõte ja sisu (The Idea and Content of the Future German Environmental Code). – Juridica 2007/7, p. 513 (in Estonian).
*7 I. Kull et al. Võlaõigus I. Üldosa (Law of Obligations I. General Part). Tallinn 2004, p. 192 (in Estonian).
*8 P. Varul et al. Võlaõigusseadus I. Kommenteeritud väljaanne (Law of Obligations I. Commented edition). Tallinn 2006, § 101, commentary 3 (in Estonian).
*10 C. von Bar et al.(ed.). Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference. Outline edition. Available at http://www.law-net.eu/.
*11 K. Saare. Eraõigusliku juriidilise isiku õigussubjektsuse piiritlemine. Doktoritöö (Delimitation of the Legal Subjectness of a Legal Entity under Private Law. Doctoral thesis). Tartu 2004, p. 132 (in Estonian).
*12 H. Hansmann, R. Kraakman. Agency Problems and Legal Strategies—The Anatomy of Corporate Law. A Comparative and Functional Approach. R. Kraakman et al. Oxford 2004, p. 21.
*13 At first glance, such a distribution of shareholding may seem democratic, but in essence in such a case both shareholders and voting blocs need to vote for every resolution in order to adopt it. Conflicts of a principle nature may render a company incapable of acting if, e.g., the term of office of the directing bodies elapses and, because of the differences between the shareholders, new members cannot be appointed into the directing bodies.
*14 Even in the USA, which is classically considered to be at the forefront of shareholder protection, in the post-Enron times the need to consider the broader goals of corporate governance has been intensely emphasised. See, e.g., T. Baums, K. E. Scott. Taking Shareholder Protection Seriously? Corporate Governance in the United States and Germany. – American Journal of Comparative Law, Winter 2005 (53); ECGI – Law Working Paper No. 17/2003; Stanford Law and Economics Olin Working Paper. Available at SSRN http://ssrn.com/abstract=473185.
*15 As noted by Jennifer Hill, in reference to an article in The Financial Times, business once again has a ‘legitimacy problem’, adding that the financial crisis represents an opportunity to reassess whether shareholders should be afforded stronger power, as a check on managerial control. See J. G. Hill. Who’s Afraid of Shareholder Power? A Comparative Law Perspective. Unpublished Paper, 2009, pp. 2–3. Available at http://works.bepress.com/cgi/viewcontent.cgi?article=1003&context=jennifer_hill.
*16 See, e.g., G. Wagner. Schadensberechnung im Kapitalmarktrecht. – Zeitschrift für Unternehmens- und Gesellschaftsrecht, August, 2008 (4), pp. 495–531.
*17 K. J. Hopt. The German Two-Tier Board: Experiences, Theories, Reforms. – Comparative Corporate Governance—The State of the Art and Emerging Research. K. J. Hopt, H. Kanda et al (ed.). Oxford 1998, p. 232.
*18 S. Kinkki. Minority Protection and Dividend Policy in Finland. – European Financial Management, 2008 (14) 3, p. 471.
*19 E. Takahashi. Der Gleichbehandlungsgrundsatz im japanischen Aktienrecht als Aufgabe der Rechtswissentschaft. – Zeitschrift für Vergleichende Rechtswissenschaft. Archiv für Internationales Wirtschaftsrecht. 108. Band. Mai 2009, p. 105.
*20 Casum sentit dominus is a principle derived from Roman law under which the owner of a thing is primarily the one to bear the risk of accidental destruction or damage of a thing. See, e.g., R. Lieberwirth. Latein im Recht. 3. Aufl. Berlin: München 1993, sv “casum sentit dominus“.
*22 Of course, here we can speak about the risk of accidental destruction only conditionally as in legal sense there is not necessarily a linear relationship between the ‘destruction’ of the shareholder’s investment and the bad economic situation of the limited company.
*23 For more on this, see, e.g., T. Tiivel. Äriühingu juhtorgani liikme kohustused ja vastutus. Magistritöö (Duties and Liability of a Member of a Directing Body of a Company. Master’s thesis). Tartu 2004, p. 30 (in Estonian).
*24 Äriseadustik. Adopted on 15 February 1995. – RT I 1995, 26/28, 355; 2010, 9, 41 (in Estonian). Hereinafter ‘CC’.
*25 E.g., under § 378 (4) of the CC, shareholders who represent at least one tenth of the share capital may bring an action with a court, in a liquidation proceeding, within two months after the date on which the shareholders were informed that the balance sheet and asset distribution plan are presented to the shareholders for examination. The shareholders may demand the preparation of a new balance sheet or asset distribution plan, or supplementary liquidation.
*26 As stated in CCSCd 10.02.204, 3-2-1-16-04 (RT III 2004, 6, 64 (in Estonian)), a claim for payment of dividend, e.g., is an enforcement claim under the law of obligations. The adoption of a resolution to pay dividend creates an obligation between the company and the shareholder under which the company is required to pay the dividend when the claim falls due and there exist no other objections such as, e.g., those arising from the prohibition to abuse rights. If the company refuses to pay to a shareholder the dividend allocated to him by a resolution of the general meeting, the shareholder may demand the payment of the dividend and resort to other appropriate remedies under the law of obligations (paragraph 15 of the decision).
*27 The author believes that such a distinction is rather conditional because sanctions under private and public law are understood differently in different legal systems. In the Germanic legal system, on which our classification of the branches of law is built on, e.g., the meaning of public law is understood more broadly and as the enforcement of an action for compensation of damage in private law also requires, if not obeyed voluntary, enforcement via a court proceeding carried out by the public authorities, then in our legal theory, civil court procedure is treated as a part of the public law. See R. Narits. Õiguse entsüklopeedia (Encyclopedia of Law). Tallinn 2004, p. 47 (in Estonian).
*28 A. Reisberg. Derivative Actions and Corporate Governance. Theory and Operation. New York 2007, p. 31.
*30 B. Black, R. Kraakman. A Self-enforcing Model of Corporate Law. – Harvard Law Review, June, 1996 (109) 8, p. 1939. Available at SSRN http://ssrn.com/abstract=10037.
*32 W. W. Bratton, J. A. McCahery. Comparative Corporate Governance and the Theory of the Firm: The Case Against Global Cross Reference. – Columbia Journal of Transnational Law 1999 (38) 2, p. 60. Available at SSRN http://ssrn.com/abstract=205455.
*34 P. L. Davies. Gower and Davies’ Principles of Modern Company Law. Seventh Edition. London 2003, p. 328.
*35 H.-U. Wilsing. Der Reiz der Anfechtungsklage. Der ökonomische Gastkommentar. – Handelsblatt, 2.10.2007. Available at http://www.handelsblatt.com/politik/handelsblatt-kommentar/der-reiz-der-anfechtungsklage;1330686.
*36 A draft act has been prepared in Germany which, inter alia, purports to reduce the time consumed by contesting a resolution and therefore also to alleviate the burden of such a proceeding on a company. See Entwurf eines Gesetzes zur Einführung erstinstanzlicher Zuständigkeiten des Oberlandesgerichts in aktienrechtlichen Streitigkeiten. Bundesrat. Drucksache 901/07 (Beschluss). 14.03.2008. Available at http://dip21.bundestag.de/dip21/btd/16/090/1609020.pdf.
*37 B. Grelon. Shareholders’ Lawsuits against the Management of a Company and its Shareholders under French Law. – European Company and Financial Law Review, August 2009 (6) 2/3, pp. 205–218.
*38 See Code de Commerce (Code de Commerce (Commercial Code) accordingly. Last amendment: Act No. 2006-11 of 5 January 2006 Art. – Official Journal of 6 January 2006, Article L.225-38 and Article L225-86. Available at http://195.83.177.9/code/liste.phtml?lang=uk&c=32.
*39 B. Grelon (Note 37), p. 210.
*42 By their nature, these measures are similar to the measures for securing an action or provisional legal protection, as known in the Estonian law, which must be connected with a particular court case, already initiated or pending initiation.
*43 A. Bertrand, A. Coibion. Shareholder Suits against the Directors of a Company, against other Shareholders and against the Company itself under Belgian Law. – European Company and Financial Law Review, August, 2009 (6) 2/3, p 270–271.
*44 Thus, § 378 (1) 3) of the Code of Civil Procedure (Tsiviilkohtumenetluse seadustik (RT I 2005, 26, 197; 2010, 8, 35, (in Estonian)), hereinafter ‘CCP’, allows a prohibition on the defendant from entering into certain transactions or performing certain acts, clause 10) of the same subsection also allows another measures considered necessary by the court. In the case of a register proceeding, a court may, under § 598 of the CCP, suspend the proceedings in the matter of the petition for entry until the time the dispute has been adjudicated by way of actions.
*45 A. Bertrand, A. Coibion (Note 43), p. 290.
*47 The Law Commission. Shareholder Remedies. Consultation Paper No. 142, 1996. Available at http://www.lawcom.gov.uk/docs/cp142.pdf.
*48 A shareholder derivative claim is a claim originally owned by the company which the shareholder or the shareholders representing certain share capital may, in the presence of the prerequisites provided by law, enforce against a member of a directing body by demanding (primarily) that the violation of an obligation is stopped and the damages caused by such violation are compensated to the company. A. Reisberg has more thoroughly explored the shareholder derivative action as a remedy (Note 28).
*49 Special rights vested into the shareholders by law are treated as such; e.g., the right to challenge a resolution changing the goal of the company (Article 12.11 ff.), the right to request information, etc.
*50 I. Ellyn, K. de Champlain. Shareholders’ Remedies in Canada. Toronto, 28.03.2005, p. 15. Available at http://www.ellynlaw.com/PDFs/ellyn%20-shareholders%20remedies%20in%20canada.pdf.
*51 Companies Act 2006. Available at http://www.opsi.gov.uk/ACTS/acts2006/pdf/ukpga_20060046_en.pdf.
*52 I. Ellyn, K. de Champlain (Note 50), p. 17.
*53 A. Reisberg (Note 28), p. 298.
*54 For the purposes of Estonian law: violation of the loyalty obligation, competing activities, etc.
*55 W. Bayer. Aktionärsklagen de lege lata und de lege ferenda. – Neue Juristische Wochenschrift 2000, Heft 36, p. 2610.
*56 Aktiengesetz vom 6. September 1965 (BGBl. I p. 1089), zuletzt geändert durch Artikel 11 des Gesetzes vom 16. Juli 2007 (BGBl. I p. 1330). Available at http://bundesrecht.juris.de/bundesrecht/aktg. Hereinafter ‘AktG’.
*57 E. Wiedmann. Der Rechtsmissbrauch im Markenrecht. Dissertation zur Erlangung des Doktorgrades der Rechtswissenschaft der Rechts-, Wirtschafts- und Verwaltungswissenschaftlichen Sektion der Universität Konstanz, Fachbereich Rechtswissenschaft. Konsta nz, 2002, pp. 42–43. About the criticism, see also H. -U. Wilsing (Note 35).
*58 W. Bayer (Note 55), p. 2610.
*60 B. Kropff, J. Semler. Münchener Kommentar zum Aktiengesetz. Band 4. 2. Aufl. München 2004, § 179, margin No. 44.
*61 B. Helmke. Satzungsdurchbrechungen bei der GmbH. Dissertation zur Erlangung des Grades eines Doktors der Rechtswissenschaft des Fachbereichs Rechtswissenschaft I der Universität Hamburg. Hamburg 2001, p. 10.
*62 Tsiviilseadustiku üldosa seadus. Adopted on 27 March 2002. – RT I 2002, 35, 216; 2010, 38, 231 (in Estonian).
*63 Under § 32 of the GPCCA, the shareholders or members of a legal person and the members of the directing bodies of a legal person shall act in accordance with the principle of good faith and consider each other’s legitimate interests in their mutual relations. Subsection 138 (2) of the GPCCA provides that a right shall not be exercised in an unlawful manner or with the objective to cause damage to another person.
*64 I. Kull. Hea usu põhimõte kaasaegses lepinguõiguses. Doktoritöö (The Principle of Good Faith in Modern Contract Law. Doctoral thesis). Tartu 2002, p. 169 (in Estonian).
*65 A. Vutt has more thoroughly explored the issues related to the contestation of the resolutions of the general meetings of companies. See A. Vutt. Äriühingu organi otsuste vaidlustamisega seotud probleeme (Problems related to the Contestation of the Resolutions of a Body of a Company). – Juridica 2005/1, pp. 53–61 (in Estonian).
*66 On the basis of the index provided at the web site of the Supreme Court (www.nc.ee), a total of 19 such cases have been processed by the highest national judiciary since 1998.
*67 See, e.g., CCSCd 3.05.2002, 3-2-1-75-02. – RT III 2002, 18, 208; CCSCd 30.04.2003, 3-2-1-41-03. – RT III 2003, 17, 164; CCSCd 11.05.2005, 3-2-1-41-05. – RT III 2005, 17, 181; CCSCd 25.04.2006, 3-2-1-27-06. – RT III 2006, 17, 162, etc.
*68 Similar provisions are, e.g., § 223 (3) of the CC which sets out that the issuers are liable to compensate for the damage caused by the issue of shares with a nominal value of less than ten kroons, § 249 (4) which provides for the obligation to compensate for any damage caused by an inaccurate valuation of the non-monetary contribution, etc.
*69 The Supreme Court made its first ruling on an action for compensation of damages to a shareholder on 31 March 2010 (civil case 3-2-1-7-10). In this case, a shareholder filed, on the basis of § 403 (6), an action against the members of the management board and supervisory board for compensation of damages caused by a merger; the Supreme Court affirmed the existence of the shareholder’s right of claim on the basis of the general elements of liability set forth in law.
*70 True, the situation is a bit different where a company is bankrupt because the enforcement of claims is decided and the company is represented in the proceedings by a bankruptcy trustee. However, the author does not believe that lenience just towards the enforcement of claims by a bankruptcy trustee is the correct path to take.
*71 M. Vutt. Shareholder’s Derivative Claim—Does Estonian Company Law Require Modernisation? – Juridica International 2008 (XV), pp. 76–85.
*72 The bases of compulsory dissolution are set forth in § 40 (1) of the GPCCA and in the context of the topic at hand, the following instances may be highlighted: the objective or activities of the legal person are contrary to law, public order or good morals; the articles of association of the legal person are contrary to law to a significant extent; incapability to appoint new persons in place of the removed members of the management board, etc. The person with the right of action is in this case the Minister of Internal Affairs or ‘any other person or agency so entitled by law’. Compulsory dissolution, being by its nature extreme, cannot therefore be treated as a normal measure to be employed for solving disputes encountered in business activity.

References: § 292
 § 330
 § 302
 § 3011
 § 38
 § 511
 § 101
 § 378
 § 378
 § 598
de lege lata
de lege ferenda
 § 179
 § 32
 § 223
 § 249
 § 403
 § 40