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Cobalt Obtains Positive Result for SIA Reaton Against Minority Shareholder Claim

Cobalt Obtains Positive Result for SIA Reaton Against Minority Shareholder Claim

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On 16 November 2017 the Supreme Court of Latvia recognized the right of SIA Reaton, Ltd., a long-time client of Cobalt, to choose the most suitable form of business restructuring.

According to Cobalt, the board of the company proposed to spin off certain business areas to daughter companies, with the majority of shareholders approving the plan in an annual meeting. A minority shareholder, who disagreed with the plan, filed suit, attempting to block the decision on the grounds that restructuring of business as proposed by the board should have been implemented as a reorganization, for which a 2/3 majority of shareholders’ vote is required. 

The Supreme Court stated that according to the Commercial Law of Latvia there are two options on how a company may transfer its business to a subsidiary: 1) to establish a new company and to invest business into the capital of daughter-company or 2) to reorganize the company by splitting off certain businesses into new companies. The company has the discretion to decide which of the forms are most suitable for its purposes. Thereby, the minority shareholder cannot claim violation of its corporate rights if the model, selected by shareholders does not demand qualified majority of votes.

Cobalt describes the ruling as "a landmark decision in relation to complex topic of shareholders involvement in company restructuring," and claims that "it will further stimulate corporate activity in companies with diverse shareholder base."

The Cobalt Latvia team included Managing Partner Lauris Liepa and Specialist Counsel Sergejs Rudans.

 

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