PRK Partners has advised the Czech town of Kromeriz on the preparation and conclusion of a shareholders agreement between it, nearby town Morkovice-Slizany, and the Czech municipalities of Drinov and Zborovice — which combined hold a majority shareholding in VAK Kromeriz (a water utility company providing services to more than 100,000 persons and companies) — securing their majority position and control over the utility for the next 30 years. The project value is CZK 1.2 billion.
According to PRK Partners, "for many years, towns and municipalities in the Kromeriz region faced attempts from private investors [showing] enormous interest in obtaining a majority stake in VAK Kromeriz. The conclusion of the shareholders agreement ensures long-term, stable cooperation among the municipalities and will maintain the municipalities’ majority stake in VAK Kromeriz. This, in turn, will ensure socially acceptable water and sewerage rates for citizens and companies and will provide for the proper management of VAK Kromeriz. Establishing the agreement also sets the stage for maintaining maximum investment into the water supply and distribution infrastructure, with optimal use of existing subsidies and, last but not least, for maintaining the employment rate, including qualified jobs, in the Kromeriz region. The agreement also secures for all shareholders proper management, growth in assets and stable economic results of VAK Kromeriz."
PRK Partners describes the agreement as "a unique and unprecedented document," and reports that "what results from it will contribute to a stable situation within VAK Kromeriz and balanced economic development for the entire Kromeriz region (some 110,000 citizens)."
The agreement was drawn up as an open platform, and, according to PRK Partners, in the future, in addition to the four founding municipalities, other municipalities that are interested in cooperating may become involved and will have full unrestricted rights to their shares.
In an email to CEE Legal Matters, PRK Partners Partner Jakub Lichnovsky, who led the firm's team on the deal, explained that: "The transaction was unique due to the fact that we explained checks and balances of the established relationship to all signatories, its municipal councils, political representatives including public. We precisely stressed that Kromeriz must retain ruling power, but secure and provide guarantees to small shareholders. This was a particularly complex issue as Kromeriz would never allow to be controlled by majority of small shareholders. All signatories agreed not to sell to other shareholders than signatories, keeping the same division of shares, building value within the company, division of powers in statutory bodies, rules of management of the company — equal development of water and sewage utility in the whole region, high level of investment, utilization of EU subsidies, keeping know how and employment positions including highly educated specialists and the most important low price of water and infrastructure to help the community to grow. We also advised on complex redrafting of the bylaws of VAK Kromeriz and represented Kromeriz at various general meetings of VAK Kromeriz. The whole process of negotiation took more than three years. Further, the Shareholders Agreement is open to other municipalities to join the Shareholders Agreement subject to their full and independent control over all rights associated with shares. We believe that this Shareholders Agreement brings a lot of benefits to the community, provides stability as every elections were interrupted by particular interests and intention of certain groups to privatize the company VAK Kromeriz."
