On June 3, 2005, new squeeze-out rules for joint-stock companies came into effect via an amendment to the Commercial Code.
Existing squeeze-out provisions are unchanged. An additional procedure has been introduced allowing 90% shareholders of joint-stock companies to buy out shares of all remaining minority shareholders without their consent. The rule applies regardless of whether the company is listed or not or whether the majority shareholder obtained its majority shareholding by a takeover bid or in another way.
The procedure is only available to a shareholder who holds at least 90% of the company's registered capital or 90% of the votes. It is entitled to ask the company's board to convene a general meeting to approve, by at least 90% of all votes held, the transfer to it of all remaining shares. It must take this step within 3 months after (as applicable):
- the date when its takeover bid ceased to be binding
- the date when it otherwise acquired its 90% shareholding
- the date when the new rule came into effect (3 June, 2005), if it already had a 90% shareholding at that time.
Minority shareholders have the right to inspect documents proving the majority shareholder's right to invoke the procedure and details of how the compensation for the bought-out shares is calculated. This information has to be available at the company's headquarters before the general meeting. Quoted companies also have to make the information available by remote access (e.g. online).
Other key details of the procedure are:
- The amount of compensation is the takeover price or, in other cases, the price determined by the majority shareholder on the basis of an expert valuer's opinion.
- Once approved in general meeting, the board has to petition the court without undue delay to register the decision in the Commercial Register.
- The decision of the general meeting also has to be published (in the same way as for the calling of the meeting).
- Any shareholder not satisfied with the amount of compensation can (unless it is based on the takeover price) ask the court to review the way it is calculated within one month after registration of the decision is published. The squeeze-out procedure is not necessarily invalidated where the amount of compensation is found to be inadequate.
- The ownership rights to shares are transferred to the new owner one month after registration is published.
- Within 30 days after transfer, the share ownership documents must be returned to the company for onward transfer to the new owner. Where applicable, the shares are re-registered in the new owner's name within 30 days after transfer.
- The majority shareholder cannot exercise rights connected to the bought-out shares unless it pays the compensation within two months from the date the ownership documents were returned to the company or the date the shares are re-registered in its name.
For more information about the new squeeze-out procedure, contact Michal Smrek at michal.smrek@cms-cmck.com or on +420 296 798 850 or Helena Hailichová at helena.hailichova@cms-cmck.com or on +420 296 798 887.
