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On Striking the Balance of Shareholder Interests During the Consolidation of Shares

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image of Review of Central and East European Law
For more content, see Review of Socialist Law.

The authors present an analysis of the developments in Russian state policy in finding a balance of interests between majority and minority stockholders in the event of the use of the legal institution of consolidation of shares. They argue that in the contemporary economic and legal environment, the development of corporate governance in Russia will be drawn towards the German model (in the traditional conception thereof) with its orientation to a large degree on the protection of strategic investors.

The incentivization of institution and individual investors in the corporate governance of a company may significantly be supported by the Russian state during the next stage of economic development of the RF, as the institutional infrastructure, as well as enforcement practice will be improved. That having been said, in resolving a conflict (including in the promulgation of legal norms) among various groups of shareholders, it goes without saying that the lawful interests of all actors need to be taken into account. On the basis of Russian legislation and case law of the RF Constitutional Court, the authors set forth arguments supporting the conclusion that corporate governance is a tool by which, firstly, provision is made for various interests, and secondly risk of abuse by person having a significant degree of managerial influence is lowered.

If, at the end of the day, the public interest dictates the necessity of a redistribution in law of the risks (of possible gain and loss) in favor of one of the actors involved in an economic conflict (for Russia this would be strategic investors), the interests of the "suffering" investors (first and foremost individual investors) must be restored by way of the payment to them of reasonable compensation. The redistribution in legislative acts of risks in favor of one of the parties in a stockholders' dispute must be fair (spravedlivyi). Therefore, a diminution of interests must not only be accompanied by the payment of compensation but must, also, be grounded in the consent of the party that has suffered the diminution of its interests. This line of thinking is illustrated by examples from the case law of the Russian Federation Constitutional Court including the issue of the constitutionality of consolidating shares of stock.


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