In the recent decisions rendered in the cases that were brought before the Constitutional Court of Croatia (Constitutional Court) by minority shareholders in the public take over procedures of the target companies Belje d.d. (U-IIIB/197/2013) and Liburnia Riviera Hoteli d.d. (U-III-4195/2012) the Constitutional Court rules that minority shareholders have no legal interest to participate as “an interested party” in the procedure that is conducted before the regulator of the capital markets (and further on in the procedure conducted before the administrative court as the appealing body) the purpose of which is determining whether a person acquiring controlling stake (or person acting in concert) must make an offer to all other shareholders for buying-out their shares.
The Constitutional Court explains its decision in the Belje d.d. case that the procedure conducted before the regulator does not affect the rights of minority shareholders and therefore minority shareholders are not eligible neither to participate in the procedure before the regulator nor to file legal remedies such as administrative claim or a constitutional claim.
It is to mention that the decision of the Constitutional Court in Belje d.d. case was the first decision of that kind ever reached in the Croatian judiciary practice since enactment of the Public Takeover Act in 1997.
In the second decision in the Liburnia Riviera Hoteli d.d. case, the Constitutional Court confirmed its standpoint without providing sufficient explanation in favour of its conclusion but only referring to its previous decision adopted in the Belje d.d. case. Even though the Croatian legal system is formally not based on the case law, it is clear that the Constitutional Court adopted the system of precedent and that the court practice, especially of the higher courts has become formal source of law.
Additional certainty in respect to the status of minority shareholders has been introduced by various legal practice of the High Administrative Court of Croatia, district administrative courts and the regulator (Hanfa). Whereas the High Administrative Court of Croatia in its decision Us-8098/2009, previously recognized minority shareholders the right to participate in the procedure by providing facts and submitting evidences, following the recent decision of the Constitutional Court, the practice of the district administrative courts (Usl-3526/12) and the regulator is to deny the right of minority shareholders to participate in the public takeover procedures.
Additional uncertainty in respect to status of the minority shareholders under the Takeover Law has been caused by the decisions of the district commercial courts which despite the statutory determined right of the minority shareholders to instigate court procedure against the person acquiring controlling stake with the purpose of mandatory conclusion of the share sale-purchase agreement regardless of the fact whether the regulator previously conducted the supervision procedure, the district commercial courts regularly deny such a right of the minority shareholders, by claiming their incompetence to decide the case supposedly falling under the jurisdiction of another authority (Hanfa).
To which extent the Croatian authorities have created a deadlock with respect to minority shareholders’ ability to exercise their rights under the Takeover Law remains to be seen in the upcoming time. Yet, it is certain that such present legal uncertainty from the perspective of minority shareholders appear to be one amongst the risks the minority shareholders inevitably need to consider when engaging on the Croatian capital market.