On 15 April 2011 the Moldovan Parliament passed the Act No. 73/2011 (Act No. 73) on amending certain legal acts, among which the Act No. 1134/1997 on Joint-Stock Companies (JSC Act). After being published in the Official Gazette, the corresponding amendments entered into force on 3 June 2011. Act No.73 inserts new provisions on buyouts of shares from minority shareholders and implements new mechanisms vis-à-vis approving of the transactions with conflict of interest, as well as other changes.
Act No. 73 has the scope to align, on one side, the JSC Act with the most recent amendments to the parallel legislation (e.g. on accounting, reporting, transactions with securities, etc.) and, on the other side, with the latest practice in the domain (e.g. dealing with situations when the voting rights were suspended by a court judgment and alike).
The National Commission of Financial Market of Moldova is obliged to align its acts with Act No.73 within three months as of 3 June 2011.
Buyout of shares held by minority shareholder
The minority shareholder has been granted with the right to request its share stake to be purchased by the shareholder, that individually or jointly with other affiliates, holds more than 90% of the joint-stock company’s voting shares.
To initiate the procedure, the minority shareholder has to submit a corresponding request to the joint-stock company’s management, which in its turn is obliged to forward it to the majority shareholder. Upon receiving the corresponding request and within 30 business days the majority shareholder has to communicate the purchase price, which has to be determined pursuant to the law.
Accordingly, the purchase price for the minority share stake has to be at least equal with the biggest of one of the positions set forth in Act No. 73. For example: the average transactional price per share for the last 12 months before the day of notification about the request; or the value of net assets pertaining to each share pursuant to the last audited financial situation; or the market value of net assets pertaining to each share determined pursuant to a report by an estimation company and of assets; or the nominal value per share.
A transfer of shares in such cases is performed by way of a direct transaction.
Transactions with conflict of interest & other exclusive rights of general assembly
Under Act No. 73, the general assembly of shareholders has been granted with the exclusive right to approve the transactions with conflict of interest where the value of such transactions exceeds 10% of the joint-stock company’s value of its net assets, pursuant to the last financial statement. Correspondently, the transactions with less value can be approved by the joint-stock company’s council, if any has been instituted by the shareholders.
Furthermore, the general assembly of shareholders has now the exclusive right to approve and amend the code of corporate governance of the joint-stock company; also, to approve the regulation on access of the shareholders to the various documents of the joint-stock company.
Given the recent court cases and discussions vis-à-vis the issue, the JSC Act has been supplemented with the provision outlining that in case a voting right of a shareholder is suspended / limited pursuant to the law or by a court judgment, the shares the voting right in respect of which has been suspended / limited are not excluded counting and summoning the general assembly, and when determining the quorum of the respective general assembly.
Also the right of the shareholders to complain to the joint-stock company’s management, National Commission of Financial Market and the court of law has been significantly detailed. Now each of the corresponding bodies can be addressed in specific cases (e.g. the court of law to annul a transaction that was executed in breach of law, etc.).
Furthermore, the rule pursuant to which a joint-stock company has to store its corporate and commercial documents / information for a period of three years has been changed. As of 3 June 2011 such documents / information have to be stored by joint-stock companies pursuant to the requirements and for the period set in the rules of the National Archive Service which administers the Archive Fond of Moldova.
In summary, the new legislation brings clearer and more detailed norms on various aspects regulating the activity of joint-stock companies. How the local participants and courts apply them in practice will soon be seen.