e-book2013

NEWSLETTER 2013

112

TCC regulates for the first time the right to squeeze-out a shareholder

from a joint stock company.

TCC Art. 208 grants a squeeze-out right specific to group companies.

A controlling (dominant, parent) company in a group, which directly or

indirectly owns at least ninety percent of the shares and of the voting

rights of its subsidiary, may squeeze-out the remaining minority if

such minority violates the good faith principle, causes trouble and acts

recklessly, by purchasing its shares in the company.

This squeeze-out right may be exercised only if there is just cause.

The legislative justification of the article states that it serves to end the

disturbing actions of shareholders who continuously block the decision

making of the company for various reasons, and to ensure peace within

the company.

Relevance with Full Dominance

The right of the dominant company to squeeze-out the minority is

regulated among provisions governing group companies right after those

related to full dominance.

Full dominance is directly or indirectly owning all shares and voting

rights in a company. In principle, in a group of companies the dominant

company may not exercise its dominance over its subsidiary in such a

manner that results in a loss incurred by the subsidiary; otherwise, any

such loss must be compensated. Nevertheless, in the event there is full

dominance, the dominant company may give instructions to its subsidiary

even if such instructions may result in losses

. The legislative justification

for TCC Art. 203 emphasizes that as a precondition of this article being

applied, the dominant company must own one-hundred percent of the

shares and rights of its subsidiary, and the justification further states that

the squeeze-out right granted under Art. 208 completes this provision.

Indeed, Art. 208 grants the dominant company, which directly

or indirectly owns ninety percent of the shares and voting rights of its

Pursuant to TCC Art. 203 and Art. 204, the instruction should be compatible with the

determined and concrete policies of the company group and it should not manifestly exceed

the payment capacity of the subsidiary, endangering its existence or resulting in the loss of

material assets.