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Enhanced protection offered to minority shareholders


https://www.ipn.md/en/enhanced-protection-offered-to-minority-shareholders-7966_989804.html

The level of protection of minority shareholders in joint stock companies will increase, said Alexandru Sava, USAID/BIZTAR expert, while commenting on the recently adopted amendments to the Law on joint stock companies, Info-Prim Neo reports. “The amendments were determined to a great extent by the latest World Bank's Doing Business Report, which showed that the interests of minority shareholders in Moldovan companies were inadequately protected”, said Alexandru Sava. The expert explained that the inadequate protection of minority shareholders is due to conflicts of interest that exist within these companies, in particular to issues related to decision-making. “There are some very simple schemes, like when a person from the company's administration creates a parallel business, which he entirely owns, and some of the former company's transactions are done with the latter, for example, the latter buys cheaper from the former and then sells at a higher price, with the difference being pocketed for one's personal profit. Alternatively, commodities are bought from the market at much lower prices and are then sold to the company at higher prices. Such schemes benefit only the manager or other managing actors and disadvantage minority shareholders, who actually lose the expected profit”, explained the USAID/BIZTAR expert. The recent amendments provide that the managers who are interested in a transaction in one way or another are forbidden from making decisions. The interested persons are required to declare that such an interest exist. “This personal requirement to declare one's conflict of interest may seem questionable, but this is the practice that has been used in Europe and around the world, and now Moldova is adopting this practice. When a person in a position of authority in a company doesn't declare his conflict of interest, the other shareholders have the right to take legal action against this person and request damages”, said Alexandru Sava. A separate amendment imposes an obligation on the majority shareholder to buy/redeem shares at the request of minority shareholders. The adopted document also contains a number of technical procedures to facilitate and clarify relations within joint stock companies. The USAID/BIZTAR Project assists the Moldovan Government in improving the business climate in the country, enhancing the dialogue between state authorities and businesses, implementing new technologies, etc.