Corporate Squeeze-Out: Practical Aspects of Preparation and Process

20/ 04/ 2018

Author: Stanislav Zakharchenko, Corporate governance, UMG Investments

Almost year ago the Law of Ukraine “On changes to several legal acts of Ukraine about enhancing the level of corporate governance” came into force, what made possible application of world-wide spread practice of squeeze-out, when dominating major shareholder 95% or several persons which act jointly, forcibly buy out shares of another minor shareholders by appropriate market value. Historical heritage of Ukrainian business was huge amount of joint-stock companies with more than 1000 shareholders, but overwhelming majority of them do not take any part in company governance, what makes additional obstacles in its effective management because of necessity to convene general meeting of shareholders and all connected with it expenses and loss of time.

After finalizing procedure of subordinated legislation approval, which made squeeze-out technically possible – investing company UMG Investments have completed two successful procedures of corporate squeeze-out.

Round table on corporate squeeze-out will be dedicated to practical aspects of the procedure and is aimed at legal advisors, which are planning to complete it or already are within this procedure. We will review questions related to planning, preparation, difficult questions, which arise within the procedure, structure of the team, responsible for different spheres of squeeze-out, and necessary documents templates will be provided. Main purpose of round table is to tell about things, which are not written in legislation, but it plays important role in correct, well-timed and successful squeeze-out passage.

Actual legislation sets formal rules for this procedure, but during its completion, there are lots of questions related to communication of all participants, namely: major and minor shareholders, emitent, valuer, banking institution (provider of escrow-account services) and others.

European direction of development of Ukrainian legislation allows current joint-stock companies to transform from formal public joint-stock companies to effective and flexible companies with high level of corporate governance. As for today, there were initiated more than 40 squeeze-outs and we suppose that this is only the beginning of this practice in our corporate nature. Such procedure requires some amount of resources from all the sides, but is still beneficial for all its participants, because major shareholder gains full control on the emitent, while minor shareholders get fair (market) price for their shares. We hope that our practical experience will help any joint-stock to successfully complete squeeze-out procedure maximally clear, qualitively and in the shortest terms.

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