Publication

The regulation on the protection of minority shareholders through adequately providing for the right to information by the law has been one of the hottest corporate debate topics in Lithuania recently. One may have lost count of how many times the respective provisions of the Law on Companies of the Republic of Lithuania, which provide for a shareholder’s right to information have been amended. The number of court cases in this field have also been rising despite an existing wide case law of the Supreme Court of Lithuania.

Since the end of 2017, when the new piece of legislation was implemented even professionals have not been able to come to terms of whether or not it in practice extends the right to information for the minority shareholders of AB / UAB (public and private joint stock companies in Lithuania). The law that was in force until the end of 2017 provided for the difference in the implementation of the right to information for shareholders holding less than ½ shares carrying the voting right in the said companies and for the shareholders with the holdings exceeding the mentioned threshold. At least in practice it was more or less clear that minority shareholders had to have access to information and access to a specific category of the company’s documents that were explicitly listed in the Law on Companies. However, any other documents and in particular the ones that fell under the list of the commercial secrets and confidential information of a particular company as confirmed by its management were out of reach for minority shareholder altogether.

While recognising the best intentions of the Lithuanian legislators to provide minority shareholders with the right to access the company’s information, including confidential and sensitive information, whether or not this has become more reachable for minority shareholders in practice is quite doubtful.

On the one hand, the division of the shareholders right to information and accessible categories of a company’s documents depending on the holdings has been abolished, which in theory indicates that minority shareholders should have access even to the most sensitive information in the circumstances specified in the law. On the other hand, the practical efficiency of tools, and in fact the tools and legal circumstances themselves, of access are so unclear now that even law professionals are questioning whether an effective implementation of this allegedly “extending” of a minority shareholder’s right will truly work in practice. Drawing on personal experience, it is worth noting that, e. g. an agreement between a shareholder seeking confidential and sensitive information and a company was problematic to admit and execute even when allowed only for majority shareholders (an earlier regulation of the Law on Companies). For instance, there were numerous disputes on whether or not such a confidentiality agreement that is commonly prepared and provided by the company may contain the clauses setting forth fines disproportionate in terms of possible infringements under the agreement. No regulation and, unfortunately, no case-law, cast any light on the content of such an agreement. In any case, the “new” Lithuanian legislation leaves many loopholes for companies to abuse a minority shareholder’s right to information, should they be willing to do so and, vice versa, there are a lot more possibilities for minority shareholders to misuse their rights, which is a problematic aspect giving rise to many court disputes for companies.

An even more unclear list of circumstances when companies may limit a shareholder’s (including a minority shareholder without a specific differentiation) right to information, may enable the conclusion that the “new normal” regulation in Lithuania giving no clear answer on whether or not a minority shareholder’s right to information has been extended, or have actually been limited.

In the light of the foregoing, a research paper on the practical implementation of minority shareholders rights recently published by the European Commission and prepared  by the national company law experts of 28 EU Member States, might be a timely and handy tool to check and compare the regulation on shareholders’ rights and their practical exercising throughout the Europe with a view to finding workable solutions to fix the company law problems, especially in such a sensitive field as the right of a private company’s minority shareholder to information.