Redemption of Minority Shares and Related Fair Price Determination in the Finnish Legal System
Abstract
The Finnish Limited Company Act includes many situations where a redemption of a share is possible. However, this article focuses on examining situations where a redemption of a share results from a concentration of control in a company by a single party and analyze how the redemption price is determined. This is because the regulation in Chapter 18 of the Finnish Limited Company Act on the redemption of shares on the basis of a concentration of control is unclear. Finnish Limited Company Act determines that the price to be paid out for redemption of a share must be “fair price”. Therefore, the meaning of fair price becomes a central issue to be discussed. It identifies factors and specific reasons influence the formation of the fair price in some of the situations that may come in question. The subject is mainly approached from a legal perspective, but also from an economic theoretical point of view. This article also presents a number of different share valuation methods and how they should be used to determine the fair price. Legal argumentation and interpretation are developed based on legislation, government proposals (draft of Act), and case law, since they provide a framework for the valuation process. However, the final conclusion of the article suggests that there is no unambiguous answer as to what constitutes a fair price, as its determination depends on many variables.
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References
Book
Airaksinen, Manne, Pekka Pulkkinen and Vesa Rasinaho. Osakeyhtiölaki II. 3rd revised edition. Helsinki: Alma Talent Oy, 2018.
Mähönen, Jukka and Seppo Villa. Osakeyhtiö II: Pääomarakenne ja rahoitus. 4th revised edition. Helsinki: Alma Talent Oy, 2020.
Parkkonen, Jarmo and Mårten Knuts. Arvopaperimarkkinalaki. 5th revised edition. Helsinki: Talentum, 2014.
Pönkä, Ville. Osakkeen lunastaminen: osakeyhtiö- ja sopimusoikeudellinen tutkimus. 1st edition. Helsinki: Talentum Media, 2015.
Seppänen, Harri. Yrityksen arvonmääritys. 1st edition. Helsinki: Alma, 2017.
Journal Article
Belloc, Filippo. “Law, Finance and Innovation: the Dark Side of Shareholder Protection.” Cambridge Journal of Economics 37, no. 4 (2013): 863–888. https://doi.org/10.1093/cje/bes068
Burunciuc, Corina and Halit Gonenc. “Reforms Protecting Minority Shareholders and Firm Performance: International Evidence.” Journal of Risk and Financial Management 14, no. 1 (2021): 1-24. https://dx.doi.org/10.3390/jrfm14010005
Kaisanlahti, Timo. “Minority Shareholders in the Finnish System of Corporate Governance.” Keskusteluaiheita, Discussion Papers No. 810 (2002): 1-71.
Jinoria, Khatuna. “Main Problems of Protection of Shareholder’s Rights in Georgia.” European Scientific Journal 13, no. 31 (2017): 64-78. https://doi.org/10.19044/esj.2017.v13n31p64
Jokinen, Juha. “Osakeyhtiön vähemmistöosakkeenomistajien osakkeen lunastushinnan määrittäminen, erityiset syyt poiketa markkinahinnasta ja hinnanmuutoksen olennaisuus.” Oikeustieto 2 (2009): 18–22.
Mantese, Gerard V. and Fatima M. Bolyea. “Shareholder Oppression Litigation—A National Perspective.” The Michigan Business Law Journal 40, no. 3 (2020): 38-46.
Patakyová, Mária and Barbora Grambličková. “Capital Doctrine in the European Union – A Lesson to Learn From Finland?.” The Lawyer Quarterly: International Journal for Legal Research 6, no. 3 (2016): 137-155.
Pönkä, Ville. “Osakkeen negatiivinen lunastushinta – Arviointia ratkaisun KKO 2020:99 valossa.” Defensor Legis, no. 4 (2021): 778–794.
Pönkä, Ville. “The Convergence of Law: The Finnish Limited Liability Companies Act as an Example of the So-Called ‘Americanization’ of European Company Law.” European Company Law 14, no. 1 (2017): 22-28. https://doi.org/10.54648/eucl2017004
Rimali, Essi. “Pörssiyhtiön vähemmistöosakkeen lunastushinnan määräytyminen – käyvän hinnan määrityksen yhtenäistymisestä osakeyhtiölaissa ja arvopaperimarkkinalaissa.” Oikeustiede-Jurisprudentia XL (2007): 227–301.
Ruohonen, Janne, Lassi Salminen and Veikko Vahtera. “Governance and Steering of MOCs – Legal Perspective.” Lex Localis -Journal of Local Self-Government 19, no. 3 (2021): 705–728. https://doi.org/10.4335/19.3.705-728(2021)
Savolainen, Hanna. “OYL 18:7 mukaisen käyvän hinnan määrittäminen noteeraamattomissa yhtiöissä.” Edilex 33 (2016): 1–37.
Savolainen, Hanna and Jani Saastamoinen. “OYL 18:7:n mukainen käypä hinta – tilastollinen analyysi noteeraamattomien yhtiöiden vähemmistöosakkeiden lunastushinnan määräytymisestä.” Lakimies 2 (2016): 245–268.
Seppänen, Harri. “OYL 18 Vähemmistöosakkeiden lunastushinta: käyvän hinnan käsitteen määritteleminen.” Defensor Legis, no. 2 (2020): 199-214.
Sjögrén, Helena and Pasi Syrjä. “Regulation Compliance in Small Finnish Companies.” International Journal of Law and Management 57, no. 6 (2015): 649-661.
Teti, Emanuele and Ilaria Montefusco. “Corporate Governance and IPO Underpricing: Evidence from the Italian Market.” Journal of Management and Governance (2021): 1-39. https://doi.org/10.1007/s10997-021-09563-z
Vahtera, Veikko. “KKO 2020:99 – Vähemmistöosakkeiden lunastus ja negatiivinen lunastushinta.” Lakimies 3–4 (2021): 665–675.
Thesis
Paavola, Olli. “Lunastushinnan määrittäminen ja osingonjaon merkitys julkisen ostotarjouksen jälkeisessä vähemmistöosakkeen lunastusmenettelyssä.” Master Thesis, Faculty of Law, University of Lapland, 2021.
Legal Document
European Union, Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on Takeover Bids
Finland, Limited Liability Companies Act (624/2006)
Finland, Securities Markets Act (746/2012)
Other Documents
European Commission, Directorate-General for Justice and Consumers. “Study on Minority Shareholders Protection: Final Report.” Publications Office, 2018.
Finland, GP 6/2006 vp. “Government Proposal to Parliament for Laws Amending the Securities Market Act, the Chamber of Commerce Act and the Financial Supervision Act.”
Finland, GP 109/2005 vp. “Government Proposal to Parliament for a New Law on Limited Liability Companies Act.”
International Finance Corporation. “Indonesia Corporate Governance Manual. Second Edition.” Jakarta, 2018.
Case law
Finnish Supreme Court, KKO 2012:64 Limited liability company - Mutual real estate company - Redemption of shares - Redemption price
Finnish Supreme Court, KKO 1993:31 Limited liability company - Share redemption
Finnish Arbitration award, Silmäasema Oyj, 23.6.2020
Finnish Arbitration award, Normet Group Oy, 2.9.2019
Finnish Arbitration award, Salcomp Oyj, 2.3.2012
Finnish Arbitration award, Birka Line Abp, 2.3.2012
Finnish Arbitration award, Merita Oyj, 19.4.2000
Website Content
Ilmonen, Klaus and Kauri Marjamäki. “Corporate Governance Laws and Regulations Finland 2021-2022.” https://iclg.com/practice-areas/corporate-governance-laws-and-regulations/finland
Georgiou, Ioanna and Demetris Achilleos. “The Mechanism of Redemption of Shares under the Cyprus Companies Law, Cap. 113.” https://www.mondaq.com/cyprus/shareholders/1117270/the-mechanism-of-redemption-of-shares-under-the-cyprus-companies-law-cap-113
Watson, Neal and Beliz Mckenzie. “Shareholders’ Rights in Private and Public Companies in the UK: Overview.” https://uk.practicallaw.thomsonreuters.com/5-613-3685?transitionType=Default&contextData=(sc.Default)&firstPage=true
Airaksinen, Manne, Pekka Pulkkinen and Vesa Rasinaho. Osakeyhtiölaki II. 3rd revised edition. Helsinki: Alma Talent Oy, 2018.
Mähönen, Jukka and Seppo Villa. Osakeyhtiö II: Pääomarakenne ja rahoitus. 4th revised edition. Helsinki: Alma Talent Oy, 2020.
Parkkonen, Jarmo and Mårten Knuts. Arvopaperimarkkinalaki. 5th revised edition. Helsinki: Talentum, 2014.
Pönkä, Ville. Osakkeen lunastaminen: osakeyhtiö- ja sopimusoikeudellinen tutkimus. 1st edition. Helsinki: Talentum Media, 2015.
Seppänen, Harri. Yrityksen arvonmääritys. 1st edition. Helsinki: Alma, 2017.
Journal Article
Belloc, Filippo. “Law, Finance and Innovation: the Dark Side of Shareholder Protection.” Cambridge Journal of Economics 37, no. 4 (2013): 863–888. https://doi.org/10.1093/cje/bes068
Burunciuc, Corina and Halit Gonenc. “Reforms Protecting Minority Shareholders and Firm Performance: International Evidence.” Journal of Risk and Financial Management 14, no. 1 (2021): 1-24. https://dx.doi.org/10.3390/jrfm14010005
Kaisanlahti, Timo. “Minority Shareholders in the Finnish System of Corporate Governance.” Keskusteluaiheita, Discussion Papers No. 810 (2002): 1-71.
Jinoria, Khatuna. “Main Problems of Protection of Shareholder’s Rights in Georgia.” European Scientific Journal 13, no. 31 (2017): 64-78. https://doi.org/10.19044/esj.2017.v13n31p64
Jokinen, Juha. “Osakeyhtiön vähemmistöosakkeenomistajien osakkeen lunastushinnan määrittäminen, erityiset syyt poiketa markkinahinnasta ja hinnanmuutoksen olennaisuus.” Oikeustieto 2 (2009): 18–22.
Mantese, Gerard V. and Fatima M. Bolyea. “Shareholder Oppression Litigation—A National Perspective.” The Michigan Business Law Journal 40, no. 3 (2020): 38-46.
Patakyová, Mária and Barbora Grambličková. “Capital Doctrine in the European Union – A Lesson to Learn From Finland?.” The Lawyer Quarterly: International Journal for Legal Research 6, no. 3 (2016): 137-155.
Pönkä, Ville. “Osakkeen negatiivinen lunastushinta – Arviointia ratkaisun KKO 2020:99 valossa.” Defensor Legis, no. 4 (2021): 778–794.
Pönkä, Ville. “The Convergence of Law: The Finnish Limited Liability Companies Act as an Example of the So-Called ‘Americanization’ of European Company Law.” European Company Law 14, no. 1 (2017): 22-28. https://doi.org/10.54648/eucl2017004
Rimali, Essi. “Pörssiyhtiön vähemmistöosakkeen lunastushinnan määräytyminen – käyvän hinnan määrityksen yhtenäistymisestä osakeyhtiölaissa ja arvopaperimarkkinalaissa.” Oikeustiede-Jurisprudentia XL (2007): 227–301.
Ruohonen, Janne, Lassi Salminen and Veikko Vahtera. “Governance and Steering of MOCs – Legal Perspective.” Lex Localis -Journal of Local Self-Government 19, no. 3 (2021): 705–728. https://doi.org/10.4335/19.3.705-728(2021)
Savolainen, Hanna. “OYL 18:7 mukaisen käyvän hinnan määrittäminen noteeraamattomissa yhtiöissä.” Edilex 33 (2016): 1–37.
Savolainen, Hanna and Jani Saastamoinen. “OYL 18:7:n mukainen käypä hinta – tilastollinen analyysi noteeraamattomien yhtiöiden vähemmistöosakkeiden lunastushinnan määräytymisestä.” Lakimies 2 (2016): 245–268.
Seppänen, Harri. “OYL 18 Vähemmistöosakkeiden lunastushinta: käyvän hinnan käsitteen määritteleminen.” Defensor Legis, no. 2 (2020): 199-214.
Sjögrén, Helena and Pasi Syrjä. “Regulation Compliance in Small Finnish Companies.” International Journal of Law and Management 57, no. 6 (2015): 649-661.
Teti, Emanuele and Ilaria Montefusco. “Corporate Governance and IPO Underpricing: Evidence from the Italian Market.” Journal of Management and Governance (2021): 1-39. https://doi.org/10.1007/s10997-021-09563-z
Vahtera, Veikko. “KKO 2020:99 – Vähemmistöosakkeiden lunastus ja negatiivinen lunastushinta.” Lakimies 3–4 (2021): 665–675.
Thesis
Paavola, Olli. “Lunastushinnan määrittäminen ja osingonjaon merkitys julkisen ostotarjouksen jälkeisessä vähemmistöosakkeen lunastusmenettelyssä.” Master Thesis, Faculty of Law, University of Lapland, 2021.
Legal Document
European Union, Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on Takeover Bids
Finland, Limited Liability Companies Act (624/2006)
Finland, Securities Markets Act (746/2012)
Other Documents
European Commission, Directorate-General for Justice and Consumers. “Study on Minority Shareholders Protection: Final Report.” Publications Office, 2018.
Finland, GP 6/2006 vp. “Government Proposal to Parliament for Laws Amending the Securities Market Act, the Chamber of Commerce Act and the Financial Supervision Act.”
Finland, GP 109/2005 vp. “Government Proposal to Parliament for a New Law on Limited Liability Companies Act.”
International Finance Corporation. “Indonesia Corporate Governance Manual. Second Edition.” Jakarta, 2018.
Case law
Finnish Supreme Court, KKO 2012:64 Limited liability company - Mutual real estate company - Redemption of shares - Redemption price
Finnish Supreme Court, KKO 1993:31 Limited liability company - Share redemption
Finnish Arbitration award, Silmäasema Oyj, 23.6.2020
Finnish Arbitration award, Normet Group Oy, 2.9.2019
Finnish Arbitration award, Salcomp Oyj, 2.3.2012
Finnish Arbitration award, Birka Line Abp, 2.3.2012
Finnish Arbitration award, Merita Oyj, 19.4.2000
Website Content
Ilmonen, Klaus and Kauri Marjamäki. “Corporate Governance Laws and Regulations Finland 2021-2022.” https://iclg.com/practice-areas/corporate-governance-laws-and-regulations/finland
Georgiou, Ioanna and Demetris Achilleos. “The Mechanism of Redemption of Shares under the Cyprus Companies Law, Cap. 113.” https://www.mondaq.com/cyprus/shareholders/1117270/the-mechanism-of-redemption-of-shares-under-the-cyprus-companies-law-cap-113
Watson, Neal and Beliz Mckenzie. “Shareholders’ Rights in Private and Public Companies in the UK: Overview.” https://uk.practicallaw.thomsonreuters.com/5-613-3685?transitionType=Default&contextData=(sc.Default)&firstPage=true
Published
2022-07-29
How to Cite
ELONEN, Otto.
Redemption of Minority Shares and Related Fair Price Determination in the Finnish Legal System.
Udayana Journal of Law and Culture, [S.l.], v. 6, n. 2, p. 125-142, july 2022.
ISSN 2549-0680.
Available at: <https://ojs.unud.ac.id/index.php/ujlc/article/view/85688>. Date accessed: 25 apr. 2024.
doi: https://doi.org/10.24843/UJLC.2022.v06.i02.p01.
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