Shareholders’ Draft Resolutions in Estonian Company Law: An Example of Unreasonable Transposition of the Shareholder Rights Directive

Abstract

One of the measures foreseen in the Shareholder Rights Directive for enhancement of the rights of shareholders is the regulation of draft resolutions. The article addresses the central question of whether the extent of the implementation of the requirements regulating draft resolutions and their disclosure in Estonian company law has been justified. Research was conducted to analyse whether the transposition of the rules on draft resolutions derived from the directive has contributed to the attainment of the objectives set out in the directive and in other European initiatives. The main conclusions presented in the article are that, as a result of the transposition of the Shareholder Rights Directive, Estonian small limited companies have a burdensome obligation to follow the formalised rules on draft resolutions and their disclosure, which, according to the directive, were initially meant only for listed companies. Although the Supreme Court of Estonia had an opportunity to interpret the respective regulations reasonably, it has chosen a rather formal approach instead and applied the law in quite possibly the most burdensome way for Estonian companies and contrary to the aims for the directive as the source of those regulations. The authors of the article take the stance that there is a need to change the rigid rules on draft resolutions that have been forced on Estonian small companies. The present mandatory rules on draft resolutions should be applicable to listed companies only. All other public limited companies should be given an opt-in option. As for private companies, the law should clearly set out the possibility of stipulating the appropriate rules in the articles of association of the company.