Arcam AB fka AMAVF

[charlie T colton]

RE: "I can’t see why GE would pay more"


" It has even been suggested that individuals can earn money on this, for example, by obtaining a small post of minority shares before the buying up of the company and then asking for compensation in connection with the work and the costs of arbitration."


The Value of Minority Stocks in Compulsory Redemption

At scandinavianlaw.se - The Value of Minority Stocks in Compulsory Redemption

This is the primary reason why Chapter 14, Section 31 of the Swedish Companies Act, 1976 (ABL)2 provides that if a company alone, or together with a subsidiary, owns more than nine-tenths of the shares representing more than nine-tenths of the votes of all the shares in another subsidiary, the parent company is entitled to redeem the remaining shares from the other shareholders of the subsidiary. Those who own shares that can be redeemed also have the right to have their shares redeemed by the parent company.

It is further provided that arbitrators in a certain order shall decide a dispute on whether the right or obligation of redemption exists, or on the redemption price.3 The costs for the arbitration proceedings shall be borne by the parent company, unless the arbitrators declare, for some particular reason, another shareholder to be liable for these costs, wholly or partly. The arbitration decision can be appealed.

The law does not stipulate any specific rules on how the minority shares shall be valued, except for the so called “special rule”, which prescribes that if the parent company has obtained the major portion of its shares in the subsidiary by means of an offer directed to a substantial number of shareholders in the subsidiary to transfer their shares to the parent company for a consideration per share, then the redemption price shall be equal to the said consideration, unless particular grounds require a different price. Questions concerning valuation of
shares will be dealt with at length below.
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The rules in Ch. 14, sec. 31 ABL are generous to the minority shareholders in that the parent company must cover costs of the arbitration. It has even been suggested that individuals can earn money on this, for example, by obtaining a small post of minority shares before the buying up of the company and then asking for compensation in connection with the work and the costs of arbitration. In addition, the rule entices the minority shareowners to bring in extensive reports and evidence to the arbitration.

The rules on compulsory redemption of shares can be seen as an expression of the principle of minority protection embodied in company law, and as a defence against the majority’s abuse. They may be placed in the same category as the rules concerning liability to redeem the shares held by shareholders who suffer damage and risk continued abuse under Ch. 15, sec. 3 ABL. As regards their content and procedure the rules may be more readily compared with the rules on the expropriation of property.4 Compulsory redemption of shares must be seen, as was just hinted, as a means towards a desirable restructuring of a company. The minority needs in this case a certain amount of protection, but it ought to work, and it actually does work, almost as well as it does in the case of a property owner or another subject of expropriation. The property owner is given the right to institute proceedings in the court of first instance free of charge, challenging the amount of expropriation compensation.5

2 General Questions of Compensation

As already mentioned Ch. 14, sec. 31 of the Swedish Companies Act does not stipulate any general rule on the amount of compensation that shall be paid under the compulsory redemption of shares. No mention is made of the relevant time of valuation either. Except for the so-called ‘special’ rule these questions have been left to case law.6 The intention seems to be, however, to apply the same starting point as before, i.e. the ‘real value’ of the shares. What is meant by this expression must be considered as uncertain. In any case, it does not refer to any formal value, such as the nominal value. Further, in accordance with the travaux préparatoires the shares’ value shall be determined “without consideration for their character as minority shares.” In other areas the question is left to legal writing and case law.7