Regulations Protecting the Shareholders’ Rights

The legal management of a company is a part of the company’s daily administration. The managing director and the board of directors participate in the actual management. The shareholders of the company participate in the activities of a company only indirectly through exercising their voting rights in the general meeting of shareholders.

Many of the provisions of the Limited Liability Companies Act aim to secure the equality of the shares and to protect the company’s minority shareholders. It is for instance not allowed to make a decision in a general meeting of shareholders, which would result in an unjustified benefit to a shareholder or to another person at the expense of the company or another shareholder. Should this happen in any case, a shareholder has the right to challenge such a decision before the court.

Furthermore, a company representative (the board of directors or the managing director) may not follow a decision made by the general meeting of shareholders or another body of the company, which breaches the Limited Liability Companies Act or the articles of association and is as such invalid. This is called a prohibition of execution of an invalid decision. Also the board of directors and the managing director are prohibited from undertaking a legal action or other measure, which would result in an unjustified benefit to a shareholder or to another person at the expense of the company or another shareholder.

The minority shareholders are also protected by majority provisions regarding certain decisions [Protection of the minority shareholders]⁠ and also by minority shareholders’ right to demand for the payment of the minority dividend [Minority dividend] ⁠and for the appointing of the auditor even if the law or the articles of the association would not this require. In certain situations a shareholder suffering from the misuse of the influence of other shareholders, can also bring an action in order to demand redemption of his/her shares at the fair price or, in extreme cases, to liquidate the company.