How to price shares in a mandatory offer.

25.11.2011

Legal Update No. 290

Goltsblat BLP advises of publication of Resolution No. 443/11 of the Presidium of the Supreme Arbitration Court (SAC) dated 13 September 2011 clarifying pricing of shares to be sold pursuant to article 84.8 of the Federal Law “On Joint-Stock Companies”.

Under article 84.8 of the Law, a majority shareholder who has purchased more than 95 per cent of the shares in a joint-stock company under a voluntary or mandatory offer may make a mandatory demand to be sold the rest of the shares. Clause 4 of this article 84.8 establishes that the securities are to be purchased at a price at least equal to their market value, to be determined by an independent appraiser.

Court practice regarding the method for determining the market price of the shares to be purchased used to be disputable, stating in particular that the price per share was to be determined by reference to the stake sold or 100% of the share capital.
In the above Resolution, the SAC established that, within the meaning of the Federal Law “On Joint-Stock Companies”, market value of a share is to be determined as the price of one share in a 100% stake, since in no other case may a single price for all shareholders be established without reference to the size of their respective stakes.

Pricing shares by reference to the stake being purchased rather than the entire share capital violates the rights of minority shareholders, who are thus forced to alienate their shares for an unfair consideration.

The Presidium of the Supreme Arbitration Court forwarded the case for review in order to resolve on the price of shares to be purchased and emphasised that the appraisal result may not deviate considerably from the share price used in prior stock market share transactions and share acquisitions pursuant to mandatory and voluntary offers.

For additional information, please contact:  

to Ivan Veselov
Senior associate, Dispute Resolution Practice
Goltsblat BLP
T: +7 (495) 287 44 44,
E: info@gblplaw.com

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