How to manage Considerable Transactions in a JSC: for minor and major Shareholders
Statistical review of our Joint Stock Companies clients shows particular problems in proper organization of decisions on Considerable Transactions.
What Considerable Transactions are?
According to the part 1 of article 70 of the Law of Ukraine «On Joint-Stock Companies», the considerable transaction is that, market value of property or services that are its object, presents from 10% of cost of assets from data of the last annual financial report of joint-stock company. It can also be stated the other additional standards for attributing the legal transaction as significant.
It's necessary to pay attention that the mentioned value of the transactions object is market value, it's prohibited for parties to state the value by themselves or use the balance value, and it makes impossible to use less value of the property or services than its real market value. Also it's prohibited to divide the object of the trasation into parts in order to avoid the procedure of acceptance of the considerable transaction.
So, if a particular Transaction of a JSC presents from 10% of a cost of assets, that Transaction should be defined as Considerable and requires the spesific procedure of approval.
First, it must be accepted by Supervisory Board of the company. In case of non-acceptance of this transaction by supervisory board, the issue can be driven to the shareholder meeting.
Second, if the value of Transaction is more than 25% it requires more complicated procedure of approval according to the Law.
Sometimes the situation when on the day of shareholder meeting it’s impossible to determine which considerable transactions will be made by joint-stock company in the course of current economic activity occurs.
What to do in this case?
The law stipulates the possibility to shareholder meeting of passing a decision on the preliminary approval of Considerable transactions that can be made by a company for not more than one year from the date of such decision.
Anyway, both the minor and major shareholders should have the access and possibility to protect their interests linked with share income and control the Considerable Transactions.
Feel free to contact our Gutovska&Partners Business Consult team to get advice on Shareholders rights protection and Considerable Transaction legal management.