On 1 January 2005 amendments to the Law on Securities Market of the Republic of Lithuania came into force, establishing legal grounds for the "squeeze-out" of minority shareholdings (i.e. the mandatory sale and purchase of the small shareholders’ shares).
Obligation to sell and purchase shares
The shareholder of a company listed on the official list or the current list of a stock exchange registered in the Republic of Lithuania, having acquired (acting independently or in concert with other persons) shares representing not less than 95 percent of the total votes at the general meeting of shareholders of the issuer, has a right to require that all the remaining shareholders sell the voting shares to the buying-up shareholder.
The shareholder must notify the company of the intended purchase of the shares. Upon receipt of such notification, the company must not later than within 5 days inform each shareholder, the Securities Commission and the National Stock Exchange of Republic of Lithuania about the mandatory purchase of the shares and publish an appropriate announcement in the Lithuanian national daily. Within 90 days from the date of the announcement in the Lithuanian national daily all the shareholders are obliged either to sell their shares to the shareholder indicated in the announcement or to contest the price proposed for the shares in a court (the latter option implies the suspension of the procedure of the mandatory buy-up of shares). If the shareholder fails to sell the shares and does not contest the price of the shares, the redeeming shareholder becomes entitled to transfer the proposed price into a deposit account to the shareholders who have not sold their shares and to instruct account managers to make respective entries in the appropriate securities accounts on the transfer of the title.
Respectively, any of the minority shareholders has a right to require the shareholder who has acquired the shares entitling it to not less than 95 percent of all votes in the general meeting of shareholders to redeem the voting shares owned by such minority shareholder. Where the shareholder fails to fulfill his obligation to redeem the shares and does not contest the price of the shares in court, he shall pay the 10 percent annual interest in respect of the amount overdue.
Price of the shares
Unfair price offered for the shares may be contested in a court. Fairness of the price is determined according to the following basic principles:
a) if the redeeming shareholder has earlier acquired any portion of its shares in the issuer by virtue of a mandatory tender offer, the fair price shall be the price of such mandatory tender offer;
b) if the redeeming shareholder has earlier acquired any portion of its shares in the issuer by virtue of a voluntary tender offer, the fair price shall be the price of such voluntary tender offer, provided the bidder has acquired not less than 90 percent of tendered shares via such voluntary tender offer;
in other instances the price of the shares is established by the redeeming shareholder, provided that a fair remuneration for the shares being bought-up is offered. The price established in this manner must be approved in advance by the Securities Commission of the Republic of Lithuania which is entitled, on grounded reasons, to order the change of the price.
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