Case nº U-I/4469/2008 of July 08, 2013. Proceedings for reviewing conformity of a law with the Constitution

Resolution Date:July 08, 2013
Issuing Organization:Constitutional Court
SUMMARY

Act on the Takeover of Joint Stock Companies

 
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The Constitutional Court of the Republic of Croatia, composed of Jasna Omejec, President, and Judges Mato Arlović, Marko Babić, Snježana Bagić, Slavica Banić, Mario Jelušić, Davor Krapac, Ivan Matija, Antun Palarić, Aldo Radolović, Duška Šarin and Miroslav Šeparović, deciding on the proposal to institute proceedings to review the conformity of a law with the Constitution of the Republic of Croatia (Official Gazette nos. 56/90, 135/97, 113/00, 28/01 and 76/10), at its session held on 8 July 2013, rendered the following

D E C I S I O N

  1. Proceedings are instituted to review the conformity with the Constitution of the Act on the Takeover of Joint Stock Companies (Official Gazette nos. 109/07, 36/09 and 108/12), and its Article 13.3 is hereby repealed.

  2. Article 13.3 of the Act on the Takeover of Joint Stock Companies (Official Gazette nos. 109/07, 36/09, 108/12) shall cease to be in force on 15 December 2013.

  3. This decision shall be published in the Official Gazette.

    Statement of reasons

  4. PROCEEDINGS BEFORE THE CONSTITUTIONAL COURT

    1. - The Croatian Parliament adopted the Act on the Takeover of Joint Stock Companies (hereinafter: ATJSC) at its session on 5 October 2007. The ATJSC was published in the Official Gazette no. 109 of 24 October 2007, and came into force on 1 November 2007.

      Until the rendering of this decision, the ATJSC had been amended twice:

      - by the Act on Amendments to the Act on the Takeover of Joint Stock Companies (hereinafter: AAATJSC/09), which the Croatian Parliament adopted at its session on 13 March 2009. This Act was published in the Official Gazette no. 36 of 23 March 2009, and came into force on 31 March 2009;

      - by the Act on the Amendment to the Act on the Takeover of Joint Stock Companies, which the Croatian Parliament adopted at its session on 28 September 2012. This Act was published in the Official Gazette no. 108 of 1 October 2012, and came into force on 9 October 2012.

      The amendments to the act of 2009 and 2012 did not include amendments to the impugned Article 13.3 ATJSC.

    2. - Proposals to institute proceedings to review the conformity with the Constitution of Article 13.3 ATJSC were filed by: Michael Ljubas of Zagreb and Jadran Produkt d.o.o. of Zagreb, which are represented by Daniel Brkan, attorney in Zagreb; Planidal ulaganja d.o.o. of Sesvete, represented by the director Nenad Marković; Cockpit d.o.o. of Split, represented by Vjekoslav Mladineo, attorney in Split; Auctor kapital d.o.o. Zagreb, represented by the director Ivana Turk; Goranko Fižulić and Biserka Preininger Fižulić, both of Zagreb, represented by Ratko Žurić and Mojmir Ostermann, attorneys at Žurić i partneri law firm in Zagreb; Marijan Ruždjak of Zagreb, represented by attorney Nataša Grah at Ruždjak i partneri law firm in Zagreb; Anto Perković of Zagreb, Zdravko Jelić of Osijek and Konikom d.o.o. of Osijek, represented by the director Zdravko Jelić (hereinafter: proponents).

    3. - 1. In addition to Article 13.3 ATJSC, the proponent Cockpit d.o.o. of Split proposed that proceedings also be instituted to review the conformity with the Constitution of Article 61.2 and 3 ATJSC, as well as Article 4.1 and 2 AAATJSC/09. The proceedings with respect to this proponent's proposals have been singled out in a separate case under no: U-I-2471/2010.

      The proponent Auctor kapital d.o.o. Zagreb proposed that proceedings also be instituted to review the conformity with the Constitution of Article 4.2 AAATJSC/09. The proceedings with respect to this proponent's proposal have also been singled out in a separate case under no: U-I-2470/2010.

      In accordance with the above, these proceedings deal only with the matter related to the proponents' proposals with regard to Article 13.3 ATJSC.

    4. - The impugned Article 13.3 ATJSC reads:

      "... EXCLUSION OF VOTING RIGHTS

      Article 13 (...)

      (3) The offeror and persons acting in concert with the offeror may not exercise the voting rights attached to all the acquired shares of the offeree company in the following cases:

    5. - where, after the obligation to announce a takeover bid has been created, they have failed, within the legally prescribed time limit, to submit an application for the approval of the announcement of the takeover bid, as of the date of such failure until the date of meeting this obligation,

    6. - where the Agency has rejected or dismissed the application for the approval of the announcement of the takeover bid, as of the date of finality of the decision rejecting or dismissing the same application until the date of finality of the decision by virtue of which the Agency approves the announcement of the takeover bid,

    7. - where they have failed, after the Agency has approved the announcement of the takeover bid, to announce the same within the legally prescribed time limit, as of the date of such failure until the date of meeting this obligation.

  5. THE PROPONENTS' ALLEGATIONS

    1. - The proponents Michael Ljubas and Jadran Produkt d.o.o. of Zagreb (case no: U-I-4469/2008) consider that the impugned Article 13.3 ATJSC is not in conformity with Articles 5.1, 49.4, and 50.2 of the Constitution.

      When stating the reasons for their proposal, the proponents pointed out that the exclusion of voting rights under the conditions laid out in the impugned Article 13.3 ATJSC produces the effect of depriving the offeror and persons acting in concert with the offeror of their voting rights attached to all the shares, regardless of the time when they were acquired, while, on the other hand, other persons, generally minority shareholders, are at the same time granted much greater rights than those they acquired by investing their capital. In relation to this, the proponents claim:

      In the case when the general assembly is held in the period while the voting rights of the offeror and persons acting in concert with the offeror are excluded, other shareholders could pass decisions, although they do not have a majority vote or the necessary representation of shareholders at the general assembly. Moreover, the other shareholders could also change the previous status of the offeror and persons acting in concert with the offeror on increasing or decreasing the equity capital of the joint stock company or decide to terminate the company. The offeror and persons acting in concert with the offeror are not provided with an efficient legal remedy against the passing of such decisions, since the takeover procedure is held before the Croatian Financial Services Supervisory Agency (HANFA), or initiated by an administrative complaint lodged with the Administrative Court of the Republic of Croatia, and the length of these procedures does not depend solely on the actions of the offeror.

      They further claim that the impugned Article 13.3 ATJSC is also contrary to Constitutional Court decision no: U-I-977/2004 of 22 November 2006, which was rendered pursuant to a proposal to institute proceedings to review the conformity with the Constitution of Article 6.3 of the Act on the Takeover of Joint Stock Companies (Official Gazette nos. 84/02, 87/02 and 120/02 (hereinafter: ATJSC/02)). This decision repealed Article 6.3 ATJSC/02, which read:

      Article 6 (...)

      (3) Until the offeror has carried out the takeover procedure pursuant to the provisions of this Law, his shares and the shares of the persons that act in concert with the offeror shall not be carrying voting rights.

      The proponents consider that the protection of shareholders during the takeover procedure may also be carried out by applying some other provisions of the ATJSC, specifically Articles 48, 49 and 59 ATJSC in a manner that is proportionate to the aim being pursued, without excluding the voting rights of the offeror and persons acting in concert with the offeror.

      The proponents propose that proceedings be instituted to review the conformity with the Constitution of Article 13.3 ATJSC. In the meaning of Article 45 of the Constitutional Act on the Constitutional Court of the Republic of Croatia (Official Gazette nos. 99/99, 29/02 and 49/02 - consolidated text; hereinafter: Constitutional Act), until the Constitutional Court renders a decision, they propose a temporary suspension of the execution of individual decisions and actions which are carried out in an administrative procedure before the Croatian Financial Services Supervisory Agency (hereinafter: HANFA) under no: 326-321-08-5 pursuant to Article13.3 ATJSC, because the execution of such decisions may cause grave and irreparable consequences for them.

    2. - Planidal ulaganja d.o.o. of Sesvete (case no: U-I-41968/2009) also considers that Article 13.3 ATJSC in not in conformity with Articles 5.1, 49.4, and 50.2 of the Constitution. In stating the reasons for its view in more detail, the proponent points out:

      The impugned provision has the effect of depriving the offeror of voting rights at the general assembly during the period from the occurrence of the obligation of submitting a takeover bid until the completion of the takeover procedure. This right is taken away not only with regard to the shares whose acquisition created the obligation of announcing the bid, but also with regard to the shares that the offeror had acquired earlier and based on which he had already acquired voting rights.

      On the other hand, the consequence of the impugned provisions, in the proponent's view, is that other, generally minority, shareholders are granted during this period significantly greater rights than the money they invested into shares would enable them to have, since they can autonomously pass decisions from the competence of the general assembly although they do not have a majority vote and (perhaps) neither the necessary representation of shareholders at the general assembly session.

      Not only is the offeror deprived of his voting rights at these assemblies, but he cannot prevent the assembly from passing valid decisions by participating in the work of the session.

      In addition to the above, the...

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