1. 1 44th AIJA Annual Congress in Geneva Working Session of the International Business Law Commission (IBLC) on August 24, 2006 General Subject – „Let‘s fight: Minority Shareholders and Capital Investors“ by Peter V. Kunz Prof. Dr. iur., Attorney-at-Law, LL.M. (Georgetown University, Washington D.C.) Full-Tenure Professor for Business Law and for Comparative Law at the University of Berne Law School, Berne/Switzerland Director at the Institute for Business Law and Head of the Departement of Business Law at the University of Berne Law School, Berne/Switzerland kunz@iwr.unibe.ch Protection of Minority Shareholders: General and Specific Aspects – Switzerland as worth-while Example?

2. 2 I.Introductory Remarks A. Personal Notes B. International Developments II.Selected Remarks A. General Aspects a) Protection – „Why“? b) Protection – „Who“? Content

3. 3 B. Specific Aspects a) „Shareholders“ and other Shareholders b) Abuse of Minority Shareholders Rights c) Remedies in General C. Switzerland as Example? a) As always – somewhere „in the middle“… b) Latest Developments III.Final Remarks Content

4. 4 1)Area of PVK‘s Research in Academics  1993: Thesis  1995/1996: LL.M. Studies at G.U.L.C.  2001: Habilitation 2)Area of PVK‘s Work in Private Practice A.Personal Notes Introductory Remarks

5. 5 B. International Developments 1) Legal Issue „en vogue“ for Decades 2) Corporate Governance in the 1990s  Reports (e.g. „Cadbury Report“, „Greenbury Report“ etc.)  Discussion about „Self-Regulation v. Regulation“ 3) Corporate Governance in the 2000s 2002:  Sarbanes Oxley Act (SOX) 2003:  EU „Action Plan“ on Corporate Governance Improvements 2006:  EU-Draft re „Shareholders‘ Voting“ Introductory Remarks

6. 6 a) Protection – „Why“?  Democracy…  Ethics…  Economics..!  „Show me the Money“… b) Protection – „Who“?  Legislatures  Courts Selected Remarks A. General Aspects

7. 7 B. Specific Aspects a) „Shareholders“ and other Shareholders  Private Companies v. Public Companies  Small Investors  Institutional Investors (e.g. Hedge Funds)  Conflicts of Interests Selected Remarks

8. 8 B. Specific Aspects b) Abuse of Minority Shareholders Rights 1) One Side: Legitimate Goals  Contradicting Views 2) Other Side: Creating „Nuisance Value“  „Greenmailing“… 3)Approach  No legal Definition and no legal Concept  No „Counter-Strategy“ Selected Remarks

9. 9 B. Specific Aspects c) Remedies in General 1) Infringements of Shareholders Rights („Opression by Majority“) – e.g.  Challenging of Resolutions  Liability and Damages  Dissolution of Company

10. 10 Selected Remarks B.Specific Aspects c) Remedies 2) Infringements by Minority Shareholders („Abuse by Minority“) i)Actions by Legislatures - e.g.  Repeal a Minority Right  „Group Rights“ instead of „Each Shareholder‘s Right“  Increase the Participation Threshold of „Group Rights“  Additional Requirements (e.g. „Valid Reasons“) ii)Actions by Courts (if motioned for) – e.g.  Rejection in case of „Bad Faith“ (Costs etc.)  Liability and Damages

11. 11 Selected Remarks B.Specific Aspects c) Remedies 2) Infringements by Minority Shareholders („Abuse by Minority“) iii)Non-Statutory Limitations  Articles and Shareholders‘ Agreements  Limitations may be null or null and void  Shareholders may disregard such Limitations

12. 12 C. Switzerland as Example? a) As always – somewhere „in the middle“…  „BeNeLux“ and „Scandinavia“  Steady Improvements by Legislature  „Freeze“ of Commercial Registers b)Latest Developments  Draft for new „Swiss Corporate Law“  Corporate Governace Improvements  e.g. Shareholders‘ Meetings Selected Remarks

13. 13 1)„Poor Little“ Minority Sharholders?  Not „Ethics“ but „Money talks“…  Corporate Laws are not „Social Laws“ (e.g. Labour Laws)  Behaviour may be Use - or Abuse - of Minority Rights  One forgotten Area: Abuse by Minority Shareholders 2)Abuse by Minority Shareholders?  „Greenmailing“ threatens Reputation  No coherent Concept of „Abuse“ – „What is it“? and „How to fight it“? Final Remarks

14. 14 2)Abuse by Minority Shareholders?  Remedy by Legislatures: e.g. Decrease of „Participation Thresholds“  Remedy by Court: e.g. „Abuse“ is „Bad Faith“, i.e. Rejection and Costs Final Remarks

15. 15 3)Limitations by Articles and Shareholders‘ Agreements?  Articles and Shareholders‘ Agreement may provide different Thresholds etc. – but:  Laws usually are flexible only on behalf of Shareholders  Laws prevail Final Remarks

16. 16 Thank you very much for your kind attention..! Peter V. Kunz University of Berne Law School Institute for Business Law Schanzeneckstrasse 1 CH-3001 Bern Phone: +41(0)31 / 631 55 88 kunz@iwr.unibe.ch