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Private Ordering and Buy-Out Remedies within Private Company Law: Towards a New Balance between Fairness and Welfare?

Published online by Cambridge University Press:  19 April 2007

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Abstract

All over Europe, we see drastic changes being made to simplify company law and make it more flexible. A fundamental principle of this reform movement is the freedom of shareholders to determine internal structure and power balance. At the same time, as a consequence thereof, we may see more situations in which minority shareholders at some point may feel trapped. More freedom and flexibility will therefore need to be supplemented with a credible and efficient level of minority protection. Until now, the general approach in Europe (but also to a certain extent in the United States) is that shareholders only have a right to exit through a buy out if the conduct of the controlling shareholder(s) is unfair and/or oppressive. One can doubt whether this provides an acceptable level of protection in terms of efficiency and effectiveness. In this article, it will be submitted that it might be economically sound, as well as efficient, effective and satisfactory from a legal point of view, for the law to go further and award minority shareholders a right to exit the company ‘at will’ provided that (i) a reasonable notice period is observed and (ii) additional costs of financing are taken into account.

Type
Articles
Copyright
T.M.C. Asser Press 2007

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