Squeeze-out: introduction expediency and fair value challenge

Abstract

The purpose of the article is to substantiate the legality of the squeeze-out procedure given legal opinions about the constitutionality of regulations on the compulsory sale of the shares of minority shareholders and the determination of their fair value. Research methods. The contribution is based on general scientific and special methods of scientific cognition. Results. The author analyzed the procedure for exercising squeeze-out, elucidated legal approaches to establishing the constitutionality of provisions covering squeeze-out, outlined legislative approaches to compulsory expropriation. The author also identified a range of problems of a fair value of the stock traded under squeeze-out and offered ways to improve the issue under consideration at the legislative level. Conclusions. It is argued that the right to compulsory expropriation may be established by the Constitution of Ukraine, the Civil Code of Ukraine, and special laws; the squeeze-out procedure is set under authority and in the manner consolidated in the Law of Ukraine “On Joint-Stock Companies”. In addition, the Law contains a guarantee for full compensation for stock value under the relevant terms. The shortcoming of the current legislation is zero guarantees for the protection of the monitory shareholder’s rights, whose shares are ought out, which should be specified in the very procedure. It is manifested in the lack of proper control over squeeze-out compliance that, in turn, causes the determination of an unfair market price of shares, which are compulsorily bought out. Therefore, there should be statutory provisions for special control of the court or the National Securities and Stock Market Commission to ensure a transparent squeeze-out and determination of a fair value of the stock.