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November-December 2006
Estonia, Latvia, Lithuania, Finland, Sweden |
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RoschierRaidla News
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Inside this Issue:
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Estonia |
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Latvia |
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Lithuania |
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Estonia
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Organic Farming Act |
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On 20 September 2006 the Estonian Parliament (Riigikogu)
adopted the Organic Farming Act. The Act regulates those areas of
Organic Farming that are not covered by EU regulation, and remain
within member state competence. Most importantly, the Act
establishes the system for controlling the use of labeling for
organic food products, inspections of organic farms, and imports of
organic food products. The Act also sets forth penalties for failing
to comply with the regulations. Operators wishing to produce food
products that are to be labeled as using organic farming methods
must apply to be listed in a registry. This registry will be
maintained by the Plant Production Inspectorate. Once an operator is
registered, it may use the Estonian national organic farming label (ecolabel).
Operators selling exclusively to consumers or end users are exempted
from the requirement to register. There is a new set of provisions
that relate to “imports”. Importers of foods labeled organic must
give notice to the Veterinary and Food Board before the goods arrive
in Estonia. Upon arrival, importers must submit for each consignment
a completed inspection certificate along with related documents to
customs. The competent authorities responsible for the inspection of
persons engaged in organic farming are the Plant Production
Inspectorate, Veterinary and Food Board and Health Protection
Inspectorate. The new Act repeals the current Organic Farming Act.
The new Act enters into force on 1 January 2007.
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Additions to Privatization Act |
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On 20 September 2006 the Riigikogu passed the Act Amending §
27 of the Privatization Act. The amendments clarify the rights of
shareholders in the adoption of resolutions by the general meeting
of shareholders and the supervisory board. Under the amendments the
state or local government acting as a minority shareholder has the
right in certain cases to veto resolutions taken by the general
meeting or the supervisory board of a public limited company whose
shares have been privatized (a so-called golden share provision).
The right only applies to public limited companies operating in
strategic fields, i.e. those which have been granted special or
exclusive rights or that own essential facilities and only after a
partial privatization of shares, where the state or local government
holds less than one half of the total number of shares. The amended
law introduces the possibility of including in certain cases an
obligation in the contract of purchase and sale of shares to amend
the articles of association of the public limited company to the
effect that in certain cases a resolution of the general meeting or
supervisory board may only be adopted if the representative of the
state or local government has voted in favor. The law also lists the
instances when the representative of the state or local government
may vote against a resolution. Namely, a veto may only be used where
the adoption of a resolution could result in a violation of law,
damage to the economic activities of the public limited company or
significant damage to the public interest. The representative of the
state or local government must justify a vote against the
resolution. The amendments entered into force on 6 October 2006.
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Amendments Enhancing Energy Efficiency
Adopted |
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On 27 September 2006 the Riigikogu passed the Act Amending
the Building Act, Building Association Act, Apartment Ownership Act,
Apartment Associations Act and the Energy Efficiency of Equipment
Act. The objective of the law is to harmonize Estonian legislation
with Directive 2002/91/EC of the European Parliament and of the
Council on the energy performance of buildings, and thus to improve
the energy efficiency of buildings and equipment. A key idea of the
new law is to introduce the concept of “a building where indoor
climate must be maintained”. Buildings that fall into this
definition, and that are under construction or planned (no building
permit yet issued) as of 1 January 2008 must meet minimum energy
efficiency requirements. Such buildings that were constructed before
that date, or for which a building permit was issued before 1
January 2008 would only have to meet such standards after major
reconstruction. The standards relate mainly to efficiency of
boilers, air conditioners, and heating installations. The energy
efficiency status of such buildings will be documented by “energy
labels” that will be issued only by certain issuers. This will
include local governments and from 1 January 2008 to 1 January 2010
operators conducting evaluations of construction works have the
right to issue such labels. These are different labels for new and
existing buildings, and the data from the energy label must be set
forth in the registry of construction works. Upon completion of
construction, sale or lease, the builder, seller or lessor must turn
over the energy label to the other party to the contract. The new
law also provides that as of 1 January 2008, authorized persons may
conduct an “energy audit”. The costs of ordering an energy label or
energy audit will be deemed management costs of the dwellings. Given
the scope of the changes in the laws, their implementation is going
to take time and therefore different dates of entry into force have
been established for different parts of the law: 22 October 2006, 1
January 2008 and 1 January 2009.
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Electronic Monitoring Made Possible by Law |
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On 27 September 2006 the Riigikogu adopted the Act Amending the
Probation Supervision Act, Imprisonment Act, Penal Code, Penal Code
Implementation Act and the Criminal Procedure Code. The principal
aim of the amendment is to reduce the instances of actual
imprisonment and the number of detainees in prisons. In order to
achieve these aims electronic monitoring is introduced as an
alternative to imprisonment. Electronic monitoring is defined as an
obligation imposed by the court on a convicted offender for a
specific term, pursuant to which the person is subjected to
monitoring his or her compliance with the restrictions on movement
by using an electronic device fastened to his or her body, which
renders it possible to determine his or her location. The term of
electronic monitoring can range from one month to 12 months. New
provisions were introduced in the Criminal Procedure Code
authorizing what persons may carry out the electronic monitoring and
control, and concerning the execution and enforcement of electronic
monitoring. The law delegates the task of establishing the procedure
for executing electronic monitoring and exercising supervision
thereof to the Minister of Justice. The amendments also specify
issues pertaining to release on parole, increase of the role of
substitutive punishment and the granting of more competence to
courts and probation officers. Under the amendments the courts must
start considering more than they have done to date regarding the
possibility of applying community service. The amendments shall
enter into force on 1 January 2007, unless a later date of entry has
been prescribed by law. By 1 July 2007 at the latest technical
arrangements must be in place for applying electronic monitoring.
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| For further information please contact
Raino Paron,
Partner at Raidla &
Partners in Tallinn. |
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Latvia
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Law on Civil Procedure Amended to Extend the
Jurisdiction of the Lower Courts |
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On 26 October 2006, Saeima (the
Parliament) amended the Law on Civil
Procedure increasing the jurisdiction of
regional courts (rajona tiesa) to
hear contract disputes and tort claims.
The amendments provide that the lower
(regional) courts will now have
jurisdiction over all contract and tort
claims of monetary value not exceeding
LVL 150,000 (approximately EUR 213,000).
Prior to the amendments, the lower
courts’ jurisdiction was limited to
claims of less than LVL 30,000
(approximately EUR 42,500). Contract and
tort claims exceeding the threshold of
LVL 150,000 fall under the jurisdiction
of the second level courts – the
district courts (apgabaltiesa).
The regional courts represent the first
level of the Latvian three-level court
system. In general, they have
jurisdiction over all private law claims
except those reserved for the district
courts. The second level courts, i.e.
the district courts, have jurisdiction
over e.g. disputes in respect of title
to real estate, patent and trade mark
claims, credit institution insolvency
and liquidation cases, and contract and
tort claims which exceed the relevant
threshold. The district courts also hear
appeals of lower court judgments.
In addition to the amendments concerning
lower court jurisdiction, the Law on
Civil Procedure contains a number of new
provisions necessary to implement the
new Law on Implementation of Sanctions
of International Organizations described
below.
The amendments to the Law on Civil
Procedure will enter into force on 1
January 2007.
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New Law on Implementation of Sanctions of
International Organizations Adopted |
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On 5 October 2006, Saeima has
adopted a new Law on Implementation of
Sanctions of International Organizations
in the Republic of Latvia. The law will
enter into force on 1 January 2007 and
will replace the existing Law on Regime
of Sanctions of International
Organizations in the Republic of Latvia
which has been in place since April
2000.
The new Law is applicable only to the
sanctions imposed either by the United
Nations Organization or by the European
Union and, thus, limits the potential
scope of those international
organizations whose sanctions are
subject to implementation in Latvia. The
current regulation grants the Cabinet of
Ministers power to implement sanctions
of an unspecified range of international
organizations. That power, however, has
never been used, and so far only
sanctions of either the United Nations
or the European Union have been
implemented by the Cabinet of Ministers.
The sanctions imposed by the United
Nations Organization or the European
Union are implemented in Latvia by
Regulations of the European Union or the
Regulations of the Cabinet of Ministers
of Latvia. The Cabinet of Ministers has
broad authority to determine the
measures necessary to implement the
sanctions and their duration in the
Republic of Latvia.
The sanctions may be implemented by
applying any of the three types of
implementation measures recognized by
the Law on Implementation of Sanctions
of International Organizations
–financial restrictions, transactional
(contractual) restrictions and travel
restrictions.
Financial restrictions apply to
financial instruments and financial
resources of the country subject to the
sanctions and the persons related to
that country. When such restrictions are
imposed, none of Latvia’s financial and
capital market participants may carry out any operations involving
financial instruments or resources that
are owned (either directly or
indirectly) by the countries or persons
subject to such financial restrictions.
Implementation of these restrictions
will be supervised by the financial and
capital markets regulator in Latvia.
Transactional restrictions prohibit
entry into any transactions involving
economic resources or assets which
result in the change of ownership,
possession or holding of such resources
or assets with an aim to create
financial instruments or resources where
a contracting party is a country subject
to sanctions or persons related to that
country. These restrictions include a
prohibition to record in any public
registries or other registries
confirming property rights of a person
the identity of persons subject to the
transaction restrictions, as well as any
property owned or
effectively controlled by such persons.
In addition, transaction restrictions
include a generally applicable
prohibition on the entry into any
transaction concerning or involving any
economic or financial resources or
assets or which is subject to
transaction restrictions. According to
Latvian contract law, any such
transaction would be considered void ab
initio.
Traveling restrictions prohibit entry
into the Republic of Latvia of any
persons subject to the travel
restrictions pursuant to the Regulation
of the European Union or the Regulations
of the Cabinet of Ministers.
The Regulation of the European Union and
the Cabinet of Ministers on
implementation of sanctions is
enforceable against the relevant persons
by way of decisions of the competent
authorities. The implementation and
enforcement decisions of the competent
authorities are appealable in accordance
with the rules of administrative
procedure and are subject to enforcement
by the relevant authorities in
accordance with the rules of civil
procedure.
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Law on Taxes and Duties Amended to Decrease
Tax Penalties |
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On 26 October 2006, Saeima
approved a number of amendments to the
law on Taxes and Duties, the most
essential of which are liberalization of
the tax penalty provisions and changes
in the rules concerning cash payments.
The amendments will enter into force as
of 1 January 2007.
The current provisions, under which the
tax payer was subject to a tax penalty
of 100% of the unpaid tax, have been
replaced with a scale of penalties under
which the amount of penalty depends on
the materiality of the unpaid tax.
Materiality is measured as a percentage
of the unpaid tax against the total
declared tax liability. When the unpaid
tax is less than 15% of the declared tax
liability, the tax penalty has been
decreased to 30% of the unpaid amount. A
penalty equal to 50% of the unpaid tax
will be payable if the unpaid tax
exceeds 15% of the declared tax
liability, while a penalty equal to 100%
of the amount of the unpaid tax will be
applied if the tax avoidance has been
committed repeatedly, i.e. if the tax
avoidance has already been detected in a
tax audit completed not more than 3
years ago. A more severe penalty has
been introduced if the tax avoidance is
recurrent, i.e., of a new tax avoidance
offence has been committed within 3
years after committing the repeated tax
avoidance offence – any subsequent tax
avoidance detected within this 3 year
period will trigger the tax penalty
equal to 150% of the unpaid amount of
the tax.
Failure to pay any outstanding default
interest, amounts outstanding as unpaid
tax liability or tax penalty within 3
months of the due date may now trigger
an insolvency filing by the tax
authorities.
No penalties will be charged when the
unpaid tax liabilities have been
detected and reported to the tax
authorities by the tax payer itself. If
the tax payer has made such a report
prior to the commencement of its tax
audit, the tax payer will be liable only
for the late interest on the past-due
amount of the tax. If the reporting has
been done after the commencement of the
tax audit but before the audit is
completed, the tax payer will be liable
for late payment interest plus a penalty
in the amount of 10% of the unpaid tax
liability. This is a considerable
improvement from the earlier regime
where even negligent failure to pay the
tax in full would trigger a penalty
equal to the full amount of the unpaid
tax.
The tax penalty will be decreased to 15%
of the unpaid tax liability in the
situations when the tax payer concedes
to the determination of the tax
authorities in respect of his unpaid tax
liability, has fully paid the unpaid tax
liability as well as any applicable late
payment interest and the tax penalty of
15% within 30 days after the completion
of the audit, provided that tax payer
has not committed any other tax
avoidance offences for the last 3 years.
Along with the liberalization of the tax
penalty provisions, the amended law has
changed the cash transaction reporting
rules. The threshold of cash
transactions subject to reporting has
been raised from LVL 1000 to LVL 3000.
In addition, the amendments strike out
the current penalties for the failure to
report cash transactions and remove the
tax penalty which was payable if the tax
payer had carried out more than three
cash transactions subject to reporting
during any calendar month.
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| For further information please contact
Dace Silava-Tomsone
(CV),
Partner at Lejins, Torgans
& Partners in Riga. |
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Lithuania
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Amendments to the Law on Copyright and
Related Rights |
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On 12 October 2006 the Lithuanian
Parliament (Seimas) adopted
amendments to the Law on Copyright and
Related Rights. The aim of the
amendments is to harmonize the
provisions of the Law with legal acts of
the European Union (namely, Directive
2001/84/EC of the European Parliament
and of the Council of 27 September 2001
on the resale right for the benefit of
the author of an original work of art
and Directive 2004/48/EC of the European
Parliament and of the Council of 29
April 2004 on the enforcement of
intellectual property rights), to
abolish legal obstacles that may impede
the common market and to improve
protection of copyright and neighboring
rights. A new rule has been established
which ensures dual protection of
industrial designs, i.e. both, under
industrial property laws and copyright
laws. The amended provisions explicitly
provide that remuneration to the
co-authors of audiovisual works for
their rental shall be paid by persons to
whom the right to rent audiovisual works
or their copies has been transferred or
granted. A change introduced regarding
an author’s non-property rights to
computer programs and electronic data
provides that these rights may not be
used in such way as to unreasonably
constrain a holder’s property rights to
computer programs and data, including
the right to adapt, change and
distribute these works. Essential
amendments have been adopted with
respect to enforcement of copyright,
related rights and sui generis
rights. The law no longer provides for
the list of actions which may be
regarded as infringement of the rights
concerned, but lays down a general
clause under which all actions, the
result of which is the breach of the
rights protected by the law, are
prohibited. Not only the owners of
copyright, related rights and sui
generis rights, but also the holders
of exclusive licenses and collective
administration institutions are entitled
to bring a claim before the court in
order to protect their rights. Further
amendments to the law include the
embodiment of the regional rights
exhaustion principle, i.e. once a piece
of work or its copy has been lawfully
put on the market in the territory of
the European Economic Area, the author
no longer holds exclusive distribution
right. The law now also establishes a
more detailed calculation and payment
procedure concerning the author’s right
to a royalty for each original piece of
art work or original manuscript of
literary or musical work resold.
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Amendments to the Law on Corporate Income
Tax |
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On 19 October 2006 the
Lithuanian Parliament (Seimas)
adopted amendments to the
Law on Corporate Income Tax.
A special tax regime has
been established in respect
of the transfer of shares
held by companies in other
entities. An increase in the
value of assets, which is
earned from the transfer of
shares, if the transferring
entity holds more than 25%
of the shares in the entity,
the shares of which are
being transferred for more
than two years continuously,
and the entity the shares of
which are being transferred
operates in a member state
of the European Economic
Area or in the state a
treaty for the avoidance of
double taxation has been
concluded with, and is a
corporate income tax (or
corresponding tax) payer in
that state, shall not be
subject to taxation. Losses
incurred as a result of such
share transfer may be
deducted from taxable income
received from the transfer
of securities during that
fiscal period; however, the
amount of losses which is
being deducted may not
exceed the amount of taxable
income received from an
increase in the value of
assets of securities during
that fiscal period (losses
which have not been deducted
may not be transferred to
the following fiscal year).
The amendments also
establish that in case
residents who terminate
their individual economic
activities transfer the
goods which have not been
marketed to the new entity
established by themselves or
their spouses, the price of
the goods shall be the price
indicated in the documents
of acquisition of goods
provided by the resident who
has terminated individual
activities, save for the
case when the assets are
used for the payment for
company’s shares.
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Law on Income Tax of Individuals Amended |
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On 3 October 2006 the
Lithuanian Parliament (Seimas)
adopted amendments to the
Law on Income Tax of
Individuals. The amendments
are aimed at specifying
non-taxable income of the
residents of the Republic of
Lithuania. The amended law
provides that pensions
received from international
organizations, as well as
benefits and compensation
from the European
Communities, contributions
which are paid under the
Decision of the European
Parliament of 28 September
2005 adopting the Statute
for Members of the European
Parliament (2005/684/EC,
Euratom) such as
transitional allowances,
old-age, invalidity and
widower’s pensions,
compensations for expenses
incurred as a result of
sickness, pregnancy or the
birth of a child and
contributions for insurance
coverage for the risks
connected with the exercise
of the mandate of the
European Parliament are
non-taxable income. The
amendments also establish
that lottery winnings,
provided they are paid out
by the entities of the
member states of the
European Economic Area which
pay lottery turnover tax in
accordance with the
procedure prescribed by the
laws of those member states,
shall not be subject to
taxation. With the aim of
balancing the housing
market, as well as
stabilizing the prices for
housing, it has been
established that expenses
incurred during the fiscal
period may be deducted from
the income if interest is
paid on the loan taken for
construction or acquisition
of one living place to
banking and other credit
institutions or funds and
state financial institutions
of foreign countries
(entered into the list by
the Minister of Finance) in
which more than 50% of
shares are held by
governments of foreign
countries, as well as
interest paid on financial
lease of one living place.
If more than one loan is
taken for acquisition or
construction of a living
place or if more than one
financial lease agreement is
concluded, a resident may
deduct from his or her
income interest paid for the
first loan or interest paid
under the first financial
lease agreement.
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further information please contact
Irmantas Norkus, (CV),
Managing Partner at
Norcous & Partners in Vilnius. |
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Finland
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The
Internet and Privacy in the
Workplace |
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In November 2006 the Finnish Data
Ombudsman ruled that
employers in Finland can not
use information about their
current or prospective
employees which has been
obtained by using Internet
search engines, such as
Google or Yahoo. Employers
must collect personal
information about the
employee primarily directly
from the employee. The use
of other sources assumes the
consent of the employee. The
Ombudsman’s decision may
make life more difficult for
HR personnel, as employers
may not be permitted to even
check the reliability of a
job applicant’s CV from
publicly available sources
available through the
Internet without first
obtaining the applicant’s
permission.
The Ombudsman’s statement
was given in response to a
job applicant’s complaint
that a prospective employer
had used a five-year old
news group discussion
posting found on the
Internet to the detriment of
the applicant. In the news
group discussion posting,
the applicant claimed to be
mentally unstable. The
applicant was not aware how
the news group discussion
posting ended up on the
world wide web.
In Finland, the Protection
of Privacy in Working Life
Act provides that an
employer may only collect
information on its employees
or job applicants primarily
from the employees or job
applicants themselves. If
other sources are used,
consent from the employee or
job applicant must be
obtained. Such other sources
include data networks like
the Internet. If the
employee or applicant does
not give his or her consent,
the employer may obtain such
data without permission only
if the data is directly
necessary for the purpose of
employment and the data is
needed for the purposes of
evaluating the employee’s or
job applicant’s reliability.
However, not every job
entitles the employer to
obtain personal data without
the employee's consent. Such
jobs include only those
where employees are
responsible for employers’
assets or the employment
requires particular
reliability, such as
positions in airports or
nuclear power plants. In all
cases, the employer must
notify the employee in
advance that personal data
will be obtained from
external sources. Further,
before any data is used as a
basis for the employer’s
decisions, such data must be
presented to the employee.
Deliberate violation of the
Protection of Privacy in
Working Life Act is
punishable by a fine or
imprisonment of up to one
year.
The Ombudsman also noted
that information obtained
from the Internet is not
necessarily reliable and, as
such, does not meet the
general requirements of good
data processing practices
set forth in the Data
Protection Act. The Act
provides that data
processors must act
diligently and must use only
reliable data sources.
Information on the Internet
is in many cases outdated,
its accuracy is not
verifiable, and with respect
to personal information, it
is often not possible to
ensure the information
relates to the person in
question.
It is not known whether the
Data Ombudsman’s ruling has
had any impact outside
Finland yet. However,
privacy laws in Finland are
some of the strictest in the
EU and not many countries
have specific laws on
privacy in the workplace.
Finnish law sets forth clear
restrictions on the use of
personal information
available on public social
networking sites such as
LinkedIn™ or MySpace™ as
well as information in
increasingly popular blogs
and IRC gallerias.
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| For further information please contact
Dimitrios Himonas
(CV),
Partner at Roschier in Helsinki. |
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Sweden
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The Swedish
Securities Council's
Competence in
Relation to the
Swedish Code of
Corporate
Governance |
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Earlier this
year, there was
an intense
debate in the
media regarding
hedge fund,
Cevian, and its
influence on
Swedish listed
companies.
Cevian tries to
create value in
its affiliated
companies by
taking an active
role in the
decision making
of the board and
has inter
alia used
its influence to
facilitate the
takeover offer
by Old Mutual
for Skandia in
2005. After
Cevian earlier
this year had
acquired a large
stake in Volvo,
it requested
together with
Parvus, another
hedge fund, that
the funds should
be offered a
joint seat in
Volvo’s
nomination
committee (the
“Committee”) in
light of their
long-term joint
position and the
size of their
joint holdings.
However, the
chairman of the
Board of Volvo
did not offer
Cevian/Parvus a
seat, referring
to the company’s
application of
the Swedish Code
of Corporate
Governance (the
“Code”) and the
internal
corporate
governance
rules. Two
interesting
legal questions
came into play
in the ensuing
controversy;
what
self-regulatory
body will be
competent to
give advice on
individual
companies’
proper
application of
the Code and
what is the
scope of review
of the
Securities
Council (the
“Council”)?
The Code came
into force as of
1 July 2006 and
it was made
mandatory for
the larger
companies listed
on the Stockholm
Stock Exchange.
The Code, which
is a development
of previous
market practice,
company law
provisions and
international
trends within
corporate
governance, has
generally been
accepted on the
market and has
come to set the
benchmark for
good market
practice. Like
its British
predecessor, the
UK Combined
code, the Code
operates on the
basis of the
principle of
“comply or
explain”. The
Stockholm Stock
Exchange may
take action
against
companies which
do not comply
with the Code
(or properly
explain any
deviations).
Moreover, the
Swedish
Corporate
Governance Board
(the “Board”) is
responsible for
monitoring,
promoting and
developing the
Code, but does
not have any
supervisory or
adjudicatory
role regarding
the application
of the Code by
individual
companies.
However, no
regulatory body
has been
specifically
charged with the
task of
supervising the
use of the Code
and providing
advice with
regard to the
application of
the Code by
individual
companies and
institutions.
Volvo had at its
annual general
meeting, in
accordance with
the Code,
adopted an
instruction for
the appointment
of members in
the Committee,
pursuant to
which the
chairman of the
board of
directors and
each of the four
major
shareholders of
Volvo would hold
a seat on the
Committee. In
case the
ownership
structure of the
company would
subsequently
change, with the
result that none
of the four
major
shareholders
would be
considered as a
major
shareholder, the
composition of
the Committee
would
consequently be
modified. The
instruction was
fairly short and
left room for
various
interpretations
with regard to
the actual
appointment of
members to the
Committee.
Specifically,
the instruction
did not address
the question of
when a group of
shareholders
would be
entitled to
count as one
shareholder and
thereby have a
sufficient stake
to qualify as a
major
shareholder for
the purpose of
obtaining a seat
in the
Committee. When
the chairman of
the board of
directors did
not grant a seat
to Cevian/Parvus,
stating that
they could not
acting in
concert qualify
as a major
shareholder,
Cevian/Parvus
requested that
the Board would
declare this to
be a violation
of the Code,
inter alia
due to the fact
that each of SEB
and SHB (two
banks each
representing
other
shareholders and
managed funds)
was considered
to be a major
shareholder in
Volvo as a
result of their
representation
of a group of
shareholders.
The Board,
however, did not
respond to the
request
reasoning that
it would not
assume any
responsibility
for the
supervision of
individual
companies’
application of
the Code. As a
last resort, the
Swedish
Securities
Council was
asked to make a
statement on
Volvo’s
application of
the Code and its
right to apply
the internal
instructions so
as to exclude
Cevian/Parvus.
The Council has
a wide and
general
competence to
issue statements
in individual
cases regarding
good stock
market practice
but has not
previously
assumed any
responsibility
for the Code.
On 6 October
2006, the
Council issued a
statement in
relation to the
disagreement in
the Committee.
The Council
confirmed that
it considers
itself competent
to issue
statements
regarding the
application of
the Code in
individual cases
by virtue of its
general mandate
to promote good
stock market
practice.
However, the
Council limited
its assessment
of the case at
hand to the
question whether
the measures
taken by the
chairman, in
relation to the
instruction,
were
characterized by
the principles
of transparency
and
non-arbitrariness
which are the
guiding
principles of
the Code
provisions on
Committees. The
Council
acknowledged
that the
instruction left
room for the
chairman of the
board of
directors to
make various
interpretations
regarding the
composition of
the Committee
but stated that
it could not be
considered to
fall within the
competence of
the Council to
overtake the
responsibility
of the chairman
and to overrule
his
interpretation.
Hence, the
Council did not
consider the
chairman’s
interpretation
of the
instruction to
be contrary to
good stock
market practice,
giving no other
grounds for its
assessment other
than that the
chairman’s
interpretation
seemed well
founded,
inter alia
due to the fact
that a legal
advisor had been
engaged.
It is noteworthy
that the Council
did not
explicitly
evaluate the
matter in
relation to the
principle of
equal treatment
of shareholders.
According to the
said principle,
Volvo would be
obliged to grant
Cevian/Parvus
access to the
Committee,
should it grant
other
shareholders a
seat under
similar
circumstances. A
failure to do so
would constitute
a breach of the
Companies Act
and would not
measure up to
good stock
market practice.
The assessment
of possible
violations would
then fall within
the scope of the
Council’s
general mandate
to determine
good stock
market practice.
It must be
assumed that the
Council would
have reacted,
should there
have been a
flagrant breach
of the principle
of equal
treatment.
However, it
would have been
interesting to
hear the
Council’s views
on, for example,
whether Volvo
has given a
satisfactory
explanation for
why SEB and SHB
funds, but not
Cevian/Parvus,
were considered
concerted
parties for this
purpose.
Instead, the
Council simply
noted that the
decision by the
chairman seems
to have been
well founded and
that it has been
prepared in
consultation
with legal
expertise.
The reaction by
Cevian/Parvus to
the Council’s
statement was to
transfer its
joint holdings
in Volvo to a
newly
established
holding company,
“Violet”. Violet
was consequently
granted a seat
in the Committee
in its capacity
as one of the
major
shareholders.
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| For further information please contact
Axel Calissendorff
(CV),
Partner at Roschier
in Stockholm. |
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| This Newsletter is a
periodic publication of RoschierRaidla and
should not be construed as legal advice or legal opinion on any specific
facts or circumstances. We have used reasonable efforts in collecting,
preparing and providing the information in this newsletter, but we do
not warrant or guarantee the accuracy, completeness, adequacy or
currency of the information contained herein. The contents are for
general informational purposes only, and you are urged to consult a
lawyer concerning your situation and any specific legal questions you
might have. |
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