We successfully represented a manufacturer of wooden buildings and saunas in a dispute with a board member and shareholder in a company. The dispute involved consulting and strategy development over an extended period of time, involving aspects of commercial law, the board’s liability and intellectual property rights. The parties disputed over several aspects of corporate law, including the ownership of intellectual property rights.
We also represented the client in a dispute where the shareholder challenged the decision to increase the share capital. Subsequently, we represented the client in compromise negotiations, as a result of which the decision to increase the share capital was upheld, and the client acquired the controlling shareholding.
A shareholder cannot prevent company development
The purpose of the decision to increase the share capital was to secure additional financing from the shareholders for the construction of a new and long-planned production building. It was a business decision, the adoption of which is the exclusive competence of the shareholders. For it to be adopted, two-thirds of the shareholders’ votes are required, which was achieved for this decision. According to the opposite party, the client’s shareholders used their voting rights to gain advantages or to the detriment of other shareholders.
The court didn’t approve the opposing party’s request to suspend the decision to increase the share capital for the duration of the dispute, and found that the shareholder could have avoided the reduction of his share by participating in the share capital increase. Moreover, the disputing shareholder was engaged in a competitive activity, and preventing the development of the client would have given the shareholder an unfair competitive advantage.
The court’s ruling is significant as there is no case law of the highest court on challenging decisions to increase share capital. At the same time, such disputes could potentially harm the whole operation of the company and prevent investment. Since the settlement of the disputes, the construction of the production building has already begun, and the company continues its development.
Our services and client team
Our client team was led by partner Karin Madisson. Senior associate Albert Linntam and associate Liisa-Maria Puur participated in the dispute. Associates Kristi Tammiku and Lee Laanemäe advised on corporate law issues, and senior associate Olivia Kranich on IP rights issues.