The Supreme Court of Estonia clarified for the first time the rules for distributing dividends and the conditions under which dividends can be distributed disproportionately among shareholders.
This resolved the ambiguity regarding the interpretation of a legal provision (Commercial Code § 157(2)), which allows for different dividend distribution procedures compared to the law, as stipulated in the articles of association. According to the Supreme Court, shareholders can also decide on the procedure for dividend distribution with each decision, and this procedure does not necessarily have to be specified in the articles of association. This is an important position because, in practice, it is common to state in the articles of association that shareholders can decide on the procedure for dividend distribution with each decision, and the articles of association typically do not contain specific rules.
The Supreme Court also formed the position that for unequal treatment of a shareholder, i.e., disproportionate distribution of dividends, the shareholder’s consent is required, and such a shareholder must essentially understand that the articles of association allow for unequal treatment and must vote in favor of such unequal treatment.
If a shareholder acquires a stake in a company where the articles of association already allow for unequal treatment, it can be considered that the new shareholder agrees with these rules, as they have the opportunity to review the articles of association before acquiring the stake.
The private limited company Eesti Traat was represented by TGS Baltic partner Martti Peetsalu and Senior Associate Maris Vutt.
