The right of shareholders holding a stock of fifty per cent and more in a company to access any confidential information of the company has been restricted by law. Until now, they have been entitled to obtain any confidential information of their company subject to signature of a confidentiality clause.
With an amendment to the Company Law coming into effect on 29 November 2017, all shareholders regardless of the size of their shareholding shall be equally entitled to access confidential information of the company, however, on two conditions. First of all, confidential information may be disclosed to a shareholder for the purposes of legal compliance, on a need-to-know basis. This requirement might be connected to the shareholder’s duty, for instance, to disclose information required by the Competition Council in order to obtain a concentration permit, and so on. Second, the shareholder must ensure the confidentiality of any such information and documentation.
Set amendment to the Company Law has imposed a restriction for holders of a fifty-per-cent or larger stock to abuse access to confidential information of the company. On the other hand, there is a threat that when the management treat the company as their own personal business, even shareholders of one-half of the company’s shares or more will virtually be deprived of any opportunity to obtain in-house information to prove abuse or machinations on the management’s part, unless the information is public by rule of law.
Under the wording of the law, to assess whether a shareholder requesting a disclosure of the Company’s confidential information, the CEO of the company will have to make a decision whether the information has anything to do with the shareholder’s duties set forth in the regulations and whether the disclosure is necessary in that particular case. This wording of the law will create grounds for potential disputes between the company and the shareholder. Information that the shareholder may consider necessary may be deemed as excessive by the CEO, something that can be done without.
The case-law should be able to formulate the rules for the correct enforcement of this provision. However, CEOs already have to adopt a serious stance on assessing every request from the company’s shareholders, as well as of the underlying reasoning, because any breach of this duty by way of failure to disclose information entails a fine in the amount of up to EUR 3,000; EUR 6,000 for repeat violations.
By Asta Macijauskienė, attorney at law, Senior Associate at Law Firm GLIMSTEDT