Corporate conflict prevention: comparative legal aspects
The article presents a comparative legal analysis of the laws of Ukraine and the United States regarding the regulation of corporate relations and corporate conflicts. Corporate conflict can be defined as disagreements (disputes) between shareholders (investors) and managers in connection with the violation of shareholders' rights that lead or may lead to claims against the company controlling the shareholder or executives regarding the decisions taken by them, early termination of powers. management, significant changes in the composition of shareholders.
Even when examining the nature of the relationship between objective and subjective causes of conflicts, the following features may be noted: the clear distribution of objective and subjective causes of conflicts, and even more so their opposition, is obviously unlawful. Any objective reason plays a role in the emergence of a specific conflict situation, including due to the action of subjective factors. As a rule, corporate conflicts in joint stock companies are the property rights of the shares of the company and the rights that these securities give (participation in management, participation in the distribution of profits of the company, etc.). The interests of shareholders are aimed at generating income from the company's activities. Earning income can be realized in two ways - paying dividends and increasing the share price. In the process of addressing these issues in practice, there may be abuse of corporate rights, including greenmail.
The main attention is paid to the issues of preventing greenmail, which, although not an offense, can cause losses to the business entity and its participants.
The term "greenmail" in the literature is interpreted as a procedure for the acquisition of a large number of shares of a company in order to create a threat to its hostile takeover in order to resell these shares at an overpriced price to the same company.
The following main features of corporate greenmail can be identified:
- it is a form of intervention in the activities of a joint-stock company;
- based on the fact that the person owns a certain number of shares, which does not allow to make a significant impact on the process of managing a joint-stock company;
- the intervention is aimed at hindering the operational activity of a joint-stock company and, as a consequence, creating certain negative consequences for the company and (or) its shareholders, including in their financial and property sphere;
- the purpose of such conduct is to sell its block of shares at an inflated price to the controlling shareholder or to the company itself or to obtain another property grant;
- the actions of corporate greenmailers are formally legitimate, but may be qualified as abuse of law.
In the United States, greenmail is interpreted differently in individual states, but what is common is that greenmail is an abuse of rights and may cause harm to the company and its members.
There is no definition of greenmail at the legislative level in Ukraine. This is due to the fact that in Ukraine the phenomenon of greenmail due to the lack of development of corporate relations in comparison with the United States has not yet become widespread, however, it should not be ruled out the significant spread of greenmail in the future.
The conclusions of the analysis include recommendations to prevent greenmail.
Danilova, E. I. (2010). Doslidzhennia prychyn vynyknennia korporatyvnykh konfliktiv. Naukovi pratsi Natsionalnoho universytetu kharchovykh tekhnolohii, 35, 66-70 [in Ukrainian].
Moroz, O. V. Sotsialno-ekonomichnyi zmist korporatyvnoho konfliktu na suchasnomu pidpryiemstvi. Visnyk Vinnytskoho politekhnichnoho instytutu, 3, 22 [in Ukrainian].
Bielikov, O. O., Hraivoronskyi, A. V., Kholchenkov, O. M. (2009). Velykyi reiderskyi slovnyk. K.: Publishing House Justinian [in Ukrainian].
Gololobov, D. V. (2004). Aktsionernoe obshchestvo protiv aktsionera. Protivodeistvie korporativnomu shantazhu. Moskva: Justicinform [in Russian].
Williams, J. D. (1985, January 2). Companies' Stock Buybacks Soared in 1984 but Might Slow This Year. The Wall Street Journal, 6B, col. 1.
Hartnett, D. J. Comment: Greenmail: Can the Abuses Be Stopped? 80 Nw. U.L. Rev. 1271. “Greenmail”
Title 26 U.S. Code, Sec. 5881.
Molotnikov, A., Garslian, L. Ukroshchenie "stroptivykh": kvalifikatsiia i otvetstvennost za korporativnyi shantazh v Rossii i SShA. Retrieved from: http://отрасли-права.рф/article/16095 [in Russian].
Profusek, R., Bober J., Johnson, D. (Fall, 1986). An Overview of Current Basic Takeover Planning Techniques. 14 Sec. Reg. L.J., 195, 219.