The squeeze-out of minority shareholders: The case of Ukraine

Abstract

The Ukraine, until recently, did not possess a legal framework for the compulsory sale of minority shareholders shares upon takeover of a joint-stock company (squeeze-out). In 2017, with a view of implementing the Directive 2004/25/EC on takeover bids, the national lawmaker adopted new legislation, enabling a person who had acquired a dominant interest in a joint-stock company to require all remaining shareholders to sell them their shares. Since then, squeeze-outs in Ukraine have become a widespread practice. This paper sheds light onto a range of serious shortcomings of the new law. It became clear that the Ukrainian version of squeeze-out essentially deviates from the course set by the Directive. The situation is further affected by the nearly total absence of the stock market in Ukraine. That results in numerous abuses of the minority shareholders rights and to some extent discredits the ideas of a takeover bid and squeeze-out as such. The authors assess the Ukrainian legal framework for squeeze-out from broader historic and comparative perspectives, identify its faulty points and offer specific steps that need to be taken to bring the Ukrainian squeeze-out practice in line with the European standards.