Latvian state made to feel like small shareholder

  • 1999-06-17
Developments last week made the Latvian government realize how unenviable it is to be a minority shareholder.
So far the Latvian government has neglected the rights of minority shareholders, which have often been violated by large shareholders and owners of controlling stakes.
Under the existing law anybody with a controlling stake in a company can totally ignore the rights of small shareholders.
The owner can increase its share at the expense of other shareholders by contributing to the fixed capital some assets of questionable value.
The law also does not provide for protection of small shareholders' rights in case they lose part or all of their investments. Large shareholders can also arbitrarily determine the profit distribution and payment of dividends.
Last week, however, the state finally felt how uncomfortable it is to be in a small shareholder's shoes.
At Ventspils Nafta, the state's proposal on dividends was ignored by another of the oil company's owners, Latvijas Naftas Tranzits, which holds 37 percent of the shares.
Last year, the Latvian state endured another humiliating experience related to Latvijas Gaze. The state trustee at the gas company, Eizens Cepurnieks, was simply not admitted to the LG council meeting. The Latvian press went hysterical, but there was nothing illegal about the actions of the company's management.
Maybe now, having its nose bloodied the Latvian state will finally amend the laws to provide adequate protection to minority shareholders. Or, will state trustees tolerate another series of arbitrary actions such as small shareholders have to put up with all the time?