TALLINN - A small stakeholder won a court case against one of Estonia's largest enterprises this week, signaling a major victory for shareholder rights.
The Tallinn City Court ruled in favor of AS Milestone, a small shareholder that claimed that the confectionery Kalev, run by CEO and majority shareholder Oliver Kruuda, had violated other shareholders' rights.
This was the first instance in which a court has ruled in favor of a small shareholder in a company listed on the Tallinn Stock Exchange.
The court ruled Oct. 31 that the resolution made at Kalev's annual shareholders' meeting last December to acquire some of its own shares had been illegal.
The court also ruled that in 2000, when Kruuda acquired a majority holding in Kalev, he should have made a buyout offer to the some 1,300 small shareholders, which he failed to do.
Priit Kotkas, who heads Milestone, was ecstatic at the court's decision. "When I started this court case I had one major objective - to ensure the fair treatment of small shareholders."
Although the total repercussions of the court's decisions were unclear, it was estimated that they might cost Kruuda an additional 100 million kroons (6.5 million euros).
On Nov. 3 Kalev's share price hovered around 35 kroons, which would mean that a buyout of Kalev stock from small shareholders, who own approximately 45 percent of the company, would amount to more than 100 million kroons.
Around half of this payment would go to Milestone.
Kruuda told the business daily Aripaev that it was not clear from the court ruling whether he was under obligation to make a buyout offer to small shareholders. He said that he planned to dispute the court ruling.
In recent months Kruuda has come under increasing criticism from minority shareholders.
Delays in the company's planned move of production facilities from within the Tallinn city limits to the suburbs are likely to cost the company some 20 million kroons - 25 million kroons in lost sales, while the recent purchase of a summer cottage in Keila-Joa for 52.7 million kroons angered shareholders and analysts as it represented a nonprofile investment.
"The way the company's management does business raises a whole lot of questions," Aadu Oja, a partner at Trigon Capital, said earlier.
Kalev controls over half the Estonian candy market.
