Bottleneck of rights issue

Indrek Minka is a senior associate at Attorneys at law Borenius specialising in matters regarding banking, securities and securities market regulations, as well advising syndicated lending, leveraged and acquisition finance, also asset finance and project finance projects. Indrek Minka is one of the authors for the International Law Office Newsletter, a premium online legal update service for major companies and law firms worldwide. He holds a masters degree in law from the University of Tartu. Priit Pahapill is a partner at Attorneys at law Borenius with expertise in syndicated lending, leveraged and acquisition finance, mezzanine finance, asset finance, and project finance projects. He also advises clients on banking, securities and securities market regulations. Priit Pahapill is one of the authors for the International Law Office Newsletter, a premium online legal update service for major companies and law firms worldwide.

The Estonian Commercial Code provides a mechanism for protecting shareholders’ participating interests from dilution. Upon increase of share capital, a shareholder has a pre-emptive right to subscribe for the new shares in proportion to the total nominal value or the compound value (in Estonian: arvestuslik väärtus ) of that shareholder’s existing shares. This pre-emptive right of shareholders may be barred by a resolution which receives at least three-quarters of the votes. This regulation sets forth prerequisite of rights issues, unless otherwise decided by the shareholder whereby the threshold for non-rights issue capital increase is relatively high. As this regulation derives from the Second Company Law Directive (77/91/EEC), a similar regulation can probably be found in the laws of most of European Union member states.