44th AIJA Annual Congress in Geneva Working Session of the International Business Law Commission (IBLC) on August 24, 20

1. 44th AIJA Annual Congress in Geneva Working Session of the International Business Law Commission (IBLC) on August 24, 2006 General Subject – „Let‘s fight: Minority Shareholders and Capital Investors“ Protection of Minority Shareholders: General and Specific Aspects – Switzerland as worth-while Example? by Peter V. Kunz Prof. Dr. iur., Attorney-at-Law, LL.M. (Georgetown University, Washington D.C.) Full-Tenure Professor for Business Law and for Comparative Law at the University of Berne Law School, Berne/Switzerland Director at the Institute for Business Law and Head of the Departement of Business Law at the University of Berne Law School, Berne/Switzerland kunz@iwr.unibe.ch

2. Content I. Introductory Remarks A. Personal Notes B. International Developments II.Selected Remarks A. General Aspects a) Protection – „Why“? b) Protection – „Who“?

3. Content B. Specific Aspects a) „Shareholders“ and other Shareholders b) Abuse of Minority Shareholders Rights c) Remedies in General C. Switzerland as Example? a) As always – somewhere „in the middle“… b) Latest Developments III. Final Remarks

4. Introductory Remarks A. Personal Notes 1) Area of PVK‘s Research in Academics  1993: Thesis  1995/1996: LL.M. Studies at G.U.L.C.  2001: Habilitation 2) Area of PVK‘s Work in Private Practice

5. Introductory Remarks B. International Developments 1) Legal Issue „en vogue“ for Decades 2) Corporate Governance in the 1990s  Reports (e.g. „Cadbury Report“, „Greenbury Report“ etc.)  Discussion about „Self-Regulation v. Regulation“ 3) Corporate Governance in the 2000s 2002:  Sarbanes Oxley Act (SOX) 2003:  EU „Action Plan“ on Corporate Governance Improvements 2006:  EU-Draft re „Shareholders‘ Voting“

6. Selected Remarks A. General Aspects a) Protection – „Why“?  Democracy…  Ethics…  Economics..!  „Show me the Money“… b) Protection – „Who“?  Legislatures  Courts

7. Selected Remarks B. Specific Aspects a) „Shareholders“ and other Shareholders  Private Companies v. Public Companies  Small Investors  Institutional Investors (e.g. Hedge Funds) Conflicts of Interests

8. Selected Remarks B. Specific Aspects b) Abuse of Minority Shareholders Rights 1) One Side: Legitimate Goals  Contradicting Views 2) Other Side: Creating „Nuisance Value“  „Greenmailing“… 3) Approach  No legal Definition and no legal Concept  No „Counter-Strategy“

9. Selected Remarks B. Specific Aspects c) Remedies in General 1) Infringements of Shareholders Rights („Opression by Majority“) – e.g.  Challenging of Resolutions  Liability and Damages  Dissolution of Company

10. Selected Remarks B. Specific Aspects c) Remedies 2) Infringements by Minority Shareholders („Abuse by Minority“) i) Actions by Legislatures - e.g.  Repeal a Minority Right  „Group Rights“ instead of „Each Shareholder‘s Right“  Increase the Participation Threshold of „Group Rights“  Additional Requirements (e.g. „Valid Reasons“) ii) Actions by Courts (if motioned for) – e.g.  Rejection in case of „Bad Faith“ (Costs etc.)  Liability and Damages

11. Selected Remarks B. Specific Aspects c) Remedies 2) Infringements by Minority Shareholders („Abuse by Minority“) iii) Non-Statutory Limitations  Articles and Shareholders‘ Agreements  Limitations may be null or null and void  Shareholders may disregard such Limitations

12. Selected Remarks C. Switzerland as Example? a) As always – somewhere „in the middle“…  „BeNeLux“ and „Scandinavia“  Steady Improvements by Legislature  „Freeze“ of Commercial Registers b) Latest Developments  Draft for new „Swiss Corporate Law“  Corporate Governace Improvements  e.g. Shareholders‘ Meetings

13. Final Remarks • „Poor Little“ Minority Sharholders? •  Not „Ethics“ but „Money talks“… •  Corporate Laws are not „Social Laws“ (e.g. Labour Laws) •  Behaviour may be Use - or Abuse - of Minority Rights • One forgotten Area: Abuse by Minority Shareholders • Abuse by Minority Shareholders? •  „Greenmailing“ threatens Reputation •  No coherent Concept of „Abuse“ – „What is it“? and „How to fight it“?

14. Final Remarks • Abuse by Minority Shareholders? •  Remedy by Legislatures: e.g. Decrease of „Participation Thresholds“ •  Remedy by Court: e.g. „Abuse“ is „Bad Faith“, i.e. Rejection and Costs

15. Final Remarks • 3) Limitations by Articles and Shareholders‘ Agreements? • Articles and Shareholders‘ Agreement may provide different Thresholds etc. – but: •  Laws usually are flexible only on behalf of Shareholders • Laws prevail

16. Thank you very much for your kind attention..! Peter V. Kunz University of Berne Law School Institute for Business Law Schanzeneckstrasse 1 CH-3001 Bern Phone: +41(0)31 / 631 55 88 kunz@iwr.unibe.ch