On the Meaning of Dominant Influence

Besides competition law, the term dominant influence is also of significant importance for the purposes of the securities law. A rule of thumb is that when dominant influence is gained over a public limited company (AS, aktsiaselts) registered in Estonia and which shares are trading on the Estonian regulated market, a mandatory takeover bid for all shares must follow. But then, what is dominant influence?

Generally, in Estonia dominant influence is understood as a situation where a person holds either directly or together with other persons acting in concert the majority of the votes represented by shares in the company (50% + 1 vote), or holds control over the managing bodies of the company, for example by having the right to appoint or remove the majority of the supervisory council or management board. Even so, the majority shareholding or the majority of votes or control over managing bodies is not the only criterion. Any contract governed by private law or the Articles of Association would suffice if they provide the individual an actual opportunity to affect the management of a company. This may be represented by the right to significantly influence the work of the governing bodies, or decision-making or control over all or a significant part of the assets of the company. Affecting decision-making may be expressed by veto-right over strategic matters like the budget, large-scale investments, important contracts or dividend payments. However, we are of the opinion that it is impossible to provide an exhaustive list. What matters is that gaining such influence involves an obligation to make a takeover bid, regardless of whether or not the influence is in fact exerted.

Here, AS Rubla’s mandatory takeover bid to the shareholders of AS Kalev serves as a good example.  AS Rubla concluded agreements with East Capital Baltikumfonden and Vipes Invest OÜ with the aim of acting in concert, including voting in unison in AS Kalev and implementing common policies in its management. This means that AS Rubla acquired a dominant influence together with the other parties acting in concert (East Capital Baltikumfonden, Vipes Invest OÜ, GKG Investeeringute AS, Mailtec OÜ and Linderin Grupp OÜ) at the moment the agreements took effect and East Capital Baltikumfonden and Vipes Invest OÜ decided to support AS Rubla in its intentions towards AS Kalev. Notably, however, the obligation to make a takeover bid lies with one person only (in this case with AS Rubla) who can factually exert a dominant influence. The example described is a good illustration of the many faces of the term dominant influence.