Example Of Corporate Governance Failure

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Example of corporate governance failure. Uralkali – Silvinit merger: conflict between Silvinit shareholders. Conflicts between minority shareholder and majority shareholder are typical for continental Europe, but in Russia violations of the minority shareholders rights are more obvious and flagrant. The majority shareholder has in his "arsenal" many tools of "oppression" and expropriation of minority shareholders: related party transactions, non-fulfillment of the mandatory offer (the offer), an unfair assessment of assets during the reorganization, additional shares issuing which erodes the share of minority shareholders, reverse stock split as a tool of displacement of shareholders from the company, as well as repression of minority shareholders representatives from the Board of directors. Of course, the presence of any of the above practices in the company means corporate governance failure. I consider Uralkali-Silvinit merger as an obvious example of such a failure. Causes of the conflict The conflict occurred between minority and majority shareholders of the company "Silvinit", which at the time of the conflict was Russia's largest producer of potassium chloride. The cause of the conflict were the conditions of Silvinit – Uralkali merger (at that time Uralkali was the second in Russia and the sixth largest producer of potassium chloride). The merger was planned in two stages: on the first phase Uralkali was supposed to buy about 20% of Silvinit common shares for $ 1.4 billion ($ 894.5 per share), while on the second phase is was planned to convert the remaining Silvinit shares to additional Uralkali shares in the following ratio: 133.4 Uralkali common shares for 1 Silvinit common share of Silvinit and 51.8 Uralkali common shares for 1 Silvinit preferred share. The proposed conversion ratios caused disagreements among shareholders: minority
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