Transcript of the television discussion aired on the TV station CT1 on Sunday 09/03/2006 at 12 : 00 noon.

 

Questions of Vaclav Moravec: Laws on squeeze out of minority shareholders

 

Participants in the TV discussion:

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

Jan KASAL, 1st Vice Chairman of the KDU-CSL /Czech Christian Democratic/ Party;

Martin BURSIK, Chairman of the Green Party

 

Vaclav MORAVEC, moderator:

The last topic. Minority shareholders are crying. The reason? Laws on squeeze out of minority shareholders, which are in force for about a year. Have you owned shares of prosperous and solid companies from the coupon privatization? Then maybe even you are crying. Not to forget, the laws on squeeze out of minority shareholders were added to the Civic Code thanks to the ODS representative Vladimir Dolezal. Senate’s fundamental questions were raised and forgotten in the Chamber of Deputies.

 

A video clip follows:

 

Vladimir DOLEZAL, an ODS representative /recorded on 11/04/2004/:

I hate to, hate to interrupt the idyllic discussion of this bill but I would very much like to submit or give notice of submission of an amendment to the so-called squeeze out.

 

Editor:

What is that squeeze out, anyway?

 

Karel KRIZ, economist:

It is the greatest failure of the State since November 1989, where politicians of this country, and namely politicians of Social Democrats colluded against minority shareholders and investors, and expropriated them.

 

Vladimir DOLEZAL, an ODS representative /recorded on 11/04/2004/:

I only want to point out that it is a formulation, formulation of the Commercial Code that follows from the Thirteenth Directive of the European Union.

 

Karel KRIZ, economist:

This method, squeeze out, is known also from the West Europe but under very different conditions, especially conditions when the State watches the price and does not allow robbing minority shareholders this way.

 

Vlasta PARKAN(OVA), a KDU-CSL representative /recorded on 11/04/2004/:

The way I see it, it is lobbying of large corporations who want to get rid of pesky minority shareholders, and I dare to say that most probably, this proposal is in conflict with the Charter of Fundamental Rights and Freedoms, namely with the Article 11.

 

Karel KRIZ, economist:

In the course of several weeks, minority shareholders and investors were squeezed out of more than two hundred enterprises in the Czech Republic, and the whole operation resulted in depriving these investors of two billions of crowns.

 

Vladimir DOLEZAL, an ODS representative /recorded on 11/04/2004/:

So I wouldn’t want to interrupt this idyll any more, and I only join in the detailed deliberations.

 

Karel KRIZ, economist:

The sponsor of this bill was the ODS representative Dolezal but this person was only a pawn of Social Democrats who had the strongest interest in this squeeze out of minority shareholders.

 

Jan MLADEK, a CSSD representative /recorded on 05/03/2005/:

I would like to encourage this Chamber of Deputies to vote in favor of the original proposal of representatives, including the amendment of my colleague Dolezal, because I must say I appreciated that especially an ODS representative brought it up, since that squeeze out, it is actually a kind of an end of the coupon privatization.

 

Karel KRIZ, economist:

Representative Dolezal is notorious for having gone through a scandal at the end of last year when he was involved in possible corruption, and because of that, Mr. Dolezal’s phone was tapped. These tapped conversations even leaked into the media but for me, it means something interesting and that is, when police was tapping his calls in that matter, they must have recorded other matters as well. Thus in all likelihood, police has his conversations with high-ranking politicians, namely with politicians from the CSSD, where they were contemplating how to rob citizens of their property.

 

Jan MLADEK, a CSSD representative /recorded on 05/03/2005/:

I’d like to stress that this is very important for functioning of Czech economy, that we get out of that dead end where the coupon privatization got us.

 

Karel KRIZ, economist:

 

That, I think is, is a tremendous challenge that the tapped conversations be reviewed also from this angle, and I am surprised that police has not analyzed them from this angle in any way, or we don’t know about it; I am concerned that police will try to destroy these recordings before they can be reviewed this way namely because this is politics of the CSSD.

 

Lubomir ZAORALEK, former Chamber of Deputies Chairman /CSSD/ recorded on 05/03/2005/:

Hundred and thirty five voted in favor, two against. I state that we have passed the bill.

 

Editor:

The President of our Republic did not sign many bills but he signed this one.

 

Karel KRIZ, economist:

It surprised me, too.

 

End of the video clip.

Vaclav MORAVEC, moderator:

The ODS Vice Chairman Petr Necas admitted already in the pre-election “Questions” where he was a guest along with Bohuslav Sobotka, that these laws were one of serious mistakes of Social Democrats in the previous election term. Mr. Vice Chairman, how are you, as the ruling party, going to correct this mistake – one word, or rather one sentence response, please?

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

I must confirm that I really said that and that it is what I really think. First of all, the very principle of a squeeze out exists in equity markets in great majority of advanced western countries. The issue was, how it was handled in our country. It means that there was a weak …

 

Vaclav MORAVEC, moderator:

How the price of shares was calculated, and so forth.

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

… protection of shareholders, that it was without an approval of the Securities Commission, and the ODS Senate Club then proposed a pertinent formulation, and it came back to the Chamber of Deputies. We all voted for that Senate proposal but it did not pass, and the danger was that the whole Civic Code, the whole revision or the Commercial Code – I think it was incorrect that it was the Civic Code; it involved the Commercial Code – would not pass, and that’s why this proposal was passed also with our votes. I must say that …

 

Vaclav MORAVEC, moderator:

Just for completeness, for instance Vladimir Dolezal and Ivan Langer abstained from voting on that Senate proposal.

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

Yes.

 

Vaclav MORAVEC, moderator:

For instance Veronika Nedved(ova). So there were quite few ODS representatives who abstained.

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

Yes, but it’s clear that the great majority …

 

Vaclav MORAVEC, moderator:

It means the majority did not vote in favor.

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

Yes, but the majority of ODS representatives voted for that Senate proposal.

 

Vaclav MORAVEC, moderator:

How are you going to fix it, the mistake?

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

It is necessary to prepare a revision, so that in the future, squeeze out could not be done so easily at the expense of minority shareholders. I say again that the very thought …

 

 

Vaclav MORAVEC, moderator:

And some returning of shares because an irreversible damage has happened there. For instance Karel Stank, Head of the Minority Shareholders’ Association, says that minority shareholders were deprived of up to thirty billion CZK.

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

I am not able to tell at this time what these financial estimates are. I am sure nothing can be done retroactively. That would be in conflict with the Constitution; it would be retroactivity of the law, and so forth. There we would run into some bewildering implications; we would put in doubt property relationships in many companies. So, I say it again: the squeeze out concept has been in this case implemented on the basis of a wrong procedure, and it is necessary to correct it.

 

Vaclav MORAVEC, moderator:

What we heard in the video clip, that it was fine with Social Democrats and that Vladimir Dolezal, as a former ODS representative, has helped you.

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

I must say that as a Finance Minister, I came across this proposal only in the Chamber of Deputies after representative Dolezal submitted it, and we had …

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

Just as everybody else.

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

Just as everybody else. We had quite a discussion about it in the Social Democrats’ Club. Eventually, the Club’s majority position was in support of this proposal but I must say that Social Democrats did not prepare this proposal and the Finance Ministry either. However, we have it …

 

Vaclav MORAVEC, moderator:

Now, if I finish it …

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

… partially corrected in the meantime because unlike with the original proposal of representative Dolezal, the Securities Commission got really involved in the current formulation; that is, today it is the Central Bank that has to issue a binding decision on at what price these shares should be bought out; it means …

 

Vaclav MORAVEC, moderator:

Yes, but there was a trick. Excuse me, but there was such a trick, a two months positive legal fiction; the Securities Commission did not have enough manpower for that, and in the meantime, huge number of minority shareholders of many companies were squeezed or bought out. And now, according to information from “Questions”, multiple claims have been filed with Czech courts; the

European Commission stated that the Directive has not been implemented in the squeeze out, and the danger is very high that the state will have to reimburse those minority shareholders. Mr. Vice Chairman, are you aware of this risk?

 

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

Well, we don’t have any such analyses at our disposal yet. As for the financial markets legislature, the Czech Republic is not behind in implementation of any norms dealing with financial markets. There, we keep all the deadlines the European Union requires. This is the problem with proposals that are hatched in the Chamber of Deputies and are approved in the Chamber legislature that is very complex.

 

Vaclav MORAVEC, moderator:

Do you admit, though, that there’s a risk the State will have to reimburse the minority shareholders in the future?

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

I don’t want to comment on this because I don’t want to influence the court decision but I think that …

 

Vaclav MORAVEC, moderator:

Who then should pay for it if independent courts so decide, who then should pay for it?

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

I don’t think it would be that representative who came up with it and proposed it.

 

Vaclav MORAVEC, moderator:

Well, we all are going to pay for it, that’s the problem.

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

As I’m saying, it is simply a problem with procedures in the Chamber of Deputies, and I know a discussion now is going on whether we could modify the Code of Procedures in connection with these amendments, and I would welcome if we would somewhat limit the possibility of adding amendments at the last moments of discussion about bills.

 

Vaclav MORAVEC, moderator:

Mr. Chairman Bursik, how would you correct the mistake that happened, from the point of view of the Green Party?

 

Martin BURSIK, Chairman of the Green Party

Well, this is not a trivial matter, really. If you take a closer look, two hundred and twenty seven companies squeezed out minority shareholders just in one year and paid them 9.2 billion CZK but there are concrete cases when one month, an expert values for instance Xaverov shares for 2011 CZK per a share, and three months later, it is only 123 CZK when he is squeezing or buying out minority shareholders. So it is evident that it was set up unfairly, and what I see as the greatest risk here …

 

Vaclav MORAVEC, moderator:

Excuse me, do you see this risk of multiple claims, or rather their success in courts, as very serious?

 

 

 

Martin BURSIK, Chairman of the Green Party

It is very serious. As a matter of fact, I have studied that April claim with the European Commission, which was delivered to the Permanent Representation of the Czech Republic. There are five concrete objections to that law of ours. The Foreign Affairs Minister Svoboda responded to it, and basically, he advised the European Commission to kindly not take those revisions of the law for an implementation of the Directive because some representative inserted it there but it is not the actual proposal, which is sort of an excuse that it is not our fault. The problem is that this cannot be remedied retroactively. That is really a very sad end of the coupon privatization and I think also including the position of the President of the Republic who admitted it was a limitation of property rights of some shareholders but signed it reluctantly anyway; that is really an end of coupon privatization in the Czech Republic.

 

Vaclav MORAVEC, moderator:

Mr. Chairman Kasal, what are you going to do as KDU-CSL?

 

Jan KASAL, 1st Vice Chairman of the KDU-CSL /Czech Christian Democratic/ Party;

My advantage is that viewers could hear and see partially the position of Vlasta Parkan(ova) today, and I can say for the KDU-CSL that we will try to help minimize the current damage. That is all I can say about it in such a short time.

 

Vaclav MORAVEC, moderator:

Guests of our program were

Acting Vice Prime Minister, Vice Chairman of the ODS Party Petr Necas. Thank you for being a guest of “Questions”, and I’m looking forward to seeing you sometime again.

 

Petr NECAS, 1st Vice Chairman of the ODS /Civic Democratic/ Party;

Good-bye.

 

Vaclav MORAVEC, moderator:

First Vice Chairman of the Czech Social Democratic Party, resigned Vice Prime Minister Bohuslav Sobotka, Finance Minister. Thank you, too, and good-bye.

 

Bohuslav SOBOTKA, 1st Vice Chairman of the CSSD /Czech Social Democratic/ Party;

Good-bye.

 

Vaclav MORAVEC, moderator:

Jan KASAL, Acting Chairman of the KDU-CSL. Thank you and good-bye.

 

Jan KASAL, 1st Vice Chairman of the KDU-CSL /Czech Christian Democratic/ Party;

Good-bye.

 

Vaclav MORAVEC, moderator:

And the Chairman of the Green Party Martin Bursik. Thank you as well and good-bye.

 

Martin BURSIK, Chairman of the Green Party

Good-bye.