The Municipality as Controlling Shareholder and the Applicability of Law Relating to Groups of Companies

Abstract

In the opinion of the authors, the rules of concern law (law relating to groups of companies) included in the Slovenian Companies Act (ZGD-1) must also be applied analogically in cases where municipalities become controlling shareholder in a company. The municipality and one or more companies in which the municipality is a controlling shareholder, form a de facto concern. This gives rise to a number of legal consequences, most importantly to the obligation to draw up a dependence report, to the liability of the municipality and the mayor for damages to the controlled company and to the right of every controlled company’s shareholders to file actio pro socio. Accordingly, legal protection of the controlled company, its minority shareholders and creditors is increased, coinciding with the purpose of concern law. The rules of concern law are, however, relevant only with regard to those influences on the controlled company exercised by the municipality as the controlling shareholder, and not in the case of a municipality exercising its regulatory prerogatives.