Mandatory dividends plan seen as catering to a single family

Political competitors and entrepreneurs see the social democrats' mandatory dividends bill mainly as a present to the Kovalenko family that has been fighting for the rights of small shareholders of BLRT Group for years. The Kovalenkos refute claims.

Draft legislation the most prominent aim of which is to give small shareholders the right to demand payment of dividends recently merited the support of 22 MPs. According to the bill, such demands could only be countered with a 75-percent majority - writes

This would mean that a shareholder with 26 percent could effectively demand dividends in a situation where the majority would like to reinvest profits into expansion or maintain reserves.

MP Liisa Oviir, who introduced the bill, said that there have been situations in Estonia where majority shareholders have not only had an advantage buy where the rights of small shareholders have been severely limited.

For example, when shareholders have refused to pay dividends in a situation where it would make economic sense. Because the aim of small shareholders is to make a profit on their investment, denying them that right is neither fair nor good practice, Oviir found.

Almost all politicians and entrepreneurs who talked to Postimees said that the bill has been drafted mainly in the interests of the Kovalenko family that has been demanding dividends for shareholders in one of Estonia’s leading industrial companies BLRT Group.

The in-house conflict of BLRT has small shareholders Mihhail Gnidin, Valeri Kovalenko and Vladimir Toropov, represented by BLT Holding, on the one side and major owner Fjodor Berman and his relatives on the other. Both camps have been filing complaints against each other for years. BLRT has not been forced to pay dividends so far.

From small shareholder to majority owner

Member of the Riigikogu Legal Affairs Committee Valdo Randpere (Reform) referred to the bill as a dead cat the social democrats have been trying to drag over the committee's doorstep for some time. He said it is clearly the result of lobbying efforts by Valeri Kovalenko’s daughter, social democrat Anastassia Kovalenko, and the Estonian Small Shareholders Union.

«It all began when Anastassia Kovalenko started appearing alongside Rainer Vakra on pictures in Facebook. Next, she joined the party after which the desire to bring the small shareholders'topic to the committee intensified,»Randpere recalls. «The entire bill is pressure from the Kovalenkos and BLRT as they have found in Liisa Oviir someone to pursue it,» the politician said.

Randpere, who is fiercely opposed to the mandatory dividends idea, said that the Estonian business code works and does not need to be turned on its head. «If a small shareholder does not like where the company is headed, they can always sell their shares or buy more to be able to make decisions themselves,» he suggested.

Randpere said that the other cynical aim of the law is to collect more income tax on dividends. «We might as well tell companies we’re going to nationalize their profits on an annual basis. It is a hare-brained cast of mind in a free economy,»he concluded.

Member of the Riigikogu Finance Committee Aivar Sõerd (Reform) agrees and finds that the draft legislation is the initiative of a single family and company.

Sõerd said that while the bill might help a narrow group of small shareholders, it would be devastating for the Estonian economy.

The MP said that Estonian companies are very young on the European level and lack sufficient capital to be forced to pay dividends on an annual basis.

He gave the example of a situation where business climate takes a turn for the worse and the company would need to either invest or set aside reserves to remain competitive but cannot because 26 percent of owners are calling for dividends.

«It would destroy companies’ competitiveness, take away their ability to react quickly,» Sõerd added. He was convinced the bill would not pass. «Indrek Saar will become the new chairman of the Conservative People’s Party (EKRE) before this bill passes,»he said.

The bill is criticized by other parties as well. Legal affairs committee member Toomas Vitsut (Center) was also skeptical. He said that the state should exercise great caution in giving small shareholders gifts at the expense of major owners. «It might also scare away major investments,»he said.

Solutions not black and white

Anastassia Kovalenko refuted allegations and said she has never taken up the matter in Riigikogu committees. «I haven’t even seen that bill,»she said.

She was nevertheless glad the Riigikogu has taken the matter under advisement. She gave the examples of Sweden, Germany and Finland where the rights of small shareholders are better protected and criticized Estonia where the matter has never merited due attention from the legislation because «major shareholders are lobbying against it».

Kovalenko pointed to economic analyses that suggest people are more willing to invest and prepared to pay more for shares if the rights of small shareholders have legal backing.

«The situation in Estonia today is that if you have fewer than 51 percent of shares, you practically have no rights. The only thing that can help you is the major owner's manners and conscience,»she said.

The social democrat said that the mandatory dividends proposal needs to be weighed carefully and might not be the best solution. In her master’s thesis, Kovalenko proposes as one possible solution the obligation of major owners to buy out small shareholders if their rights have been misused over a longer period of time. The proposal has been included in the social democrats' bill.

Reacting to criticism from members of the Reform Party, Kovalenko said that there are always those who are against. She said that solutions are not black and white nor is it a matter of small shareholders making endless demands and giving orders. «There are preconditions to everything. Small shareholders would have to prove their rights have been misused and that repeated attempts to find a solution have failed due to opposition from the major owner,» she noted.

The bill was signed by individual MPs from the Social Democrat Party, Center Party, Free Party and the Conservative People’s Party.

Read more news of Tallinn on our site.
Politicalcompetitors entrepreneurs Kovalenkos
If you notice an error, highlight the text you want and press Ctrl + Enter to report it to the editor
3 views in november
I recommend
No recommendations yet


Post your comment to communicate and discuss this article.

Coalition partner the Social Democratic party (SDE) has announced its top riders for the March 2019 elections in Estonia's 12 electoral districts, though its full list will be confirmed in December, the party says. There are no real surprises on a well-stocked list which includes the recently-attracted Indrek Tarad, currently still an independent MEP. Mr Tarand, whilst standing for SDE, has not as yet become a party member. Since the system in Estonia is a...
According to Statistics Estonia, the change of the consumer price index in October 2018 was 0.5% compared to September and 4.4% compared to October of the previous year. Goods were 3.7% and services 5.7% more expensive compared to October 2017, while regulated prices of goods and services increased by 9.1%, and non-regulated prices by 3.1%. Compared to October 2017, the consumer price index was affected the most by transport, which contributed nearly a thi...
The Ministry of Culture has rejected the request of English-language web magazine Estonian World (EW) for support from the state to to the tune of €5,000 for the remainder of 2018. The ministry has, however, promised to seek opportunities for supporting the portal in 2019. "Unfortunately, the support to this extent of English-language Estonian media outlets is not provided for in the agenda and budget of the government-approved Compatriots Programme for th...
Last Wednesday, Theatre NO99 abruptly announced that it would be closing its doors, with its final performances scheduled for November and December. The theatre will be vacating a large building at the Central Tallinn address of Sakala 3, interest in which has been expressed by Sakala Skene, a new open centre for the performing arts and theatre education. Sakala Skene is a new brand uniting Polygon Theatre and Polygon Threatre School, Old Baskin's Theatre,...
The European Athletics Council has decided to award the right to host the European Athletics Under 20 Championships in 2021 to the Estonian Athletic Association, which will stage the event at Tallinn's Kadriorg Stadium. The same format was previously successfully hosted by the Estonian Athletic Association in 2011, in collaboration with the City of Tallinn. At the European Athletics Council meeting in Budapest, the Estonian bid to host the event was presen...
The Ministry of Foreign Affairs has reopened the Estonian embassy in Budapest. The ministry announced the step on social media on Monday, saying that starting 5 November the embassy is offering consular services again. The embassy is providing consular services and assistance starting 5 November. Anyone who would like their documents issued there can indicate so on the application form, the ministry said. Consular services are available by advance appointm...
Every day, some 30 people in Estonia call the Health Board complaining that a family doctor in Tallinn won't take them as a patient even though they technically have room on their patient rosters to accept new patients. Family doctors, however, find that working with too large a patient list could jeopardise the quality and accessibility of their care. Estonian Society of Family Doctors chairperson Le Vallikivi explained to daily Postimees that they are fa...
Conservative People’s Party (EKRE) Riigikogu group chair Martin Helme has paid to boost his social media presence and used Riigikogu expenses benefits to pay for highlighting posts, a recent Riigikogu Chancellery document reveals. Postimees wrote earlier in the week about EKRE’s social media success and how their messages seem to reach more voters. Facebook’s company pages can be highlighted to reach more people. But the practice costs money. Bought posts...
40% of employers in Estonia intend to increase their employees' wage levels, while 39% are planning on creating new positions and 70% intend to hire new employees to replace outgoing workers and fill temporary or new positions, it appears from a survey conducted by recruitment portal and the Salary Information Agency. "40% of employers are planning to raise their employees' basic salaries, which is indicative of the wage pressures resulting fro...