The Exit Problem in Close Corporations in the US and Sweden - Today and Tomorrow

Abstract: The basis of this thesis is the exit problem in close corporations and the protections available to the minority. The phase one of the problem is when oppression takes place, which includes actions when dividends are withheld and excessive bonuses are paid to the majority, leading to the unfair treatment of the minority. Phase two of the problem is the exit problem itself, the minority owner's difficulties to leave the corporation on fair terms since the securities in close corporations are not traded on a ready market. Hence there is no ''fair'' price set by the market. The next section of this thesis will compare and contrast the protection afforded to minority shareholders under US and Swedish law. In particular a study of the Swedish limited liability company will highlight the differences regarding minority shareholder rights. One main difference is the US fiduciary duties which impose an obligation upon the controlling shareholders and directors to act in good faith. This is a good standard which affords a higher protection than the fair-play rules in Sweden. The conclusion based on the analysis of the protections available is that the protections in Sweden are not satisfactory and that they need to be amended in order to enhance the protection. The best way to implement the changes is to amend the Companies Act&semic to put into place higher protection for the private company as well as to make it possible to opt out from certain onerous requirements.