Protecting Minority Investors in Armenia

Below is a detailed summary of the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain.

 ScoreScore Description
Extent of disclosure index (0-10) 5.0  
Which corporate body can provide legally sufficient approval for the Buyer-Seller transaction? (0-3) 2Board of directors excluding interested members
Is disclosure by the interested director to the board of directors required? (0-2) 1Existence of a conflict without any specifics
Is disclosure of the transaction in published periodic filings (annual reports) required? (0-2) 2Disclosure on the transaction and on the conflict of interest
Is immediate disclosure of the transaction to the public and/or shareholders required? (0-2) 0No disclosure obligation
Must an external body review the terms of the transaction before it takes place? (0-1) 0No
Extent of director liability index (0-10) 6.0  
Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0-1) 1Yes
Can shareholders hold the interested director liable for the damage caused by the transaction to the company? (0-2) 1Liable if negligent
Can shareholders hold members of the approving body liable for the damage cause by the transaction to the company? (0-2) 1Liable if negligent
Must the interested director pay damages for the harm caused to the company upon a successful claim by a shareholder plaintiff? (0-1) 1Yes
Must the interested director repay profits made from the transaction upon a successful claim by a shareholder plaintiff? (0-1) 1Yes
Can both fines and imprisonment be applied against the interested indrector? (0-1) 0No
Can a court void the transaction upon a successful claim by a shareholder plaintiff? (0-2) 1Voidable if negligently concluded
Ease of shareholder suits index (0-10) 8.0  
Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? (0-1) 1Yes
Can the plaintiff obtain any documents from the defendant and witnesses during trial? (0-3) 3Any relevant document
Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) 1Yes
Can the plaintiff directly question the defendant and witnesses during trial? (0-2) 2Yes
Is the level of proof required for civil suits lower than that of criminal cases? (0-1) 0No
Can shareholder plaintiffs recover their legal expenses from the company? (0-2) 1Yes if successful
Extent of shareholder rights index (0-10.5) 10.5  
Can shareholders amend company bylaws or statutes with a simple majority? 1.5Yes
Can shareholders owning 10% of the company's share capital call for an extraordinary meeting of shareholders? 1.5Yes
Can shareholders remove members of the board of directors before the end of their term. 1.5Yes
Must a company obtain its shareholders’ approval every time it issues new shares? 1.5Yes
Are shareholders automatically granted subscription rights on new shares? 1.5Yes
Must shareholders approve the election and dismissal of the external auditor? 1.5Yes
Can shareholders freely trade shares prior to a major corporate action or meeting of shareholders? 1.5Yes
Strength of governance structure index (0-10.5) 3.0  
Is the CEO barred from also serving as chair of the board of directors? 0No
Must the board of directors include independent board members? 0No
Must a company have a separate audit committee? 1.5Yes
Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected shares? 1.5Yes
Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of a company? 0No
Is cross-shareholding between 2 independent companies limited to 10% of outstanding shares? 0No
Is a subsidiary barred from acquiring shares issued by its parent company? 0No
Extent of corporate transparency index (0-9) 3.5  
Must ownership stakes representing 10% be disclosed? 0No
Must information about board members’ other directorships as well as basic information on their primary employment be disclosed? 0No
Must the compensation of individual managers be disclosed? 0No
Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties and other factors influencing the reporting? 1.5Yes
Must annual financial statements be audited by an external auditor? 1Yes for listed companies
Must audit reports be disclosed to the public? 1Yes for listed companies