The Supreme Court ruled in favour of Frigorífico Carrasco on 9 April. The case dates back to 2007, when the company decided to capitalise a substantial banking debt as the result of a decision taken at a shareholders meeting at which Paycueros was not present.
In 2011, a court of first instance ruled in favour of Paycueros, finding that Frigorífico Carrasco had violated the minority shareholder’s rights by failing to publicly disclose that the new shares were available for subscription. The court ordered the meatpacker to pay Paycueros US$64 million in compensation – roughly Frigorífico Carrasco’s entire net worth.
But the first instance ruling was overturned in 2012 by an appeals court on the grounds that Paycueros had failed to adequately challenge the shareholders’ decision to capitalise the debt prior to filing the lawsuit, as well as refusing several attempts by Frigorífico Carrasco to solve the matter through negotiations. Paycueros subsequently brought the case before the Supreme Court.
The Supreme Court confirmed the appeals court decision, ruling that Paycueros cannot claim monetary compensation for the dilution of its stake in Frigorífico Carrasco, and should instead have purchased new shares if it wished to maintain the same participation.
Ferrere partner Sandra González said the “bet-the-company” strategy, in which the entire value of Frigorífico Carrasco was at stake, represents “an untested legal issue in a very complex legal field”, without precedents to draw on.
Article published in Latin Lawyer on 9 May, 2013.