Timor-Leste

Protecting Investors in

Timor-Leste

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

The information appearing on this page was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 183 economies. The most recent round of data collection for the project was completed in June 2011.

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Indicator
Extent of disclosure index (0-10) 3
What corporate body provides legally sufficient approval for the transaction? 1
Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? 0
Whether immediate disclosure of the transaction to the public and/or shareholders is required? 0
Whether disclosure of the transaction in published periodic filings (annual reports) is required? 1
Whether an external body must review the terms of the transaction before it takes place? 1
Extent of director liability index (0-10) 4
Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? 1
Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? 1
Whether shareholders can hold members of the approving body liable for the damage that the Buyer-Seller transaction causes to the company? 1
Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 0
Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff? 1
Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? 0
Whether fines and imprisonment can be applied against Mr. James? 0
Ease of shareholder suits index (0-10) 5
Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? 1
Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? 1
Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? 3
Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? 0
Whether the plaintiff can directly question the defendant and witnesses during trial? 0
Whether the level of proof required for civil suits is lower than that of criminal cases? 0
Strength of investor protection index (0-10) 4.0

Notes:

Extent of Disclosure Index (0-10)

What corporate body provides legally sufficient approval for the transaction?
0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote

Immediate disclosure to the public and/or shareholders
0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest

Disclosures in published periodic filings
0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest

Disclosures by Mr. James to board of directors
0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts

Director Liability Index (0-10)

Shareholder plaintiff’s ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company
0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority shareholders

Shareholder plaintiff’s ability to hold the approving body (the CEO or board of directors) liable for for damage to the company
0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority shareholders

Whether a court can void the transaction upon a successful claim by a shareholder plaintiff
0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest

Shareholder plaintiffs’ ability to sue directly or derivatively for damage the transaction causes to the company
0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less

Shareholder Suits Index (0-10)

Documents available to the plaintiff from the defendant and witnesses during trail
Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that directly proves specific facts in the plaintiff’s claim; (3) any information that is relevant to the subject matter of the claim; and (4) any information that may lead to the discovery of relevant information.

Ability of plaintiffs to directly question the defendant and witnesses during trial
0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval

Strength of Investor Protection Index (0-10)

Average of the extent of disclosure index, director liability index, and shareholder suits index.

*Largest stock exchange in terms of number of listed companies.

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