Case Study: share capital increase The company FLORA produces wooden floors (parquet, etc.) with revenue of 10m. It has two shareholders. 90% is owned by a Scandinavian strategic investor Scaninvest who is engaged in similar activities across Europe. 10% is owned by a Lithuanian company Litinvest whose CEO and sole shareholder several years ago assisted Scaninvest to acquire the company for 5m, helped with various local peculiarities, and also was a CEO of FLORA. Later, Litinvest got involved in real estate business and Scaninvest appointed another CEO. The 90% shareholder also granted a loan to FLORA of 9m to renovate FLORA and buy new equipment. As a result, FLORA is soon to increase revenue to 50m and become profitable though currently it has been just over the water. FLORA's share capital is 1m (1m of shares, 1 EUR each, Litinvest has 100k shares, Scaninvest 900k shares). The foreign investor decides to "capitalize" the loan, ie to convert it into share capital. In the board, it is proposed to issue additional 10m of shares (1 EUR each) and offer to all shareholders to pay for them. Scaninvest is to pay for the shares by converting the loan. Litinvest is offered to pay for the shares in cash (ie pay additional 1m). Both shareholders would keep their proportions as a result. Litinvest does not have free cash flow (all in real estate) and runs to court challenging the proposed resolutions. Why Litinvest is unhappy with the proposal having a right to keep proportionate? What should the court say? Why