Procedure for appealing resolutions of the shareholders’ meeting

In a limited liability company, the general meeting of shareholders adopts decisions in the form of resolutions on many matters significant from the perspective of the company’s activities and its shareholders. The activity of the body representing the owners should, in principle, be focused on the interests of the company and its members. Accordingly, resolutions passed by the general meeting of shareholders are expected to be positive for the company’s development, compliant with the law, respectful of good practices prevailing in broadly understood commercial dealings, and not harmful to the interests of the shareholders. However, despite this, in limited liability companies, the owners are not always in agreement on all matters concerning the company’s operations. Conflicts may arise between shareholders regarding decisions made. Additionally, minority shareholders may be dominated in the decision-making process by the majority, who do not always act in their favour. Apart from conflicts, some shareholders, driven by various motives, may also seek to make decisions contrary to the company’s interests, infringing on the interests of other shareholders, or breaching legal regulations. Consequently, as a result of conflicts, attempts to circumvent the law, or unlawful actions, resolutions may be passed which, broadly speaking, contravene the provisions of the Commercial Companies Code. Nevertheless, the law provides shareholders and other company bodies with tools to challenge such resolutions and remove them from the legal framework. In this article, we will explain how the mechanism for challenging resolutions works — when resolutions can be contested, who may challenge them, what effects the challenge entails, and what are the key elements of such proceedings.

Who can challenge resolutions?

The list of persons entitled to challenge resolutions of the General Meeting of Shareholders is specified in Article 250 of the Commercial Companies Code (CCC). Primarily, shareholders of the company have the right to challenge resolutions. It is important to note, however, that their standing is not unlimited, as the law clearly sets out the circumstances under which they may oppose a resolution. Firstly, a shareholder who participated in the general meeting, voted against a resolution, and requested that their opposition be recorded in the meeting minutes may automatically challenge that resolution. Another case arises when a shareholder was unjustifiably excluded from participating in the general meeting. Additionally, a shareholder who was absent from the meeting may challenge a resolution if the meeting was improperly convened or a resolution was adopted on a matter not included in the agenda. In the case of written voting, a shareholder may file a complaint against a resolution if they were excluded from the vote or voted against the resolution and lodged an objection within two weeks of receiving notice of the resolution. Besides shareholders, other company bodies such as the management board, the audit committee, or the supervisory board and their members are also entitled to oppose resolutions.

Grounds and effects of lodging a complaint against a resolution

The Commercial Companies Code specifies grounds on which a resolution of the general meeting of shareholders may be challenged. It is essential to distinguish between two separate situations and types of claims that may be brought against a resolution. A resolution may be repealed based on a claim filed by an entitled party if it conflicts with the company’s articles of association, good customs, harms the company’s interests, or aims to the detriment of shareholders (Article 249 CCC). On the other hand, if a resolution contravenes legal provisions, a claim for declaration of invalidity of the resolution may be brought pursuant to Article 252 CCC. The Code, in Article 254, also sets out the effects of a final judgment annulling a resolution. According to §1, “A final judgment annulling a resolution shall be binding in relations between the company and all shareholders as well as between the company and the members of its bodies.” Moreover, “§2. In cases where the validity of a company action depends on the resolution of the general meeting of shareholders, annulment of such resolution shall not affect third parties acting in good faith.” §4 provides that the same effects apply to judgments issued following claims for declaration of invalidity. In case of uncertainty whether to bring a claim for repeal or invalidity of a resolution, or regarding the consequences of each type of claim, it is advisable to seek professional advice from a legal counsel.

Key elements of the procedure

It is worth addressing key aspects of the procedure related to challenging resolutions. A claim for repeal should be filed within one month from the date of becoming aware of the resolution, but no later than six months thereafter. For a claim of invalidity, the right to file expires within six months from learning of the resolution, but not later than three years after its adoption. The claim must meet the formal requirements set out in the Code of Civil Procedure. It is crucial that the circumstances justifying the annulment or invalidity of the resolution are presented clearly and comprehensively. Therefore, in case of doubts regarding the content or arguments of the claim, consulting a legal professional is recommended. Pursuant to Article 253 CCC, the company is represented in such disputes by the management board or a special proxy appointed for this purpose. A final judgment repealing or declaring invalid a resolution should be submitted by the management board to the registry court within seven days.

Summary

In summary, the procedure for challenging resolutions of the general meeting of shareholders in a limited liability company is an important mechanism preventing irregularities within the company. Claims against resolutions enable minority shareholders to have a real influence on company matters and to protect their interests within it. Additionally, such claims remove from the legal framework resolutions that are inconsistent with applicable law, aim to circumvent the law, harm the company’s or shareholders’ interests, or violate the company’s articles of association. The procedure also provides other company bodies, such as the management board, supervisory board, or audit committee, with a judicial tool to control decisions made by shareholders. Hence, understanding the resolution challenge mechanism is valuable both for shareholders and members of other company bodies who have standing to challenge resolutions.