Jagna Kowalczyk-Fudali

Rechtsanwältin (Polen)
Senior Associate
Phone: +48 12 378 66 33

Rights which protect the shareholders under the Code of Commercial Companies

The Code of Commercial Companies contains a number of provisions which protect the so-called minority (shareholders). One of these protective measures is that shareholders who represent at least 1/10 of the share capital may be authorised by the court to convene an extraordinary meeting of shareholders of a limited liability company (Article 237 of the Polish Code of Commercial Companies, hereafter: CCC). This mechanism is meant to remedy situations in which company authorities are passive and ignore the request for convening a meeting. It is also an extension of the shareholders' right to request the convention of a shareholders' meeting pursuant to Article 236 CCC.  However, in practice it turns out that the application of this provision is not only difficult but, above all, time-consuming. 

Convening an extraordinary meeting of shareholders of a limited liability company on the basis of a court authorisation – formal requirements and proceedings:

1. Request that the management board convene a meeting of shareholders

In the first place, the minority shareholders must use their right to request the management board to convene a shareholders' meeting. The request should be made in writing and include the proposed date of the meeting as well as its agenda. It must be filed with the management board at least a month before the requested date. The request for convening an extraordinary meeting of shareholders must be justified, so that the management board has a chance to respond to it. Please note that the Polish CCC gives such a right to a minority only with respect to extraordinary meetings of shareholders, but does not deal with ordinary meetings. 

2. Request for court authorisation to convene a shareholders' meeting

If the two-week deadline counted from the day the request is filed with the management board lapses to no effect, the shareholder(s) who filed the request can apply to the registry court for an authorisation to convene a shareholders' meeting.

The application filed with the court must contain the request for authorisation to convene a shareholders' meeting. 

The application must meet the formal requirements of a claim and contain the request for authorisation to convene a shareholders' meeting, including the agenda. It must also invoke the request for convening the shareholders' meeting which was ignored by the management board. The applicant must prove his right to file the request, that is he must demonstrate that he holds enough shares in the share capital.  The application may also indicate a person whom the court may appoint to chair the meeting. The application should include a copy of the shareholder's request to the management board for convening an extraordinary meeting of shareholders and a confirmation that the management board received it. This application carries a court fee of PLN 300.

What the court does before it grants an authorisation to convene a meeting of shareholders of a limited liability company 

First, the registry court must call the management board to explain why they did not convene the meeting. A reasonable and convincing explanations of the management board may influence the registry court's decision, especially if it shows that the application was unjustified and the convening of the meeting would cause too much organisational or financial problems. After a fruitless expiry of the deadline for the management board to submit a statement, the registry court may issue a relevant decision if the case is clear. If the court has any doubts, it can continue the proceedings pursuant to general provisions. Such proceedings take at least a few months in every instance. The ruling of the court of first instance can be appealed to the regional court, which protracts the proceedings for another few months. This is because the meeting can be only convened after the decision of the relevant court becomes legally binding, so in the case of a conflict a potential appeal must be taken into account. 

In its decision the court indicates the persons who are authorised to convene the meeting and the deadline within which they must do so (usually 3 months). 

3. Practical problems with the court authorisation to convene a shareholders' meeting

Please note that in practice this procedure is extremely time-consuming and completely ineffective. The time necessary to meet all legal requirements connected with the minority shareholders going to the court for authorisation to convene an extraordinary meeting of shareholders quite often paralyses the company's decision-making ability. Additionally, the court is bound by no deadline to decide on such applications and has to wait each time for the company's/shareholder's answer or for the ineffective lapse of time to provide it. If the proposed decisions go against the interest of the management board members, they may effectively drag the proceedings. Another problem arises when no one actually runs a company, and the application aims to overcome this deadlock while, simultaneously, the shareholders are ignorant or cannot reach a unanimous consensus. The court authorisation to convene such a meeting should help to solve such problems. However, in practice, especially in conflict situations and where capital is dispersed, it may turn out that requesting a meeting will only make the decision deadlock more acute. 

4. This problem may be alleviated through careful formulation of articles of association which will speed up the convention of ordinary or extraordinary meetings of shareholders.  

One effective solution to this problem is to give the minority shareholders (who represent at least 10% of the share capital, depending on the ownership structure) in the articles of association the right to convene an ordinary or an extraordinary meeting of shareholders in case the management (or another body) does not do so for any reasons despite having been requested to do so. Such a provision is often missing in articles of association, yet it helps to avoid a long-term and, in practice, hardly effective mechanism of court authorisation to convene a meeting.

Our attorneys-in-law offer legal advice in Poland. They are at your disposal in Rödl & Partner offices in: Gdansk, Gliwice, Cracow, Poznan, Warsaw, Wroclaw.

9.12.2016 r.