Legitimisation to challenge corporate resolutions in court
Article 206 of the Caorporate Enterprises Act regulates the standing to challenge corporate resolutions adopted by the General Meeting of a commercial company.
Percentage of share capital required to challenge company resolutions
In principle, any of the directors, third parties with a legitimate interest and shareholders who have acquired such status prior to the adoption of the resolution, provided that they represent, individually or jointly, at least one per cent of the share capital, have standing to challenge corporate resolutions.
The status under which the challenge is brought in each case must be alleged in the complaint and this allegation must be used to determine whether or not the plaintiff has standing to challenge.
Therefore, a shareholder wishing to challenge a company resolution must hold at least one per cent of the share capital or, in listed companies, one per thousand of the share capital.
The basis for calculating this shareholding is the full capital of the company and therefore includes the portion of capital corresponding to non-voting shares, treasury shares and shares in arrears of dividend liabilities.
The articles of association may reduce the percentages of capital indicated and, in any case, the members who do not reach them shall be entitled to compensation for the damage caused to them by the contestable resolution.
In other words, the company’s articles of association could reduce the percentage of share capital for challenging the resolution, and it is not possible for the articles of association to require a higher percentage of share capital as a requirement for standing to challenge resolutions adopted by the General Meeting.
Challenging agreements contrary to public policy and exclusive representation of the company by the claimant
Any shareholder, even if they have acquired this status after the resolution, administrator or third party, will have standing to challenge resolutions that are contrary to public policy.
The actions of contestation must be directed against the company. If the plaintiff is the sole representative of the company, for example, a sole shareholder and director, and the shareholders’ meeting has not appointed anyone for this purpose, the judge hearing the challenge shall appoint the person who is to represent the company in the proceedings from among the shareholders who voted in favour of the challenged resolution.
The transfer of the shares or holdings of the challenging shareholder, which has already started the proceedings, allows the acquiring shareholder to succeed to the position of the transferring plaintiff in the proceedings.
Involvement of shareholders in the procedure for challenging company resolutions
In addition, shareholders who have voted in favour of the contested resolution may intervene at their own expense in the proceedings in order to maintain its validity. The intervention of the shareholders in the challenge procedure is of a litisconsortial nature and is governed by the general rules of Article 13 of the Law on Civil Procedure.
Thus, the intervener has the status of a party to the proceedings, its intervention does not cause the proceedings to be reinstated, it can formulate its own claims and can appeal against the opposing decisions even if the defendant company has not done so.
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