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Improper representation during the adoption of a resolution can still be remedied during the trial

30 May 2023

Does the adoption of a resolution by a capital company by the vote of a shareholder who was not properly represented at the vote always mean that the resolution can be declared invalid? Contrary to appearances, the answer to this question is not at all as obvious as it might seem.

The applicable laws comprehensively regulate the consequences of acting on another’s behalf without proper authorisation or in breach of the rules of representation specific to a legal person, and at the same time provide for situations in which such defects may be subsequently ‘rectified’. Thus, the question must be asked whether such a procedure can be applied to resolutions of capital companies?

Subsequent confirmation of a defective legal act

The aforementioned remedial procedure, is regulated in the Civil Code, and being more precise, in Article 103 of the Civil Code (with regard to acting without or in excess of a power of attorney) and in Article 39 of the Civil Code (with regard to acting contrary to the rules of representation by an organ of a legal person). It provides – in both cases – that if an agreement has been concluded without proper authority or in excess of it, its validity depends on confirmation by the person on whose behalf the alleged agent/representative acted.

Given that the contract is nothing but a legal act performed by at least two parties, the indicated possibility of confirmation of the action of the alleged agent/representative applies in general to legal acts to which more than one entity is a party (the subsequent confirmation of a unilateral legal act, which in such case is absolutely invalid, is therefore excluded). Until such confirmation is made (for which the other parties to the action may set an appropriate time limit), the legal action taken has no effect.

Resolution of a capital company vs. legal action

The above leads to the conclusion that the qualification of a resolution of a capital company as a legal act to which more than one entity is a party would open the way for the application of the described procedure also in cases where the defect in the authorisation concerns the act of voting (submission of a declaration of will of a specific content).

This issue, due to the lack of an unambiguous statutory regulation, has not been unequivocally resolved either in case law or in legal science. However, among the multitude of positions presented in this respect, the predominant view is that a resolution of a capital company constitutes a multilateral legal act (possibly a legal act of a specific type). This position has so far been presented in particular by the Supreme Court and common courts in proceedings involving challenges to resolutions of capital companies. It should be emphasised, however, that the resolutions adopted by capital companies cover a variety of issues, often not directly aimed at producing specific legal effects, and therefore their nature – in terms of qualification as a legal act – should be assessed individually in each specific case. Such conclusions may be drawn, inter alia, from reading the resolution of 7 judges of the Supreme Court of 18 September 2013, passed in the case ref. no.: III CZP 13/13 and constituting the foundation of the current procedural practice within the scope of challenging resolutions of capital companies.

When, at trial, they allege that an unauthorised person voted

As a result – when a disputed resolution of a capital company meets the conditions for recognition as a multilateral legal act – a shareholder who was improperly represented is given the possibility of confirmation of the voting action, if the adopted resolution pursued  his/her interests in practice.

Such confirmation should take the form of a written declaration made in compliance with all rules of representation and then delivered to the company and to the other shareholders participating in the voting on the resolution in question (as they are the parties to the action in question). Documentary evidence that the statement in question has been submitted to the other parties to the action and to the company must then be provided in the course of litigation, in accordance with the rules governing civil proceedings. This action may be performed either by the defendant company or by the shareholder himself/herself if he/she has decided to intervene in the proceedings as an accessory intervener on the side of the defendant company and has been admitted as such.

The effect of the confirmation of the voting action by the shareholder should be that the court takes into account – when assessing whether the contested resolution was validly adopted – the votes originally cast by an unauthorised person. It should be borne in mind, of course, that this circumstance will be of significance for the outcome of the trial only on condition that the total number of votes cast in favour of a specific resolution – after adding the votes contested due to improper representation – corresponds to the requirements for particular types of resolutions set forth in the Code of Commercial Companies or the Articles of Association of the company.

Author:

Kamil Kania

Attorney-at-law

Kamil Kania

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