Today  there came into force the act of 5th December 2008 y. on amendment of act Code of Commercial Companies (Dz.U. 2009 No. 13 Item 69). Provisions of Commercial Companies Code amended under today?s novelisation strengthen the position of minor shareholders of joint-stock companies and grant new prerogatives to supervisory boards of these companies.

The novelisation refers mainly joint-stock companies (and limited join-stock partnerships, to which certain provisions on joint-stock companies apply respectively), which have at least one share dematerialised and thus are public companies. It does however also amend provisions that govern joint-stock companies as such and to this extent it shall have more general consequences.

Under the new law shareholder(s) that hold only 5% of shares in a joint-stock company may demand that the management board of a company called an extraordinary general meeting (section 400 § 1 of CCC). Formerly CCC vested this right into shareholders that held at least 10 % of the total share capital of the company. The minor shareholders exercise their right by a notice addressed to the management board; currently the notice may also be issued electronically (e.g. via e-mail). Should the management board omit to call the extraordinary general meeting in two week time form the date of receipt of the notice the shareholders may request that the relevant registry court authorize them to call the meeting themselves. The meeting then decides who is to bear the costs of it being summoned ? the company or the shareholders who demanded the meeting. According to CCC the statutes of the company may provide for that the right to call a meeting be vested in shareholders who hold even fewer than 5% of company?s total shares. They can not however increase the minimal required share capital over the level of 5%. Consequently in respect to some joint-stock companies there may arise a necessity to adjust theirs statutes to the amended CCC. If the statues provide that the right referred to above may be exercised only by shareholders who hold at least 10 % of the stock (which was acceptable under previous wording of CCC), they should be properly amended by decreasing the minimal percentage of shares held to no more than 5%.

On top of that shareholders may now call an extraordinary shareholders meeting by themselves, without need to rely on the management board (or the supervisory board). According to section 399 § 3 of CCC shareholder(s) which hold  at least 50 % of company?s stock or represent at least 50 % of votes on the general meeting have the right to call an extraordinary shareholders meeting. The shareholders who call the meeting appoint it?s chairman.

The novelisation also introduced a totally new institution, which may be of use to minor shareholders of joint-stock companies. New section 401 § 1 of CCC allows shareholder(s) who hold at least 5 % of the shares to demand that a certain issue be placed on the agenda of the general meeting. The request of shareholder should be grounded or include a draft of a resolution concerning the proposed issue. The request should be send to management board – also electronically ? at least 14 days prior to the date of the meeting (21 days in respect to public companies). The management board should then without delay -not later that 4 days before the meeting (8 in respect to public companies) – publish the issues that are to be placed on the meeting agenda on request of shareholders. This means that shareholders as currently they may themselves decide what objects are to be placed on the agenda of the general meeting. On one hand this shall definitely contribute to a greater flexibility and invention of joint-stock companies as even minor shareholders are now enabled to present their initiatives on the general meeting of the company. On the other hand new regulations may cause obstruction of the general meetings especially when one of the shareholders presents a considerable number of objects on the agenda e.g. in order to postpone adoption of a resolution he considers unfavourable.

Another amendment worth mentioning concerns prerogatives of supervisory board of a joint-stock company. In accordance with the novelised provision of CCC supervisory board may call an extraordinary shareholders meeting under it?s discretion. Previously supervisory board had the right to call the extraordinary general meeting only when the management board failed to comply with it?s request to call the meeting in two week upon the receipt of request.

The novelisation reflects a general tendency to increase the influence of shareholders on conduct of affaires of joint-stock companies. Recent events, which took place over the world (mainly in U.S.A.) showed that smaller shareholders very frequently lack instruments to participate in governance of the company and on this field they are too dependant on the company?s management board. Rights granted to the shareholders by novelisation definitely put them in stronger position allowing them to participate in establishing the course of conduct of a company to a higher extent than previously. Even though in practice companies may face certain problems arising from malicious use of the new institutions by shareholders the novelisation  generally reflects tendencies that should be assessed positively.

This entry was posted on Monday, 03-08-2009 at 15:36 by Adam Jodłowski and is filed under How to invest in Poland. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.