Filing a protest against a resolution of the General Meeting before the General Meeting

In the legal environment of companies, the filing of a protest against a resolution of a general meeting is an important legal institute whose purpose is to protect the rights of shareholders. This article focuses on the question whether it is possible to lodge a protest against a resolution of a general meeting before the meeting, what are the consequences of such a protest and whether the absence of the protesting shareholder at the general meeting has an impact on the invalidity of the contested resolution. The source for this article is in particular the decision of the Supreme Court, Case No. 27 Cdo 1179/2023 of 24 January 2024.

Legal framework

Under the Companies Act (C.C.A.), a shareholder is entitled to request and receive at a general meeting an explanation of matters concerning the company or persons controlled by it, if such explanation is necessary for the assessment of the content of the matters put before the meeting or for the exercise of his shareholder rights at the meeting (Section 357 C.C.A.). The articles of association may provide that each shareholder has a reasonable time limit for presenting his request and may also limit the scope of the request (Section 357(2) C.C.A.).

In order for a court to determine whether a resolution of a general meeting is invalid, the key issue is whether a reasoned protest has been lodged against the contested resolution. The condition of filing a protest to challenge the validity of a resolution is waived by law only if the shareholder did not file a protest against the challenged resolution for a serious reason (Section 424(1) of the CCC).

A protest may be lodged at any time during the general meeting, but ideally should be lodged before the vote on the draft resolution to which it relates. This gives the company the opportunity to respond to the shareholder's objections and to correct any deficiencies in the draft resolution or its justification before the vote.

Option to lodge a protest before the general meeting

According to the above-mentioned decision of the Supreme Court, a protest against a resolution may also be lodged before the general meeting. Even a written protest sent to the company's board of directors before the general meeting fulfils its two basic functions. Namely, it has a preventive function, as the general meeting can react to the shareholder's objections and correct any defects in the resolution, thereby preventing the subsequent invalidation of the resolution by the court. At the same time, this procedure also ensures, as part of the second function, that the company can reasonably expect to challenge the validity of the resolution objected to.

Absence of a shareholder from a general meeting

The functions of the protest remain fulfilled even if the shareholder who lodged the protest prior to the general meeting does not attend the general meeting. According to the Supreme Court, a shareholder's non-attendance at a general meeting does not mean an automatic loss of the right to seek annulment of the resolution. It is the shareholder's duty to lodge (deliver) the protest to the company, while it is the duty of the board of directors to consider the protest at the general meeting. The Supreme Court finds no reason to insist that a shareholder attend a general meeting merely to repeat at the meeting the objections formulated in a written protest filed in advance.

Possible consequences of a shareholder's failure to attend a general meeting

The Supreme Court notes, however, that the courts should take into account all the circumstances of each case. Where a shareholder fails to attend a general meeting and thereby waives his right to an explanation (particularly where the protest lodged prior to the general meeting was directed against the inadequate reasons for the proposed resolution in the invitation to the meeting), this may suggest that his application for a declaration that the resolution of the general meeting is invalid is a means of chicanerous exercise of rights. In such cases, the courts should focus on whether the alleged violation of the law or the articles of association has had serious legal consequences and whether it is appropriate to apply the provision of Section 260 of the Civil Code, according to which the court will not declare a resolution null and void if it would be contrary to the interests of the company worthy of legal protection.

Conclusion

A protest against a resolution of a general meeting may be lodged not only during the meeting but also before the meeting. This procedure allows the general meeting to respond to shareholders' objections and to correct any defects in the resolution or its reasoning, which strengthens the company's legal certainty. Although a shareholder's failure to attend a general meeting does not mean an automatic loss of his right to seek annulment of the resolution, the courts should carefully consider all the circumstances of the case in order to prevent abuse of this right.

Do you need qualified representation as a shareholder at a company meeting? Or, on the contrary, do you need to convene and organise a general meeting as a statutory body in accordance with the law? Do not hesitate to contact us, we will be happy to help you with this.