Is a Former Shareholder Entitled to Seek a Declaration of Invalidity of a Limited Liability Company’s General Meeting Resolution?

The question of who is entitled to challenge a resolution of a limited liability company's general meeting and seek its invalidation may seem clear at first glance when looking at the law. However, when we delve into various situations that may arise in corporate law, we find that the legal regulation of active legal standing in this regard needs to be supplemented by interpretative rules.

According to Section 191 of the Business Corporations Act, any shareholder, managing director, supervisory board member (if established), or liquidator may seek to have a resolution of a limited liability company's general meeting declared invalid. These individuals have the right to file a petition for invalidity if the resolution conflicts with legal regulations, the articles of association, or if the resolution is contrary to good morals.

The Principle of Speciality in Relation to the Civil Code

In this context, the relationship of specialty between Section 191 of the Business Corporations Act and the general regulation of the invalidity of a legal entity's decisions in Section 258 of the Civil Code is of fundamental importance. In accordance with the principle of lex specialis derogat legi generali (the specific law overrides the general law), the assessment of active legal standing to file a petition for invalidity of a general meeting resolution must follow the specific provisions contained in Section 191 of the Business Corporations Act. The legislature deliberately narrows the circle of persons who may interfere in the internal affairs of the company in this way, thereby protecting the stability of the company and preventing excessive abuse of this right by third parties.

The Right of a Former Shareholder to Seek Invalidation of a General Meeting Resolution

Judicial practice shows that the interpretation of the term "shareholder" within the meaning of Section 191 of the Business Corporations Act is not always strict. The Supreme Court has repeatedly leaned towards an extensive interpretation of this provision. In certain cases, a person who has lost their position in the company after the adoption of the contested resolution is still considered a shareholder if the resolution continues to impact their rights and obligations, which stem from their previous relationship with the company. These conclusions were recently described by the Supreme Court in its ruling of October 26, 2023, file no. 27 Cdo 452/2023.

According to commentary literature [Pokorná, J. § 191 in Lasák, J., Dědič, J., Pokorná, J., Čáp, Z. et al. Zákon o obchodních korporacích. Komentář 2nd ed. Prague: Wolters Kluwer ČR, 2021, p. 960], it must be assumed that if the law explicitly defines the circle of persons granted active legal standing, this means that other persons do not have the right to interfere in the internal affairs of the company. However, this does not mean that legal practice should mechanically exclude the possibility of protecting the rights of former shareholders.

In its aforementioned ruling, the Supreme Court confirmed that, under certain circumstances, a shareholder's active legal standing may continue even after their participation in the company has ended. The loss of shareholder status, therefore, does not automatically lead to the extinction of their right to seek the invalidation of a general meeting resolution. What is decisive is whether the contested resolution of the general meeting has (or could have) affected the rights of this former shareholder.

Conclusion

The right to file a petition for the invalidation of a general meeting resolution of a limited liability company is closely tied to the concept of active legal standing. Although the Business Corporations Act defines the circle of persons who may exercise this right, judicial practice admits that active legal standing may persist even after a shareholder's participation in the company ends, particularly in cases where the contested general meeting resolution continues to affect the shareholder's rights and obligations. This approach respects the purpose of the legal regulation of invalidating general meeting resolutions and ensures that former shareholders can seek protection of their rights if they do not have any other legal remedies available.

Are you a shareholder in a limited liability company facing strained relationships or disputes within the company? Do you need legal advice regarding general meetings or the exercise of shareholders' rights? Do not hesitate to contact us; we will be happy to provide you with prompt and expert legal services.