Judicial Expulsion of Shareholders in Polish Limited Liability Companies: A Framework Analysis
I. Introduction: The Dissolution of Corporate Collaboration
The limited liability company, by its constitutional design, rests upon a foundation of collaborative enterprise—shareholders united in pursuit of a common commercial objective. Yet what remedies exist when this collaborative framework becomes untenable? When shareholders, rather than constructing an enterprise in concert, engage in mutual obstruction? When each decision precipitates conflict, and the corporation, instead of functioning productively, drifts toward decisional paralysis? Polish corporate law addresses such contingencies through an instrument of last resort: the judicial expulsion of a shareholder.
Pursuant to Article 266, Section 1 of the Polish Commercial Companies Code, a court may order the expulsion of a shareholder from the company upon petition by all remaining shareholders, provided “compelling reasons” support such action. The statute deliberately refrains from enumerating specific circumstances that might constitute such compelling reasons, thereby affording courts substantial discretion in evaluating whether continued cooperation among antagonistic shareholders remains feasible or whether compulsory dissolution of the relationship represents the sole viable alternative.
II. Statutory Framework and Judicial Interpretation
A. The Scope of “Compelling Reasons”
The statutory provision establishing “compelling reasons” (ważne przyczyny) as the predicate for shareholder expulsion imposes no categorical restrictions on the legally cognizable circumstances that may warrant removal. Notably, the statute does not limit actionable grounds to those that functionally disable the corporation’s governing organs. This expansive formulation requires courts to undertake comprehensive substantive evaluation of plaintiff allegations in light of the specific statutory requirements.
A judgment sustaining a petition for shareholder expulsion operates constitutively, reshaping the underlying legal relationship. In adjudicating such matters, the court must evaluate the circumstances advanced by the plaintiff against the statutory hypothesis, determining whether those circumstances fall within the normative concept of “compelling reasons” established by law.
B. The Corporate Relationship and Its Essential Character
Such judicial evaluation necessarily requires consideration of the fundamental nature of the corporate relationship. The adhesive binding shareholders in a limited liability company is their shared commercial purpose—what might be termed a community of economic interests. The corporate structure inherently presupposes cooperation among shareholders in executing their contractual undertaking. This cooperation rests upon—particularly in limited liability companies, where personal dynamics assume significant importance—mutual trust among the shareholders.
Accordingly, a compelling reason within the meaning of Article 266, Section 1 may encompass circumstances that materially impair the possibility of collaborative action within the corporate framework, even absent formal impediment to decisional processes by the corporation’s governing bodies. Jurisprudence and scholarly commentary have repeatedly emphasized that shareholder conflict adversely affecting the capacity for collaborative execution of the corporate agreement may, in particular circumstances, constitute compelling cause. Whether such conflict functionally prevents the adoption of resolutions is immaterial to this analysis. [See Court of Appeal in Szczecin, First Civil Division, Apr. 13, 2016, Case No. I ACa 51/16].
C. Interpersonal Breakdown as Compelling Cause
More specifically, compelling grounds for expulsion may be found in the impossibility of conflict-free collaboration with a shareholder—a circumstance arising from interpersonal dynamics within the corporation that have severed relational bonds and destroyed trust between that shareholder and others, thereby foreclosing prospects for cooperative pursuit of corporate objectives. [See Court of Appeal in Warsaw, Fifth Civil Division, Dec. 16, 2015, Case No. VI ACa 48/15]. Such circumstances might derive from familial disputes manifesting in shareholder relations, conduct demonstrating disloyalty toward the corporation and majority shareholder, or ostentatious disregard for legitimate interests of other stakeholders.
III. Limitations on the Expulsion Doctrine
A. The Requirement of Objective Grounds
An overly expansive interpretation of the statutory provision would obtain, however, were every conflict or divergence of opinion among shareholders treated as compelling grounds for expulsion. A shareholder’s removal cannot be predicated solely upon the subjective sentiments of other shareholders regarding that individual; rather, it requires objective circumstances attributable to the shareholder that render continued corporate operation impossible or otherwise compromise corporate interests.
A petition for shareholder expulsion cannot be sustained on trivial or insubstantial grounds arising from minor disagreements or conflicts among shareholders—even where serious differences exist regarding corporate governance that nevertheless exert no adverse effect upon corporate operations. Pursuant to Article 266, Section 1, such interpersonal animosities cannot constitute grounds for expulsion. The justification for removal must rest upon objective impossibility of continuing the collaborative relationship. Courts should carefully scrutinize whether an expulsion petition and its cited “compelling reasons” constitute merely a pretext for eliminating an inconvenient individual from the corporate enterprise.
B. Insufficient Grounds: Illustrative Applications
Compelling reasons justifying shareholder expulsion cannot include, for instance, a single absence from a shareholders’ meeting—particularly where that shareholder holds insufficient shares to prevent adoption of resolutions—or the mere fact of having granted proxy authority for representation and voting at a general meeting. [See Court of Appeal in Kraków, First Civil Division, July 22, 2021, Case No. I AGa 12/20].
Conversely, systematic failure to exercise participation rights at shareholder meetings, where a given shareholder’s absence renders impossible the adoption of any resolutions and thereby paralyzes corporate operations, constitutes compelling grounds for that shareholder’s expulsion. [See Court of Appeal in Warsaw, Fifth Civil Division, July 17, 2014, Case No. VI ACa 1604/13].
C. Procedural Requirements and Standing
Shareholder expulsion may be pursued only where the shares of those seeking removal represent more than half the stated capital. The articles of association may authorize fewer shareholders to bring such action, provided their collective shares exceed half the stated capital. In such instances, all remaining shareholders must be named as defendants.
IV. Provisional Relief: Suspension of Shareholder Rights
To secure the expulsion proceeding, a court may—for compelling reasons—suspend a shareholder’s exercise of membership rights in the company pending final adjudication.
Suspension of a shareholder’s participation rights in meetings necessitates adoption of certain legal fictions regarding continued corporate operations. The suspended shareholder must be treated as though entirely absent from the corporate structure, meaning exclusion from calculations of required quorum for convening meetings, conducting proceedings, adopting resolutions, or establishing capital thresholds authorizing exercise of minority rights. Resolutions adopted absent the suspended shareholder’s participation retain legal validity even if the underlying expulsion proceeding ultimately terminates in dismissal of the petition.
An alternative interpretation would render the court’s provisional order practically nugatory—permitting a suspended shareholder, through mere absence from meetings, to prevent adoption of any resolutions whatsoever. Such an outcome would render the protective order’s efficacy illusory and is therefore unacceptable. [See Supreme Court, Civil Chamber, May 23, 2019, Case No. II CSK 307/18].
V. Valuation and Acquisition of the Expelled Shareholder’s Interest
A. The Nature of Share Acquisition
The expelled shareholder’s shares must be acquired either by remaining shareholders or by third parties. While share acquisition in this context exhibits obvious distinctions from ordinary transfer transactions, it most closely approximates a consensual transfer between seller and purchaser. The limited liability company itself is not a party to transactions effectuating shareholder expulsion. The consideration for share acquisition does not derive from corporate assets, and successful expulsion entails no depletion of corporate property. Share acquisition in expulsion proceedings constitutes derivative acquisition of rights.
The expelled shareholder’s declaration is supplanted by judicial decree. The court’s function, beyond establishing predicate grounds for the defendant shareholder’s expulsion, extends to determining the acquisition price. [See Supreme Court, Civil Chamber, Dec. 12, 2013, Case No. II CSK 121/13].
B. The Court’s Mandatory Valuation Function
Price determination represents a statutory obligation of courts ordering shareholder expulsion. The ruling in this regard, derivative from the expulsion itself, does not depend upon either party’s filing an appropriate motion—neither regarding the principle of establishing an acquisition price nor concerning the quantum thereof. Moreover, one must recognize that acquiring the expelled shareholder’s interest constitutes merely a condition precedent to expulsion’s effectiveness and remains subject to the volition of remaining shareholders or third parties.
Under such legal architecture, regardless of the ultimate acquirer’s identity, the relationship between acquirer and expelled shareholder cannot influence the price that the court determines ex officio. [See Supreme Court, Civil Chamber, Dec. 12, 2013, Case No. II CSK 121/13].
C. Market Value as the Governing Standard
The actual value of shares is their fair market value—i.e., the price a shareholder would obtain in an arms-length transaction with a third party. [See Supreme Court, Civil Chamber, Dec. 12, 2013, Case No. II CSK 121/13].
VI. Consequences of Failed Acquisition: Nullification and Damages
A. Temporal Requirements and Nullification
A court ordering shareholder expulsion must specify the deadline within which the acquisition price, together with interest calculated from the date of service of the complaint, must be tendered to the expelled shareholder. Should the price neither be paid nor deposited with the court within the designated period, the expulsion order becomes void.
The critical consequence of deadline expiration is not creation of an enforceable monetary claim, but rather nullification of the expulsion order itself. [See Court of Appeal in Szczecin, Sept. 2, 2014, Case No. I ACa 384/14].
B. Damages for Unsuccessful Expulsion
Where an expulsion order has become void for the foregoing reasons, the unsuccessfully expelled shareholder may seek damages from the petitioning parties. The plaintiff’s liability for damages encompasses all harm that the expulsion proceeding inflicted upon the unsuccessfully expelled shareholder.
This liability framework derives from Article 267, Section 2 of the Commercial Companies Code, which predicates damages upon the order’s nullification for reasons specified in Section 1—namely, failure to tender the acquisition price with interest within the prescribed deadline. Order nullification denotes a state wherein the membership roster ultimately underwent no constitutive modification, and its composition—both in terms of identity and ownership structure—remained unchanged from its pre-judgment configuration.
The unsuccessfully expelled shareholder possesses no claim for payment for shares, and neither the corporation’s other shareholders nor third parties acquire any right to obtain those shares. In such circumstances, compensable harm may encompass both actual losses (damnum emergens) and lost profits (lucrum cessans) occasioned by initiation of the expulsion action. [See Supreme Court, Civil Chamber, Jan. 24, 2019, Case No. II CSK 757/17].
VII. Conclusion
The Polish framework for judicial expulsion of shareholders reflects sophisticated balancing of competing interests: the legitimate need to remove shareholders whose continued participation renders corporate cooperation impossible, against the fundamental property rights of shareholders and the requirement for objective justification of such extraordinary remedy. The jurisprudential elaboration of “compelling reasons” demonstrates appropriate judicial restraint, requiring substantial showing of dysfunction while preventing deployment of expulsion as instrument of mere convenience or majority oppression. The statutory scheme’s careful attention to valuation, temporal requirements, and consequences of failed acquisition further evidences legislative concern for protecting minority shareholders while facilitating resolution of otherwise intractable corporate deadlock.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
