Challenging the Vote – The Action to Set Aside a Shareholders’ Resolution
When Shareholders Turn on One Another
Resolutions passed by shareholders’ meetings that conflict with a company’s charter, violate good business practices, damage the company’s interests, or aim to harm a shareholder can be challenged through a lawsuit seeking to overturn the resolution. Filing such a challenge doesn’t halt registration proceedings, though a registry court may suspend them after holding a public hearing.
The Threshold Question: When Can a Resolution Be Overturned?
The mere existence of conflict among shareholders cannot, by itself, justify finding that a challenged resolution meets the criteria set forth in Article 249, Section 1, of the Polish Commercial Companies Code. The plaintiff must prove, in each instance, that circumstances exist demonstrating that the challenged resolution conflicts with the company’s charter or with good business practices and, simultaneously, either damages the company’s interests or aims to harm a shareholder. This assessment must be made in concreto—that is, with reference to the specific content and consequences of the particular resolution, not on the basis of general situational context or broad corporate conflict. (The Court of Appeals in Katowice established this principle in its ruling of October 23, 2019, Case No. V AGa 172/19.)
The general clauses regarding “good business practices” and “harm to a shareholder” found in Article 249 of the Code refer to extralegal systems of evaluation and rules of conduct, granting the presiding court a measure of decisional freedom that enables it to adapt general norms to specific factual situations. In a cassation appeal, one cannot rest on abstract allegations; instead, one must present arguments indicating the existence of discrepancies involving factual situations similar to those established in the case at hand, along with persuasive arguments that the adoption of the resolution obviously resulted in harm to a shareholder or violated good business practices. (The Supreme Court’s Civil Chamber clarified this in its decision of June 4, 2020, Case No. II CSK 534/19.)
When Family Feuds Invade the Boardroom
A conflict between shareholders that is familial in nature—tied, say, to a marital separation—can spill over into a company’s operations. Such situations may lead shareholders to take actions aimed at mutual harm, including through formal decisions made in the form of resolutions by company organs. Yet the mere fact that a conflict exists does not determine whether specific resolutions violate good business practices, damage the company’s interests, or seek to harm shareholders. What’s necessary is a finding that, given the resolution’s concrete content, it violates justified, legally protected interests. (The Court of Appeals in Kraków reached this conclusion in its ruling of June 27, 2018, Case No. I AGa 259/18.)
The Anatomy of Shareholder Harm
A resolution of a general meeting can be deemed harmful to a shareholder both when the intent to cause harm exists at the time the resolution is adopted and when no such intent is assumed upon its adoption, but the resolution’s content is such that its implementation led to the shareholder’s harm. In evaluating a general-meeting resolution under the criteria provided in Article 249, Section 1, of the Code, factors that may prove significant include the manner in which the company was formed, the character of the legal ties linking the shareholder to the company (with emphasis on the personal element), and the necessity of guaranteeing shareholders—including minority shareholders—influence over how the company functions and over the personal composition of its organs, even in minimal scope. (This well-established line of Supreme Court jurisprudence was recalled, among other places, in the Supreme Court’s decision of January 11, 2023, Case No. I CSK 711/22, which referred back to Supreme Court rulings of April 16, 2004, Case No. I CK 537/03, and October 13, 2004, Case No. III CK 459/02.)
The phrase “resolution aimed at harming a shareholder,” as used in Article 249 of the Code, cannot be interpreted solely from the standpoint of the financial interests of the shareholder whom the resolution’s content is meant to affect. This interpretation must, taking into account all the essential circumstances of the particular case, consider the shareholder’s general position within the corporate entity, of which economic status is only one determinant. The evaluation of whether a contested resolution aims to harm a shareholder must be conducted by answering the question: Was this resolution adopted in order to weaken that position and thereby bring about harm to the shareholder that manifests itself also in the scale of financial benefits associated with that position? (The Court of Appeals in Poznań addressed this in its ruling of September 29, 2022, Case No. I AGa 177/22.)
When a Company Turns Against Itself
A resolution damages a company’s interests when it has been adopted by shareholders with the awareness that its implementation will negatively affect the sphere of the company’s interests—whether by diminishing its assets to the benefit of shareholders or by preventing the company from developing the enterprise it operates. What’s at issue, then, is a situation in which the resolution ensures protection of shareholders’ or third parties’ interests at the expense of the company’s interest. (The Court of Appeals in Kraków articulated this principle in its ruling of December 20, 2012, Case No. I ACa 1231/12, which was endorsed by the District Court in Warsaw in its ruling of October 10, 2018, Case No. XXVI GC 894/17.)
The Meaning of “Good Business Practices”
The provisions of the Commercial Companies Code contain no general clause referring to “principles of social coexistence.” In its place, the Code introduced a general reference to “good business practices.”
The concept of good business practices used in Article 249 of the Code refers not only to commercial honesty directed outward in the company’s operations (in relation to other participants in economic exchange) but, above all, to internal relations within the company, including relations among shareholders. This argues, therefore, for reaching toward moral criteria that apply not only among entrepreneurs but also in society at large, including the general norm of decent behavior. As a rule, then, a shareholders’-meeting resolution adopted with the purpose or intent of harming a minority shareholder violates the moral norm prevailing in society, which manifests itself in the duty to behave decently. (The Court of Appeals in Katowice articulated this in its ruling of February 13, 2020, Case No. V AGa 105/19.)
The clause regarding good business practices contained in Article 249, Section 1, of the Code expresses the idea of equity, refers to values universally recognized in the culture of society, enables the adaptation of general legal norms to specific factual situations while taking into account systems of evaluation or rules of conduct of an extralegal character, and serves the realization of justice in the substantive sense—a constitutional value under Article 45, Section 1, of the Polish Constitution. It is proper to understand the concept of good business practices as a manner of conduct that can be reconciled with the rules of honest commerce, usually made concrete in the customs prevailing in that commerce, which take into account the character of the given type (or industry) of economic activity, and whose very content and manner of interpretation are directed toward ensuring its undisturbed functioning and, consequently, its development. (The Supreme Court established this in its ruling of February 23, 2017, Case No. V CSK 230/16, which was endorsed by the Court of Appeals in Katowice in its ruling of July 14, 2021, Case No. V AGa 374/20.)
Breaking the Law, Breaking Good Faith
The Court of Appeals in Katowice formulated an important principle regarding the application of Article 249, Section 1, of the Code in its ruling of November 16, 2020 (Case No. V AGa 146/20): If a shareholders’-meeting resolution violates statutory provisions—for instance, by accepting the non-performance of a statutory obligation—then it automatically violates good business practices within the meaning of Article 249, Section 1. This violation constitutes grounds for overturning the resolution, provided that, additionally, it aims to harm a shareholder. In the case under review, this concerned a situation in which the company—despite an obligation arising from the Accounting Act—failed to prepare a consolidated financial statement, and the resolution approved only the individual statement, thereby concealing from a minority shareholder essential information about the financial situation of the entire capital group.
The significance of this ruling lies in establishing a straightforward rule: a shareholder seeking to overturn a resolution need no longer independently prove that the company’s specific action violates good business practices—it suffices to demonstrate a violation of statutory provisions. This shifts the burden of argumentation to an objective plane (compliance with law), which makes it easier for minority shareholders to defend their rights. At the same time, the court emphasized that merely finding a statutory violation is insufficient; it’s necessary to demonstrate the second prerequisite from Article 249, Section 1, of the Code—namely, that the resolution aimed to harm the shareholder. In the case discussed, the harm consisted in depriving the shareholder of access to complete financial information about the capital group, which made it impossible for him to conduct a reliable assessment of the value of his shares and of the actual economic situation of the enterprise in which he held a capital stake.
The Special Assessment: When Can a Resolution Requiring Additional Contributions Be Challenged?
Although the institution of additional contributions is expressly provided for by law, one cannot exclude situations in which a resolution on this matter will be challenged under Article 249 of the Code. The Court of Appeals in Poznań, in its ruling of March 12, 2020 (Case No. I AGa 121/19), emphasized that additional contributions have a supplementary and non-standard character—a company should, after all, finance its needs from current revenues or typical external sources, particularly credit. Additional contributions should be imposed only when they have become necessary and only within the limits of the company’s actual financial needs.
The reasons for burdening shareholders with additional contributions should emerge from the draft of the resolution that is to be adopted by shareholders at the general meeting for this purpose. This draft, as well as the resolution itself, should also clearly indicate what obligations (purposes, tasks) will be financed by the additional contributions, so as to enable shareholders to conduct a real, reliable verification of the advisability (necessity) of adopting a resolution on this matter. This serves, in particular, to protect the rights of minority shareholders. One cannot, after all, exclude situations in which burdening shareholders with the duty of additional contributions becomes a form of harassment of minority shareholders or constitutes an attempt to “push them out of the company.” As the Court of Appeals in Poznań stated, it is contrary to good commercial practices to exploit the position of a majority shareholder in order to obtain disproportionate personal benefits at the expense of the company’s assets or the assets of minority shareholders.
The Dividend Question: When Withholding Profits Becomes Weaponized
A shareholder’s right to a dividend, as provided in Article 191, Section 1, of the Commercial Companies Code, does not have an absolute character, because it arises only when shareholders adopt an appropriate resolution to that effect. Leaving the decision regarding the method of distributing profit earned in a given fiscal year to shareholders does not mean, however, that such a decision is exempt from judicial review. A court has the right to review a resolution at the initiative of a shareholder who contests it on the basis of Article 249, Section 1, of the Code.
The key criterion for verifying a resolution regarding non-payment of a dividend is the actual destination of the accumulated profit. As the Supreme Court indicated in its ruling of March 16, 2022 (Case No. II CSKP 191/22), if the designation of all profit to reserve capital is explained by the company’s investment plans, yet no steps have been taken to realize these plans within a time frame in which the accumulated funds should have been put to use, this may testify to the merely ostensible character of the argumentation explaining the reasons for the decision to forgo paying a dividend. If investment objectives are not thoughtfully considered and certain to be realized within a commercially reasonable time frame, and the accumulated profit becomes part of reserve capital having a level that exceeds rationally evaluated needs of a company with a strong and stable market position, then the decision to forgo paying any dividend to shareholders can be viewed as damaging to their interests.
The court also evaluates the established practice of dividend payment in the company. A decision to retain all profit in the company’s reserve capital when the company had no particular need to strengthen that capital violates the balance between the company’s interests and the shareholder’s right to participate in annual profit—especially when the company had previously been regularly paying a dividend constituting a specific percentage of profit.
Dilution by Design: When New Shares Drown Out Minority Voices
Resolutions concerning increases in share capital through the creation of new shares, which are then taken up entirely by majority shareholders alone, leading to ever-greater concentration of capital in their hands, can be deemed contrary to good business practices and aimed at harming a shareholder. A particularly reprehensible practice is the adoption of successive such resolutions following a court’s overturning of earlier resolutions of analogous content—this should be recognized as an attempt to circumvent legally binding court rulings and a persistent pursuit of an objective that has already been classified as violating Article 249 of the Code.
As the Court of Appeals in Gdańsk indicated in its ruling of September 15, 2021 (Case No. I AGa 87/21), the justification for a resolution to increase share capital must demonstrate the existence of a substantive and objective necessity for its adoption due to the company’s exceptionally difficult economic situation, one that threatens it in the very near term with loss of financial liquidity and, in the more distant future, with the possibility of its functioning or even its existence. Only proper balancing of the interests of all shareholders and of the company itself could cause an increase in share capital to deserve acceptance.
One cannot accept justifying the necessity of increasing share capital by reference to the company’s earlier economic decisions leading to the creation of obligations (such as the duty to pay the price for real estate being acquired). Additionally, it is contrary to good business practices to invoke the necessity of returning to majority shareholders amounts paid on account of earlier overturned resolutions to increase capital as an argument in favor of adopting a new analogous resolution.
In the case discussed (Case No. I AGa 87/21), the company for many years achieved profits in the millions, designating them entirely to reserve capital instead of to dividends, while simultaneously making successive attempts to dilute the shares of minority shareholders through capital increases taken up exclusively by majority shareholders.
The Exit Question: When Restricting Share Sales Crosses the Line
As a rule, restricting the transferability of shares is permitted by law, but specific circumstances may also arise in which such an action can be challenged under Article 249 of the Code.
For example, the Court of Appeals in Katowice deemed contrary to good business practices, damaging to the company’s interests, and aimed at harming shareholders a resolution that changed the provisions of the charter through:
- extending the share-sale process (to more than three months);
- increasing the costs of sale (by at least three thousand złoty);
- transferring the authority to consent to a sale from the management board to the supervisory board, in which the majority consists of representatives of entities with interests contrary to those of the company (namely, the Cooperative);
- requiring payment of the entire price before obtaining consent to the sale while simultaneously lacking any regulation of the rules for returning this price in the event of refusal of consent.
The court also drew attention to the imprecision of the procedure—including the absence of any solution for situations in which several shareholders offer identical prices or when a purchaser wishes to acquire only part of the shares being offered—as well as to the risk that the company would lose its status as a medium-sized enterprise as a result of the concentration of shares in the hands of a single shareholder who has a representative on the supervisory board. (Court of Appeals in Katowice, Fifth Civil Division, ruling of September 3, 2021, Case No. V AGa 266/21.)
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.
