The Corporate Divorce – Action for Exclusion of a Shareholder
There’s a moment in the life of some companies when the partners realize they can no longer work together. Not because of a minor disagreement about strategy or a dispute over quarterly numbers, but because something fundamental has broken. Trust has evaporated. Communication has ceased. The business partnership—which once seemed like it might last forever—has become untenable.
Polish corporate law provides a remedy for this situation, though it’s neither simple nor painless: the action to expel a partner (known formally as pozew o wyłączenie wspólnika). Under Article 266, Section 1 of the Commercial Companies Code, a court may order a partner’s expulsion from a limited liability company “for important reasons” upon demand of all remaining partners. But what constitutes “important reasons”? The statute doesn’t say. This leaves courts to navigate between two competing risks: making it too easy to expel inconvenient partners, or making it so difficult that dysfunctional companies remain paralyzed.
What Counts as “Important Reasons”?
Case law has established that “important reasons” means circumstances under which the company’s operations in its current personal composition would be at minimum highly impeded, or altogether impossible.
The norm in Article 266, Section 1, which speaks of “important reasons” justifying a demand for partner expulsion, doesn’t limit the catalog of legally significant circumstances to those preventing the company’s organs from functioning. This means the court’s task is to conduct comprehensive evaluation of the petitioner’s allegations against the criteria of this specific provision. The court, deciding the case, analyzes the legally material circumstances presented by the requesting party based on this specific provision’s criteria (determining whether the presented circumstances fall within the concept of “important reason” according to the statute). It’s also essential to consider the essence of the company relationship. [Court of Appeal in Szczecin, First Civil Division, judgment of April 13, 2016, I ACa 51/16]
Such an “important reason” for expulsion under Article 266, Section 1 can consist of impossibility of conflict-free cooperation with the partner, resulting from interpersonal relations within the company causing rupture of bonds and loss of trust between that partner and the remaining partners, eliminating the chance for cooperation in striving to realize the company’s goals. [Court of Appeal in Warsaw, Fifth Civil Division, judgment of December 16, 2015, VI ACa 48/15]
But not everything qualifies. A motion for partner expulsion cannot be justified by trivial, insignificant reasons arising from minor misunderstandings or conflicts between shareholders—even if serious differences exist regarding the company’s functioning that don’t, however, negatively affect its operations. According to Article 266, Section 1, such personal animosities cannot constitute grounds for expelling a partner. The condition justifying expulsion is objective impossibility of continuing cooperation. It should be emphasized that the court must carefully examine whether the motion for partner expulsion and the cited “important reasons” aren’t merely a pretext for getting rid of someone inconvenient from the company.
Important reasons justifying partner expulsion cannot consist of, for example, a one-time absence of a partner from a shareholders’ meeting, particularly when that partner holds a number of shares that doesn’t prevent adoption of resolutions, or the fact of granting power of attorney to represent at the general meeting with voting rights. [Court of Appeal in Kraków, First Civil Division, judgment of July 22, 2021, I AGa 12/20]
On the other hand, failing to exercise the right to participate in the company’s shareholders’ meetings—when that partner’s absence at meetings results in impossibility of adopting any resolutions and thereby paralyzes the company’s operations—constitutes an important reason for expelling that partner from the company. [Court of Appeal in Warsaw, Fifth Civil Division, judgment of July 17, 2014, VI ACa 1604/13]
The distinction matters. One-time absence when the remaining shareholders have enough votes to conduct business? Not grounds for expulsion. Systematic absence that makes it impossible to achieve quorum and freezes all company operations? That’s different.
Who Can File—and Who Gets Sued
Partner expulsion can be sought only if the shares of partners demanding expulsion constitute more than half of the share capital. The articles of association may grant the right to file suit to a smaller number of partners, provided their shares constitute more than half of the share capital. In this case, all remaining partners should be defendants.
This requirement creates an interesting dynamic. You need majority support—measured by capital, not headcount—to expel someone. But you must have all the other partners on board. If you hold fifty-one percent and want to expel the forty-nine-percent holder, you can file. If you hold forty percent and your ally holds thirty percent, and you both want to expel the thirty-percent partner, you can’t—unless the articles of association specifically allow it.
And everyone who’s not joining the expulsion lawsuit becomes a defendant. This isn’t optional. If you’re trying to expel Partner A, and Partners B, C, and D exist but aren’t joining your lawsuit, they all get named as defendants alongside Partner A. The procedural logic is straightforward: they all have stakes in the outcome, and the court needs to hear from everyone.
Suspending the Partner Pending Trial
To secure the lawsuit, the court may—for important reasons—suspend the partner in exercising membership rights in the company.
Suspending a partner in the right to participate in shareholders’ meetings forces adoption of certain legal fictions regarding the company’s further functioning. The suspended partner must be treated as if not part of the company, meaning omitting that partner’s share when establishing required quorum for convening a meeting, conducting proceedings, adopting resolutions, or establishing capital thresholds authorizing exercise of minority rights. Resolutions adopted without the suspended partner’s participation remain legally valid, even if the secured proceeding for partner expulsion ends with dismissal of the expulsion lawsuit. Other interpretations could render the security decision senseless (particularly when the suspended partner’s absence would prevent adoption of any resolutions), which in turn would be impermissible. [Supreme Court, Civil Chamber, judgment of May 23, 2019, II CSK 307/18]
This is powerful medicine. Imagine being suspended from your own company—unable to vote, unable to attend meetings, treated legally as if you don’t exist—while litigation grinds forward over months or years. If the court ultimately dismisses the expulsion lawsuit, you return to full rights. But the resolutions adopted without you during the suspension remain valid. The company moved on. Deals were made. Strategic decisions were taken. You had no say. And there’s nothing you can do about it retroactively.
The Supreme Court’s reasoning is pragmatic: if suspended partners could later invalidate resolutions adopted in their absence, the suspension mechanism would be pointless. Companies would remain paralyzed during litigation, defeating the entire purpose of the procedural security. So the law accepts a harsh trade-off. The risk of injustice to the suspended partner (who might ultimately prevail) is outweighed by the need to keep companies functioning during litigation.
The Price of Expulsion
The expelled partner’s shares must be acquired by the partners or third parties. Acquiring shares, though different from selling shares, is an action most similar to a share-sale transaction conducted between seller and purchaser. The limited liability company itself isn’t party to actions aimed at expelling a partner. Money to cover the acquisition price doesn’t come from the company’s assets, and partner expulsion doesn’t in any way diminish the company’s assets. Acquiring the partner’s shares has the character of indirect acquisition of rights. The expelled partner’s declaration is replaced by court judgment regarding partner expulsion, and the court’s role—beyond establishing grounds for expelling the defendant partner—comes down to establishing the acquisition price. [Supreme Court, Civil Chamber, judgment of December 12, 2013, II CSK 121/13]
The court establishes the acquisition price based on actual value on the day the lawsuit was served. Actual value of shares means the price the partner would obtain on the market if selling shares to a third party. The obligation to establish acquisition price rests with the court deciding on partner expulsion, and the decision on this issue, arising from the very partner expulsion, doesn’t depend on demand by any proceeding participant, either regarding principles for establishing share acquisition price or regarding the amount of that price.
It’s also worth remembering that actual implementation of acquiring the expelled partner’s shares is a necessary condition for expulsion’s effectiveness and depends on the decision of remaining partners or third parties. In this legal construction, regardless of who acquires the expelled partner’s shares, relations between the new owner and expelled partner don’t affect the acquisition price automatically established by the court. [Supreme Court, Civil Chamber, judgment of December 12, 2013, II CSK 121/13]
This creates an unusual situation. The court orders the expulsion and sets a price—whether the parties like it or not. Neither side gets to negotiate. The court determines “actual value,” which means fair market value, based on what a willing buyer would pay a willing seller. But here’s the catch: there is no willing seller. The expelled partner is being forced out. And the remaining partners are being forced to buy.
How does the court determine fair market value? Typically through expert testimony—accountants, business valuators, financial analysts who examine the company’s books, assess its assets and liabilities, project its future earnings, compare it to similar companies. This isn’t a precise science. Two experts can look at the same company and reach different valuations. The court chooses.
The Deadline—and What Happens If It’s Missed
The court, deciding on expulsion, designates a deadline within which the expelled partner must be paid the acquisition price plus interest, calculated from the day the lawsuit was served. If during this time the amount wasn’t paid or deposited with the court, the expulsion judgment becomes ineffective. The effect of expiration of the deadline specified in the judgment expelling a partner for paying the acquisition price isn’t creation of a demandable claim for payment but ineffectiveness of the judgment regarding expulsion. [Court of Appeal in Szczecin, First Civil Division, judgment of September 2, 2014, I ACa 384/14]
Think about what this means. You win the lawsuit. The court orders the partner expelled. The court sets the price. But if you don’t pay within the deadline, the entire judgment becomes void. Not voidable—void. As if it never existed. The expelled partner walks right back in.
Why such a harsh rule? Because Polish corporate law treats partner expulsion as a species of forced sale. The expelled partner is being deprived of property rights—an ownership stake in the company. This deprivation is justified only if accompanied by fair compensation, actually paid. If the remaining partners won’t or can’t pay, they haven’t earned the right to expel.
The deadline also prevents the judgment from hanging over everyone indefinitely. Imagine winning an expulsion lawsuit but never quite getting around to paying. The expelled partner would exist in legal limbo—technically still a partner, but with a judgment ordering expulsion that might become effective at any moment once payment occurs. The fixed deadline eliminates this uncertainty. Either pay within the specified time, or the judgment dies.
Damages for Ineffective Expulsion
In case the expulsion judgment became ineffective for reasons specified above, the unsuccessfully expelled partner has the right to demand from the plaintiffs compensation for damage. Liability for damages encompasses all damage arising for the partner whose expulsion from the company became ineffective due to lack of payment of the price. Ineffectiveness of expulsion means the composition of partners didn’t ultimately change, and ownership rights remain unimpaired. The unsuccessfully expelled partner has no right to compensation for shares, and other partners or third parties have no right to acquire those shares. As a result, damage in such a case can arise from lost profits and losses caused by conducting the expulsion proceeding. [Supreme Court, Civil Chamber, judgment of January 24, 2019, II CSK 757/17]
This provides some protection against weaponization of the expulsion mechanism. Imagine you’re a minority partner. The majority decides they want you gone, but they don’t have the money to buy you out. They file an expulsion lawsuit anyway—perhaps hoping you’ll get fed up and leave voluntarily, perhaps trying to pressure you into accepting a lowball settlement, perhaps just being vindictive. They win the lawsuit but miss the payment deadline. The judgment becomes ineffective. You’re still a partner.
Now you can sue them for damages. What damages? Lost business opportunities you couldn’t pursue while the litigation was pending. Harm to your reputation from being publicly sued for expulsion. Legal fees (beyond what the court might have awarded in the underlying case). Emotional distress, if you can prove it caused concrete economic harm—lost income from being too stressed to work, medical expenses for stress-related illness.
The damages remedy doesn’t make you whole—litigation is always costly, always disruptive. But it creates a deterrent. File an expulsion lawsuit only if you’re serious. Only if you have the money to pay. Otherwise, you might end up not only failing to expel the partner but also writing a substantial check for damages.
The Wisdom and Folly of Corporate Divorce
Partner expulsion is corporate law’s answer to irreconcilable differences. Like divorce in family law, it acknowledges that sometimes relationships break down beyond repair, and forcing people to remain bound together serves no one’s interest.
But the analogy only goes so far. In divorce, the parties divide assets and go their separate ways. In partner expulsion, the expelled party receives money, but the remaining partners continue running a company that the expelled partner helped build. The expelled partner’s sweat equity, creative contributions, relationships with customers and suppliers—all that stays with the company, yet the departed partner receives only “fair market value” for the shares.
This asymmetry explains why courts scrutinize expulsion motions carefully. The standard isn’t “we don’t get along” or “I don’t like his business judgment.” It’s objective impossibility of cooperation—dysfunction so severe that the company cannot function. One partner systematically preventing quorum so no decisions can be made? That qualifies. One partner engaging in self-dealing or fraud? Almost certainly. Two partners who disagree about expansion strategy but can still conduct meetings and vote? Probably not enough.
The case law draws these distinctions carefully, conscious that expulsion is both necessary (to prevent one partner from holding the company hostage) and dangerous (creating risk of majority tyranny over minorities). The procedural safeguards—requiring all remaining partners to join the lawsuit, requiring actual payment of fair value, allowing damages for bad-faith expulsion—try to balance these competing concerns.
Whether the balance is right is another question. Critics argue the system gives majorities too much power to squeeze out minorities. Defenders respond that the fair-value requirement and damages remedy provide adequate protection. What’s clear is that partner expulsion, like corporate divorce generally, is expensive, time-consuming, and emotionally fraught. The best solution, as with marriage, is to choose your partners carefully in the first place.
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.
