The Nuclear Option: Action for Expulsion of a Member from a Limited Liability Company
There comes a point in some companies when the dysfunction runs so deep that minor repairs won’t work. Partner expulsion won’t solve it. Selling shares isn’t possible. The company has reached a state where continuing its existence serves no rational purpose. Polish corporate law provides one final remedy: judicial dissolution. A partner or member of a company organ can petition the court to dissolve the company if achieving the company’s purpose has become impossible, or if other important reasons arising from the company’s internal relations have occurred.
This is the nuclear option. Once the court grants dissolution, the company enters liquidation. Assets get sold. Debts get paid. Whatever remains gets distributed to shareholders. The business ceases to exist. Given these stakes, courts approach dissolution petitions with caution, treating them as a last resort available only when all other remedies have been exhausted.
Dissolution as Last Resort
The demand for company dissolution is an ultimate remedy, and the right to it exists when permanent conflict among partners cannot be eliminated through application of other legal measures, particularly partner expulsion under Article 266 of the Commercial Companies Code or sale of the partner’s shares. [Court of Appeal in Poznań, First Civil Division, judgment of February 13, 2020, I AGa 340/18]
Therefore, situations where majority shareholders abuse their position at the expense of a minority shareholder don’t always constitute sufficient grounds for judicial dissolution. Existence of conflict connected with different visions for conducting the company’s business or strategy doesn’t necessarily have to result in immediate dissolution. Only impossibility of achieving the company’s purpose was recognized by the legislature as one of the essential reasons that can justify dissolving the company. This impossibility must concern the company’s entire activity according to the articles of association, must have permanent and objective character. [Supreme Court, Civil Chamber, judgment of April 16, 2019, II CSK 66/18]
The principle is straightforward: if you can fix the problem some other way, do that instead. Can the troublesome partner be expelled? Try expulsion first. Can you sell your shares and exit voluntarily? Pursue that avenue. Can the company’s governance structure be reformed to reduce conflict? Make the attempt. Only when these alternatives have been exhausted—or when they’re demonstrably futile—does dissolution become appropriate.
This hierarchy of remedies reflects a basic policy judgment. Companies are valuable. They employ people, serve customers, generate economic activity. Dissolving a functioning company destroys value, even when the shareholders hate each other. Courts will order destruction only when preservation has become impossible.
Normal Functioning Versus Accepted Functioning
One cannot equate normal and proper functioning of the company with conducting activity unaccepted by the majority of partners as a common goal, even if the company manages to achieve favorable financial results, but as a consequence of decisions made independently by only one partner. This means that the mere existence of the company as such, without consent of all partners and decision-making by one of them, isn’t the proper or normal manner of functioning. Even if these decisions are economically justified and bring profits, if they don’t result from agreement among partners, they aren’t consistent with the company’s fundamental principles. Cooperation and collaboration of partners are the foundation of every company’s operation. [Court of Appeal in Wrocław, First Civil Division, judgment of February 13, 2015, I ACa]
This passage articulates something crucial: profitability isn’t everything. A company can be making money—good money, even—and still be dysfunctional in a way that justifies dissolution. Imagine a limited liability company with two equal partners. One partner makes all the decisions unilaterally, ignoring the other. The decisions happen to be brilliant; the company thrives financially. But the ignored partner never consented to being sidelined. The company’s governance structure—which assumes partners will act jointly—has broken down.
The court’s point is that this isn’t “normal and proper functioning” even though it’s profitable. Corporate law doesn’t just protect economic interests; it protects governance rights. A partner’s right to participate in decision-making has value independent of whether unilateral decisions produce good results. Stripping that right—even while generating profits—violates the fundamental nature of the partnership relationship.
The subject of a lawsuit for company dissolution isn’t analysis of individual partners’ behaviors or establishing which vision of the company’s activity is more advantageous. The decisive factor is objective evaluation of the situation prevailing in the company, from the perspective of possibility of achieving the company’s goals and ensuring its proper functioning. [Court of Appeal in Wrocław, First Civil Division, judgment of February 13, 2015, I ACa]
Courts don’t conduct performance reviews of individual partners. They don’t decide whose business strategy is better. They ask a simpler question: Can this company achieve its stated purposes given its current circumstances? If yes, dissolution is inappropriate regardless of interpersonal drama. If no, dissolution may be warranted regardless of who’s to blame.
Conflict Among Partners—When Does It Justify Dissolution?
The provision contained in Article 271, Point 1 of the Commercial Companies Code shouldn’t be treated as a tool for a partner’s exit from the company in a situation where the partner loses interest—even for economic reasons—in participating in the company. The dissolution mode indicated by the legislature in this provision finds application only when the company is in crisis, legally comparable to impossibility of realizing the company’s goals.
Conflict among partners that can constitute grounds for dissolving the company cannot consist merely of the minority partner being outvoted, but rather that the company’s authorities, exploiting the majority of partners, limit the minority partner’s essential contractual or statutory rights, making that partner’s engagement in the company ineffective. Additionally—to justify dissolving the company in this mode, one must demonstrate that recovering these rights in another way is excessively complicated, and exit from the company or sale of the share in the company isn’t possible. [Supreme Court, Civil Chamber, judgment of January 12, 2018, II CSK 207/17]
Being outvoted isn’t oppression. That’s democracy. You proposed Strategy A, the majority preferred Strategy B, B wins. You’re disappointed but not wronged. This is how companies with multiple owners function.
But what if the majority uses its voting power to strip you of rights the law or articles of association guarantee? Suppose the articles give you the right to appoint one member of the management board, but the majority amends the articles to eliminate that right. Or suppose you’re statutorily entitled to examine company books, but the majority refuses access and votes to ratify this refusal. These aren’t cases of being outvoted on ordinary business decisions; these are cases of the majority using its power to nullify your fundamental membership rights.
Even then, dissolution isn’t automatic. You must also show that recovering these rights through other means is “excessively complicated”—litigation to enforce your rights would be protracted, uncertain, expensive—and that you can’t simply exit by selling your shares. If there’s a ready market for your shares at a fair price, sell and leave. Dissolution is reserved for situations where you’re trapped: your rights are being violated, legal remedies are impractical, and exit isn’t available.
Therefore, one must recognize that even deep and long-lasting conflict among partners in itself doesn’t yet determine impossibility of achieving the company’s purpose, and thus doesn’t constitute sufficient justification for a partner’s demand to dissolve the company. [Supreme Court, Civil Chamber, judgment of April 16, 2019, II CSK 66/18]
Conflict among partners can, however, become such sufficient prerequisite for dissolving the company when, for example, the company loses capacity to act due to permanent conflict between partners with equivalent voting power. Case law indicates that impossibility of achieving the company’s purpose, justifying its dissolution by court, can be caused by conflict existing among partners when disputes between two groups of partners with equivalent voting power prevent adoption of resolutions, impeding the company’s proper functioning. [Court of Appeal in Warsaw, Seventh Commercial Division, judgment of February 22, 2019, VII AGa 1086/18]
Here’s the paradigm case for dissolution based on partner conflict: deadlock. Two partners (or two groups of partners) each hold exactly fifty percent of shares. They disagree fundamentally about how to run the company. Every significant decision requires shareholder approval. Neither side can achieve the necessary majority. The company is frozen.
This isn’t about who’s right and who’s wrong. Maybe both sides have valid points. Maybe one side is clearly correct. Doesn’t matter. What matters is that the governance mechanism has failed. The company cannot make decisions. It cannot pivot in response to market changes, cannot pursue new opportunities, cannot respond to crises. It exists but cannot function. This is impossibility of achieving purpose in its clearest form.
One can count on positive resolution of a lawsuit for company dissolution when the partner has already exhausted other available—less far-reaching—forms of protecting rights, such as challenging resolutions or selling shares. It’s worth noting that to demonstrate that possibilities in this scope have been exhausted, the partner should seek purchasers of shares not only among other partners but also among third parties. [Supreme Court, Civil Chamber, judgment of January 12, 2018, II CSK 207/17]
This is the exhaustion requirement in practice. Before asking the court to dissolve the company, show you tried alternatives. Did you challenge improper resolutions? Did you attempt to sell your shares? Did you offer them to co-partners? Did you seek third-party buyers? Did you explore whether governance reforms could solve the problem?
The requirement makes sense. Dissolution destroys a going concern—not just for you but for all stakeholders. Employees lose jobs. Customers lose a supplier. Creditors face uncertainty about payment. Before imposing these costs, demonstrate that less destructive solutions won’t work.
One cannot automatically—without conducting proper evidentiary proceedings and establishing facts concerning the actual state of affairs in the company—exclude in advance the possibility that an essential reason for dissolving the company may be long-term behavior of majority partners toward a partner possessing minority shares, violating in flagrant manner the principle of equal treatment in the same circumstances and the principle of proportionality. [Court of Appeal in Szczecin, First Civil Division, judgment of September 12, 2012, I ACa 450/12]
Minority oppression can justify dissolution, but it requires proof. You can’t just allege that the majority is mistreating you. You have to establish it factually. What specific actions did they take? How do these actions violate equal-treatment principles? How are they disproportionate to legitimate business purposes? Courts will examine the evidence and decide.
This evidentiary burden is appropriate. “Oppression” is a serious charge. It implies not just disagreement but abuse of power. Making such a charge stick requires more than assertions; it requires proof.
Economic Difficulties and Company Purpose
In commercial transactions, the main purpose of a company’s functioning is generating profits through conducting business. Nevertheless, the court should evaluate possibility of achieving this purpose from a broader perspective, because temporary or even long-lasting economic difficulties, as long as they can be overcome, don’t justify dissolving the company. Essential is whether the reasons for the unfavorable state of affairs are somehow caused by partners or company organs.
Ultimately, every entrepreneur’s financial results depend only partially on personal efforts, because significant influence on them—under market-economy conditions—comes from external factors, which in some cases outright determine whether specific business activity conducted in a given place and time will bring loss or prove profitable. [Court of Appeal in Białystok, First Civil Division, judgment of January 25, 2018, I AGa 27/18]
Companies go through rough patches. Markets shift. Recessions happen. Competitors emerge. A company losing money this quarter or this year or even for several years doesn’t necessarily face impossibility of achieving its purpose. If the losses result from external market conditions—a downturn in the industry, new regulations, changed consumer preferences—rather than from partner conflict or mismanagement, dissolution is inappropriate. The solution is better business strategy, not liquidation.
But what if the losses stem from partner conflict? Suppose the partners are so busy fighting each other that they neglect the business. Customers defect. Key employees quit. Opportunities are missed. Here the economic difficulties aren’t just bad luck; they’re symptoms of the underlying dysfunction. This might justify dissolution—not because the company is losing money per se, but because partner conflict has made it impossible to reverse the losses.
Impossibility of Achieving Purpose—The Permanent and Objective Standard
Partners acquire a claim for company dissolution when achieving the company’s goals proves impossible, according to Article 271, Point 1 of the Commercial Companies Code. This legal norm refers to a state of permanent character—meaning non-transient—and simultaneously objective—meaning such that despite attempts at organizational-legal actions, it won’t change. In such a situation one can recognize that the company will be deprived of possibility of realizing goals contained in the articles of association. [Court of Appeal in Białystok, First Civil Division, judgment of July 7, 2017, I ACa 120/17]
The two-part test is crucial. Permanent means not temporary. A problem that might resolve itself given time doesn’t justify dissolution. The partners had a falling-out but might reconcile. The company faces a cash-flow crisis but has prospects for recovery. A key employee quit but can be replaced. These are transient difficulties, not permanent impossibility.
Objective means the impossibility doesn’t depend on any party’s subjective preferences or choices. It’s not “we could achieve the company’s purpose but one partner refuses to cooperate unless we adopt his preferred strategy.” That’s a subjective obstacle created by a partner’s choice. Objective impossibility means external circumstances or structural features of the situation make achievement impossible regardless of anyone’s preferences.
Example of objective impossibility: the company was formed to develop a specific piece of real estate, but the government has designated that land as a nature preserve where no development is permitted. The company’s purpose cannot be achieved. This is objective (doesn’t depend on anyone’s preferences) and permanent (the government isn’t changing its mind).
Example of subjective difficulty: two equal partners disagree about whether to expand into a new market. One thinks it’s a good opportunity; the other thinks it’s too risky. Neither will compromise. This creates deadlock, but it’s not objective impossibility of achieving the company’s purpose. The purpose (conducting profitable business in the company’s industry) remains achievable; the partners simply can’t agree on strategy.
The distinction isn’t always clean. Deadlock between equal partners can become objective impossibility if it’s truly permanent—neither will ever compromise, and there’s no mechanism for breaking the deadlock. At that point, subjective disagreement hardens into objective structural dysfunction.
Impossibility of achieving the company’s purpose can also result from a subjective aspect, when caused by internal conflicts within the company, especially by quarreling partners possessing equal numbers of shares. Such a situation prevents the company’s proper functioning and realization of intended goals. [Court of Appeal in Białystok, First Civil Division, judgment of December 19, 2014, I ACa 519/14]
So the court acknowledges that subjective factors—partner conflict—can create objective impossibility. The key is permanence. Temporary conflict doesn’t suffice. But when conflict becomes so entrenched that reconciliation is impossible, and the conflict prevents the company from functioning, it crosses into objective impossibility.
The Preservation Instinct
Throughout this case law runs a consistent theme: courts don’t want to dissolve companies. They’re looking for reasons to preserve rather than destroy. This judicial conservatism makes sense. Dissolution is irreversible. Once the company is liquidated, the assets sold, the employees dismissed, you can’t undo it. If the court guesses wrong—dissolves a company that might have recovered, or where the partners might have reconciled—the damage is permanent.
So courts impose high bars. Prove the conflict is permanent, not temporary. Prove you exhausted alternatives. Prove the company can’t achieve its purpose, not just that it’s having difficulties. Prove you can’t exit voluntarily. Show your work.
These requirements frustrate some litigants, particularly minority shareholders trapped in dysfunctional companies. From their perspective, the company is broken, continuing it serves no purpose except enriching or empowering the majority, and they want out. But the court’s job isn’t to facilitate convenient exits; it’s to order dissolution only when continuation truly serves no legitimate purpose.
The tension is inherent. Limited liability companies are creatures of contract—the articles of association—overlaid with statutory protections. When the contract breaks down, when partners who agreed to work together can no longer do so, how long should the law force them to remain bound? Too short a leash and you destroy viable companies over transient disputes. Too long and you trap people in dysfunctional relationships that benefit no one.
Polish law, as reflected in this case law, leans toward preservation. Dissolution is the nuclear option—available when necessary, but only when necessary, and courts define necessity narrowly. Whether this balance is right depends on your perspective. Ask a trapped minority shareholder and you’ll get one answer. Ask an employee of a dissolved company who just lost her job, or a creditor left with an uncertain claim in liquidation, and you’ll get another.
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.
