Review of resolutions of the general meeting for defects

The validity check of resolutions of the general meeting in register proceedings, and the consequences of a missing notarial record in those cases in which the law requires certification of the GM resolution.

Pursuant to the (since repealed) Commercial Code, courts had the power to review the validity of resolutions by the general meeting (“GM”) within the procedure for approving and making entries in the Commercial Register (“register proceedings”) on the basis of such resolutions (Sec. 131 (8) of the Commercial Code).

The new rules, which were passed as a part of the comprehensive recodification of Czech private law (in force since 1 January 2014) – i.e., for our purposes, the Corporations Act and the Act on public registers of legal entities and natural persons – include no provisions which would correspond to former Sec. 131 (8). In the light of this fact, the Czech Supreme Court ruled that the validity of GM resolutions may not be reviewed within register proceedings. In other words, a resolution by the members of a limited liability company, say, may only be challenged as invalid following the procedure set out in Sec. 191 of the Corporations Act, within the set time period and citing either the resolution’s conflict with the law, or its incompatibility with the company’s founding charter (e.g. because of insufficient vote in favor of the resolution), or because of its violation of public morals.

A different, special set of rules applies to particularly grave defects: where those are present, the resolution is regarded as if it had never been made, i.e., as null and void. This applies in particular to resolutions which change the founding charter of the company such that its contents come into conflict with mandatory provisions of the law (Sec. 45 of the Corporations Act in conjunction with Sec. 245 of the Civil Code). In such a case, the register court must review the defects of the resolution ex officio.

The Supreme Court decision further states that in those cases in which the law requires a notarial record to certify the GM resolution, the notarial record must be presented to the register court, or else the motion for entry will be rejected. However, the Supreme Court failed to state clearly whether the non-existence of such notarial record has impact on the valid existence of the GM resolution.

A literal interpretation of the decision would allow for the conclusion that a GM resolution should be considered validly passed even in the absence of the notarial record, unless and until it is being challenged within the context of a procedure pursuant to Sec. 191 of the Corporations Act, but I believe it would be wrong to do so. The law demands such certification via a notarial record only for those GM resolutions to which it attributes fundamental importance. To construe the Supreme Court’s ruling literally would make it easy to circumvent the certification requirement, which cannot have been the lawmaker’s intention. I do believe that we will see a future Supreme Court decision which clarifies that such resolutions, too, are to be regarded as if they had never been passed (or which stipulates similar consequences).

Source: Decision 29 Cdo 1104/2016 by the Czech Supreme Court of 22 February 2017, Commercial Code (Act No. 513/1991 Coll.), Corporations Act (Act No. 90/2012 Coll.), Act No. 304/2013 Coll., on public registers of legal entities and natural persons, Civil Code (Act No. 89/2012 Coll.)


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