In its new judgment 27 Cdo 3620/2020, the Czech Supreme Court specified the conditions and limitations which apply to the qualified shareholder as they add items to the agenda of the general meeting.
A joint-stock company was held by two shareholders, M.P. and K.S., at 50% each; both held also positions on the board of directors. On 17 July 2018, M.P. in his capacity as a shareholder asked that the general meeting convene, and M.P. as a director accommodated the request and called the general meeting for 3 May 2018. The agenda of that meeting as originally shared comprised four items; the central matters were the election of the officers of the GM and the approval of an amendment to the manager agreements of the board members, adding an article about the board members’ personal data, broken down in items 1, 2, 3. However, on 27 April 2018, the company received a request from qualified shareholder M.P., asking to add another item to the agenda, entitled “Recall of board member K.S. on grounds of his breach of duties as a member of the board of directors”. This item only became known to shareholder K.S. (and a third board member) on the day on which the general meeting convened (i.e., 3 May 2018), and only shortly before the beginning of proceedings. The two other board members rejected the inclusion of the new item in the agenda, but board member M.P. went ahead nonetheless. With the vote of shareholder M.P., the general meeting passed a decision on the removal of shareholder K.S. from the board (shareholder K.S. did not exercise the vote). Shareholder K.S. proceeded to challenge the decision, arguing that the inclusion of the contested item on the agenda was in conflict with the time limits set out in Sec. 369 (2) (newly (3)) of the Corporations Act (in the wording in force until 31 December 2020).
The first-instance court (whose ruling was upheld in the appeals) took decision 8 Cmo 199/2019-144 as its point of departure, according to which a general meeting which is attended by all shareholders of the company cannot be nullified solely because the manner in which it was called does not conform to the law, especially since qualified shareholders are supposed to be able to ask for the addition of items to the agenda within fewer than five days before the GM convenes. The court found that the reasons for which the appellant had been removed from the management of the company had merit.
In its own judgment, the Supreme Court relied on Art. 6 of Directive 2007/36/EC of the European Parliament and the Council of 11 July 2007, on the exercise of certain rights of shareholders in listed companies (the “Directive”). Calling the general meeting should serve the exercise of shareholders’ right of participation in the general meeting – a right which crucially entails that the invitation to the GM satisfies the requirements as to proper form, content, and time limits. If the company fails to provide shareholders with sufficient information, then the latter are not in a position to properly and diligently prepare for the general meeting and are thus prevented from fully exercising their right to participation in the general meeting. While it is true that the Corporations Act allows qualified shareholders to ask for an extension of the agenda even after the GM has already been called, it would run counter to the objectives of the Directive if they could do so without any restrictions as to content or timing whatsoever. Because of this, the announcement of a supplemented agenda should be made within the time limits set in Sec. 369 (2) (newly (3)) of the Corporations Act. Given that in the case at hand, the statutory time limits were not observed and the new item was never formally added to the agenda, the general meeting could not pass a valid decision on that item. Consequently, the resolution on the recall of the appellant from the board of directors is unlawful.
Source:
Supreme Court judgment 27 Cdo 3620/2020