Łukasz Koziński of the Corporate Law practice group at Wardyński & Partners reviews the rules for conducting annual shareholder meetings.
Most capital companies in Poland have already held their annual meetings for the last financial year (the shareholders’ meeting for limited-liability companies – sp. z o.o. – or the general assembly of stockholders for joint-stock companies – SA). But now, while the meeting for last year is still fresh in mind, is a good time to think ahead toward future meetings and avoid problems and errors that have cropped up before.
The ordinary (i.e. annual) meeting for both types of companies should be held no later than 6 months after the end of the financial year. (In most companies the financial year is the same as the calendar year, in which case the regular meeting should be held by 30 June of the following year.)
Companies do not already remember that the law requires the shareholders to adopt specific resolutions at each regular meeting. Under the Commercial Companies Code, the agenda for the regular shareholders’ meeting or general assembly of stockholders must include:
- review and approval of the management board’s report on the company’s business and the financial report for the past financial year;
- issuance of a release to members of the company’s authorities for performance of their duties (this applies to all persons who held office during the year, even if they are no longer serving on the board when the resolution is adopted) – remembering that these resolutions must be adopted by secret ballot;
- adoption of a resolution on distribution of profit or coverage of loss (in the case of a limited-liability company, the articles of association may indicate in advance some other method for dividing the profit among the shareholders).
In order to approve these matters, the ordinary meeting need not be conducted physically; the resolutions may be adopted in writing. Other resolutions may also be adopted at the ordinary meeting as well.
Often the drafts of the minutes of the ordinary meeting submitted to the lawyers have been prepared on the basis of a template prepared for meetings in previous years. This approach is a frequent source of errors.
When preparing for the ordinary meeting of a limited-liability company, it is important to note that under Commercial Companies Code Art. 233, if the balance sheet prepared by the management board shows a loss exceeding the sum of reserve capital, supplementary capital and one-half of the share capital, the shareholders’ meeting must promptly adopt a resolution concerning the continued existence of the company. Art. 397, which applies to joint-stock companies, is worded similarly, except that it refers to a balance sheet showing a loss exceeding the sum of the reserve capital, supplementary capital, and one-third of the share capital. These provisions require that such a resolution be adopted every time the balance sheet is prepared, and the balance sheet is always prepared in connection with the close of the financial year. Thus it is necessary to check each year whether it is necessary to adopt a resolution on the continued existence of the company.
Before holding the ordinary meeting it always necessary to review the articles of association (sp. z o.o.) or statute (SA). These documents may contain additional guidelines concerning the resolutions that must be adopted at the annual meeting. One crucial item to check is the term of the members of the company authorities, which should always be extended if the same members are to continue to serve in this capacity and the company is to continue functioning properly.
Therefore, even in the case of apparently trivial matters, it is worthwhile checking with a lawyer, because following the same routine from previous years, or simple carelessness, can result in serious errors, which may require a major effort to fix and generate additional costs for the company which could have been avoided through proper care.