In a desicion on 17 December 2019, 27 787/ 2018 Civil Code, the Czech Supreme Court ruled on the question of the failure to annul the resolution of joint stock company’s general meeting.
Under Section 260 (2) of the Civil Code, it is clear than in cases where a joint stock company adopts a resolution that violates the law or i tis own statutes, two comulative statutory conditions must be met for a court to refrain from annulling that resolutions : (a) the breach of law or statutes must not have had serious legal consequences and (b) the failure to annul the general meeting’s resolution must serves interests of the company that are worthy of legal protection. The penalty of annulment of a general meeting resolution must be proportionate to the seriousness of the consequences of the brech of law, statutes or good manners. Moreover, it should reflect the purpose of the legislation on the annulment of a general meeting resolution. If the need to ensure the company’s inernal stability outweights the interests protected by Section 428 Zo. k., the court will not declare the resolution null and void.
In the case at hand, the purpose of the legislation on convening general meetings had been wholly fulfilled despite the fact the company had announced the meeting to it is shareholders by a means that differed partially from the one foreseen by it is statutes. Since the company only had two shareholders and delivered an invitation to them ( simultaneous with publication of the announcement on the company’s website) in due time, it provided these shareholders with even greater protection of their right to attend general meetings than was required by the statutes. In these circumstances, the failure to comply with the statutes ( as regards the formo f the invitation to the General Meeting) had no neative legal consequences, let alone any that were serious.
Section 260 o.Z. concerns the interests of a company that are worthy of legal protection and implicitly protects the stability of internal comapny relations. If special circumstances justify a corporate body (for example, a general meeting) to pass a resolution that breches legal regulations, the company’s statutes or good manners and this has no serious legal sonsequences, then it will always be in the company’s interests for the court to refrain from annuling the resolution.
JUDr. Gabriel Achour
T + 420 270 006 111
E gabriel.achour @ achourpartners.com
Gabriel Achour provides legal advice on M&A and real estate and construction matters including the structuring and implementation of investments in transport infrastructure, energy, residential development and large-scale shopping centre projects. Gabriel has extensive experience in financing, litigation and international arbitration. He has participated in many projects involving the creation of standard banking documentation for major Czech banks, including the preparation of comprehensive loan agreements and security documentation.