Sooner or later, everyone makes a spontaneous, ill-considered decision. An impulse purchase of a chocolate bar at the checkout probably does little harm. But becoming a minority shareholder in a Polish limited liability company can have severe consequences lasting for years.
When do we most often become minority shareholders in a Polish limited liability company? In practice, two situations seem most common. First, a minority holding is often acquired in pursuit of passive income: the shareholder contributes assets but neither intends nor is expected to participate personally in running the business. The second, particularly important case involves companies with several shareholders holding equal or different numbers of shares, each individually, or all but one, being minority holders.
In our business environment, shareholders often fail to consider cooperation terms in detail before forming a company, focusing instead on the specific objective that prompted their joint venture. Rules for a failure to reach consensus or an exit necessitated by other shareholders' dishonesty are almost always overlooked. This approach causes many disappointments and problems when their paths begin to diverge for various reasons.
In practice, the Commercial Companies Code alone provides minority shareholders with no effective protection if the majority chooses to act unethically. If a conflict escalates or shareholders prove dishonest, they can easily exclude the minority from any management influence and permanently stop distributing profits, rendering the minority holding effectively worthless. In a typical case, the only meaningful right remaining is individual inspection: examining company documents and requesting explanations from the board. Even exercising that right in practice depends on the board's goodwill. Under Article 271 point 1 KSH, a court may dissolve the company at a shareholder's request for 'important reasons arising from the company's relationships', but proving such reasons on the basis of harm to a minority shareholder is extremely difficult, if not impossible.
The Warsaw Court of Appeal held on 17 February 2015, I ACa 1214/14, that a conflict between shareholders alone does not satisfy Article 271 KSH's conditions for dissolution. Dissolving a company capable of operating should be exceptional. On 13 February 2015, the Wrocław Court of Appeal, I ACa 1608/14, observed that personal conflict constitutes an important ground for dissolution only where proper or normal functioning becomes impossible. The Szczecin Court of Appeal, I ACa 348/14, and other Polish appellate courts took similar positions. Where a company employs staff and operates normally with customers and the market despite a serious minority-shareholder dispute, it is understandable that a court would approach a claim to dissolve it with considerable caution.
More on company law and the role of a shareholder in a Polish limited liability company:
Michał Górecki, Polish attorney-at-law
m.górecki@i-dgp.com
