After discussing the powers of management boards and supervisory boards in limited liability companies, it's time to discuss another body through which companies operate. The shareholders' meeting, which will be discussed in today's post in our Compliance series, is the governing body of a limited liability company, authorized to make strategic decisions related to the company's operations.

The shareholders' meeting is a mandatory body of the company, formed by all shareholders. Owners' participation in the meeting should be considered a right (not an obligation), and shareholders may also exercise their rights within this body through their representatives. Depending on the subject matter, shareholders' meetings are divided into extraordinary and ordinary .

An extraordinary shareholders’ meeting is convened at any time, as needed, in the cases specified in the Commercial Companies Code or the company agreement, and when the bodies or persons authorized to convene meetings deem it advisable.

The annual general meeting of shareholders should be held within six months after the end of each financial year (we have described the company's financial year-end and related reporting obligations in detail in Compliance #3 ). The annual general meeting therefore addresses matters related to the consideration and approval of the management board's report on the company's operations and financial statements, the adoption of a resolution on the distribution of profit or coverage of losses, and the granting of discharge to members of the company's governing bodies for the performance of their duties.

The shareholders' meeting is convened by the management board via registered mail or courier, sent at least two weeks prior to the shareholders' meeting. Legislators have also introduced the option of notifying shareholders by email to the electronic mailing address if the shareholder has previously consented to this in writing, providing the address to which the notification should be sent. Furthermore, resolutions may be adopted by the shareholders' meeting even without a formal convening, provided the entire share capital is represented and no one present objects to the meeting being held or to the inclusion of specific items on the agenda. The importance of complying with all formal requirements for convening a shareholders' meeting is demonstrated by the fact that if the meeting is improperly convened or a resolution not included on the agenda is adopted, a shareholder may bring an action to have such resolutions set aside or declared invalid.

Powers of the shareholders' meeting

The scope of the shareholders' meeting's powers is so broad and crucial to the company and its shareholders that it can be argued that it is the most important body in the company . This stems not only from the fact that, as a legislative body, the shareholders' meeting consents to the management board's most important actions, but also from its authority to appoint and dismiss members of other company bodies.

The powers of the shareholders' meeting can be divided into those that are unique to the shareholders' meeting and those that can be delegated to other bodies. These powers may derive from legal provisions (in particular, the Commercial Companies Code), the company's articles of association, or the meeting's independent authority to accept a given matter for consideration.

Among the powers that fall within the exclusive competence of the shareholders’ meeting, the following should be mentioned:

consideration and approval of the management board’s report on the company’s activities, the financial statements for the previous financial year and granting discharge to members of the company’s bodies for the performance of their duties;
a decision regarding claims for compensation for damage caused during the formation of the company or during the exercise of management or supervision;
sale and lease of an enterprise or its organised part and the establishment of limited property rights thereon;
acquisition and disposal of real estate, perpetual usufruct or share in real estate, unless the company agreement provides otherwise;
refund of subsidies;
merger, division and transformation of the company.

There are also powers that are statutorily vested in the shareholders' meeting, but which can be delegated to other bodies through appropriate contractual provisions. For example, the supervisory board may be granted the authority to appoint or dismiss members of the management board based on the company's articles of association. Some of the shareholders' meeting's powers may be granted to this body solely on the basis of the company's articles of association (e.g., consent to the company performing a specific action) or through its own initiative (e.g., obligating the company to perform a specific action).

In summary, the shareholders' meeting is a body essential to the proper functioning of a company. Due to its key role and the broad powers that can be granted to this body, special attention should be paid to its powers. When executing transactions, the articles of association of our business partners should be audited for any unfavorable provisions regarding the powers of the shareholders' meeting. When formulating the powers of this body in one's own business, it is important to grant powers that reflect the business profile and the actual needs of the company. Incorrect, imprecise, or overly extensive powers granted to this body can lead to the paralysis of the company's operations .

This article is for informational purposes only and does not constitute legal advice.

Legal status as of May 11, 2022

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