From when does the time limit for filing a petition for invalidation of a resolution of the General Meeting start?
Author of the article: Mgr. Pavel Čech, ARROWS (office@arws.cz, +420 245 007 740)
In its recent decision of 13 November 2024, Case No. 27 Cdo 2064/2023, the Supreme Court has clarified important issues concerning the time limit for filing a motion to invalidate a resolution of a general meeting, specifically in the context of limited liability companies. This issue is of fundamental importance for the legal certainty of shareholders and for the stability of legal relations in the company. In this article, we will look at the key provisions and the interpretation adopted by the Supreme Court (regarding the legislation effective until 31 December 2020).
Time limits for filing a petition
According to the Companies Act (Article 191(1)), shareholders, managing directors, members of the supervisory board and liquidators have the right to file a motion to invalidate a resolution of the general meeting if they consider the resolution to be illegal or contrary to the articles of association or good morals. However, this motion must be filed within the time limits set, which are protective and ensure the legal certainty of the company.
In this respect, the law distinguishes two key time limits:
- The three-month time limit: This time limit begins to run from the moment the person entitled to the resolution knew or could have known of the resolution adopted. If the time limit expires, the right to file a petition is extinguished.
- One-year time limit: This time limit is absolute and runs from the time the order is made. If the time limit expires, the right to bring an action shall be extinguished.
Subjective and objective determination of the beginning of the period
An important interpretation given by the Supreme Court is the combination of subjective and objective determination of the start of the three-month period. The subjective moment refers to the moment when the person entitled actually became aware of the adoption of the order. The objective moment is based on the assumption that the person could have known of the order if he had exercised ordinary care.
Absence of a shareholder from a general meeting
An important aspect of the decision concerns shareholders who, of their own volition and for reasons of their own, do not attend the general meeting, even though they have been duly and timely invited. In the present case, the shareholder (the appellant) was duly and timely invited to the general meeting.
The Supreme Court emphasised that the shareholder in this case had an objective opportunity to learn about the proposed resolutions from the invitation to the general meeting. The fact that the shareholder (the appellant) did not collect the invitation to the general meeting cannot change that. Such a fact can in no way be to the detriment of the company.
In the above circumstances, according to the Supreme Court, the three-month limitation period begins to run, in principle, on the day of the general meeting. It does not begin only later, when the shareholder is actually informed of the resolutions adopted.
The Supreme Court aptly stated, inter alia: 'A shareholder who does not exercise his right to participate in the general meeting without further delay cannot be in a better position (in relation to the right to invoke the invalidity of a resolution of the general meeting) than a shareholder who duly and honestly participates in the general meeting.'
This interpretation underlines the importance of the loyalty and diligence of shareholders in obtaining timely information about the company's proceedings. It also ensures the stability and predictability of the legal relationship between the shareholders and the company.
If the time limit for filing a petition for nullity were extended due to a shareholder's inactivity (failure to receive an invitation, arbitrary non-attendance at a general meeting), this would lead, among other things, to a destabilization of the internal relations of companies.
Pre-emption of the right to file a petition
If a petition for annulment of the resolution is not filed within the time limit, the right of the shareholder or other persons entitled thereto is extinguished. As indicated, the validity of a resolution can no longer be reviewed if the three-month or one-year time limit has expired. This principle ensures legal certainty and protects the stability of relations within the company. Thus, the legal system emphasises that shareholders and other beneficiaries should exercise their right to review the resolution in a timely manner.
Conclusion and state of play under current law
The Supreme Court's decision provides a clear and practical interpretation of the limitation periods for filing a petition to invalidate a resolution of a general meeting. This interpretation strengthens the legal certainty of the shareholders and the company and ensures the protection of the rights of all persons concerned while respecting the stability of the company's internal relations. The decision discourages the shareholders from being lax and reticent in the performance of their duties.
For the sake of completeness, it should be added that, under the current legal regulation, a shareholder (the appellant) would not have the right to challenge the invalidity of a resolution of the general meeting, presumably for another reason, namely for failure to lodge a protest, when he could have attended the general meeting. However, this was not the subject of the evidence, since the courts in this case dealt in particular with the expiry of the limitation period and its effects on the appellant's claim.