Insignificant (apparent) decisions of the general meeting

Imagine that your company's general meeting approves a resolution that is considered non-existent by law. What does this mean for the managing director, shareholders, or partners? In this article, we will explain in clear terms in which cases general meeting decisions are null and void (apparent) and what the consequences are. You will also learn how to prevent such situations in order to avoid serious legal risks.

Author of the article: ARROWS (JUDr. Kateřina Müllerová, office@arws.cz, +420 245 007 740)

What does a null (apparent) resolution of a general meeting mean?

Nullity (also referred to as apparent nullity) of a resolution of a general meeting means that such a decision is regarded as if it had never been adopted. In other words, it does not legally exist and has no effect. This is different from the "normal" invalidity of a resolution – an invalid resolution also contravenes the law or a contract, but it must be challenged in court by an authorized person (typically a partner) in a timely manner, and the court will revoke it. With a null resolution, nothing like this is necessary: it is automatically ineffective by law.

• Section 45 of the Business Corporations Act (ZOK) regulates null and void decisions of company bodies. It stipulates that in certain cases, a decision is regarded as not adopted (i.e., it is apparent). Null and void resolutions do not need to be challenged by an action, and the law does not set any limitation period for them. The court takes nullity into account ex officio (i.e., even without a motion).

Consequence of nullity: Such a decision has no legal effect from the outset, as if it had never been made. It is not capable of establishing or changing any rights or obligations. If, nevertheless, a null resolution is acted upon, this constitutes an act without legal basis—for example, payments made on the basis of an apparent resolution must be returned because they constitute unjust enrichment. At the same time, if a resolution is not adopted, the legal relationships remain as if no resolution had been adopted (the situation prior to the resolution persists).

The following sections describe typical situations in which a general meeting resolution may be null and void, including practical examples, consequences for the company and individuals, and recommendations on how to avoid such problems.

Decision on the distribution of profits in violation of accounting rules

Profit distribution in commercial corporations is subject to strict legal rules known as balance sheet tests. The general meeting may decide to distribute a share of profits only if the financial results and the legal framework (in particular Section 34 of the Business Corporations Act) allow it. For example, a decision to distribute profits on the basis of financial statements that are no longer current (older than six months) or in an amount that would jeopardize the company's capital is contrary to the law.

Such a resolution of the general meeting has no legal effect – it is effectively considered null and void. The Supreme Court of the Czech Republic has clearly stated that a decision of the general meeting on the distribution of profits based on invalid accounting documents is ineffective from the outset, without it being necessary to sue for its invalidity. Why so strict? The law primarily protects the company's creditors, who would be disadvantaged by the illegal distribution of profits.

Practical example: In 2025, the general meeting of XYZ, s.r.o. approves the distribution of profits for 2024, but uses the 2023 financial statements (as the more recent ones are not yet available). This decision is invalid from the outset – according to the court, "a decision of the general meeting on the distribution of profits based on outdated financial statements is automatically without legal effect, without it being necessary to invoke its invalidity." If the company actually paid out the profits on this basis, unjust enrichment would arise on the part of the shareholders who received the money. The company could demand that they return the amounts paid out.

Risks for executives and shareholders

For executives (statutory bodies), the implementation of such an unlawful resolution poses a significant liability risk. They are acting contrary to the duty of care of a prudent manager – the Supreme Court ruled that if the managing directors agreed to the payment of profits contrary to the law, they breached their duty of care. As a result, they may be personally liable for damages to the company or even to creditors (e.g., if the illegal payment leads to the company's bankruptcy).

It is tempting for partners/shareholders to have "extra" profits paid out, but they must take into account that they may lose the money at any time. If the new management or insolvency administrator finds that the decision was void, the paid-out shares will be recovered as performance without legal grounds. This may occur even after a long period of time, as apparent validity has no time limit – even years later, it can be argued that the resolution was non-existent.

How to prevent similar problems? As a statutory representative, you should carefully follow the accounting rules. Have your financial statements prepared in a timely manner and check with experts (lawyers, economists) that the intended distribution of profits is in accordance with the law. If you are unsure, it is better to postpone the distribution or distribute only part of the profits. The health of the company and legal certainty are always more important than the immediate benefit of the shareholders.

Decisions made by persons without voting rights

For a resolution of the general meeting to be valid, it must be approved by the persons authorized to do so, i.e., the shareholders or partners (or their duly authorized representatives with power of attorney). If someone who does not have the necessary rights participates in the decision-making process, the resulting resolution may be null and void.

A typical example is a situation where a decision of the sole shareholder is made by a person who is not actually a shareholder (does not have a share or whose membership has expired). Czech case law considers such conduct to be a null and void legal act – the decision was made by someone who was not authorized to do so and therefore has no legal effect. In practice, this can happen, for example, after a transfer of shares: the original owner no longer has voting rights but nevertheless attempts to "decide" as the sole shareholder.

Another example: An unauthorized person posing as a shareholder's representative attends the general meeting. However, they do not have a valid power of attorney. If a resolution were adopted with their "votes" (e.g., on a capital increase or a change in management), this would constitute a serious defect. In extreme cases—where these votes were decisive—the court could find the resolution null and void because the lack of voting authority means that the necessary majority was not legitimately achieved. At the very least, such a resolution would be contestable on the grounds of invalidity.

What are the consequences?

If a resolution is adopted by unauthorized persons, it is regarded as if it had not been adopted at all. Any subsequent action based on such a "decision" is therefore invalid. For example, the general meeting of a limited liability company dismisses the managing director and appoints a new one, but it turns out that a person who was no longer a partner voted. The newly appointed managing director does not actually take office—the company continues to have the original (unrevoked) managing director. This can lead to chaotic situations: two people may consider themselves authorized to act on behalf of the company, contracts concluded by the "new" managing director are questionable, etc. From a legal point of view, however, the matter is not complicated: since the dismissal and appointment were null and void, the situation prior to the resolution applies (i.e., the old managing director remains in charge).

Risks for management and shareholders: If the company's management relies on a null and void resolution, it exposes the company to legal uncertainty. Disputes may arise over the validity of contracts or acts performed on the basis of a non-existent decision. For shareholders, this means a possible prolongation of conflicts – for example, in shareholder disputes, the opposing party may argue that a certain decision of the general meeting is not valid at all, and the dispute becomes more complicated. In the worst case, the invalid dismissal of a statutory representative may even lead to criminal consequences if an unauthorized person takes any action on behalf of the company (e.g., infringement of third-party rights, etc.).

Prevention: Ensure that persons are properly identified and verified at the general meeting. As a company, ensure that only shareholders/partners registered in the register (shareholder register, list of partners) or their verifiably authorized representatives are admitted to the meeting. Require the presentation of powers of attorney and verify their validity. If there has been a change in the ownership of shares or stocks, make sure that it is properly recorded and taken into account when convening the general meeting. If in doubt, consult a lawyer before allowing a person with an unclear mandate to vote. This will prevent someone from later challenging the entire decision on the grounds of "unauthorized voting."

Other situations contrary to the law and mandatory provisions

Other fundamental defects in the decisions of the general meeting may also lead to nullity, in particular if they contravene mandatory provisions of the law or completely exceed the powers of the general meeting. Here are a few other typical cases:

• Decisions outside the scope of the general meeting (ultra vires): The general meeting may only decide on matters entrusted to it by law or the articles of association (statutes). If it appropriates decision-making on a matter that does not belong to it, such a resolution is null and void. For example, the general meeting cannot directly decide on the commercial management of the company – typically, it cannot approve specific commercial contracts or forgive debts to another company, as this falls within the competence of the statutory body. Example: The general meeting of Alfa s.r.o. decides to conclude a contract with Beta s.r.o. for regular supplies of materials for its business. Such a resolution is apparent because it does not fall within the competence of the general meeting – the general meeting is not responsible for the business management of the company.

• Decisions contrary to mandatory rules (prohibited by law): Any resolution by which a company attempts to circumvent the law or violate mandatory provisions is extremely risky. Some such resolutions are directly void by law. An example is an illegal amendment to the articles of association/statutes: the general meeting cannot validly adopt a provision that contravenes the law, even if everyone agrees to it. Example: The general meeting decides to amend the articles of association so that no future decisions need to take the form of a notarial deed, thereby seeking to exclude the application of Section 172(1) of the Business Corporations Act (which requires a notarial deed for amendments to the founding document). Such a resolution is only apparent and the amendment to the articles of association has not taken place. The company must therefore continue to comply with the legal requirement for a notarial deed for decisions specified by law – the attempt by the general meeting to change this by its "own rule" is legally null and void.

• Another situation may arise if the legal form of the decision is not complied with. The law stipulates that certain resolutions (e.g., amendment of the articles of association, increase in share capital, etc.) must be certified by a public document – a notarial deed. If the decision is not drawn up by a notary within 60 days of its adoption, it has no legal effect. In other words, after the deadline has expired, it is regarded as if it had not been adopted. This is a very practical case of apparent validity: if you forget to have a notary certify the resolution, the entire decision will lapse. In practice, we encounter this, for example, in companies that approve amendments to their articles of association but omit the notarial deed – the amendment then does not take effect and is not entered in the commercial register.

• Vague or incomprehensible resolutions, impossible performance: The decisions of the general meeting must be clear and feasible. If it is formulated in such a way that its content cannot be determined or understood, or if it would commit to objectively impossible performance, it is considered not adopted. For example, if the resolution reads: "The general meeting approves that the board of directors will ensure the highest possible profit in the future and guarantee stable dividends to shareholders," this is such a vague and unenforceable decision that it would probably be considered apparent (it is not clear what specifically the board of directors must do). Similarly, a resolution imposing something physically or legally impossible (e.g., "the general meeting instructs the managing director to double the share capital from its own resources by tomorrow" – which is impossible) will have no legal effect. This is expressly confirmed in the law: if the content of a decision is vague, incomprehensible, or imposes something impossible, it shall be regarded as not having been adopted.

All of the above cases have in common that the resolution suffers from such a serious defect that it is not legally effective from the outset. The company is therefore not bound by it, and even the court must treat it as if it did not exist. This does not mean, however, that disputes cannot arise in real life – sometimes it is necessary to have the nullity formally confirmed by a court (e.g., by a declaratory action), especially if there is uncertainty among the parties as to whether the resolution is apparent. To be on the safe side, it is therefore better to prevent problematic situations.

Practical recommendations for preventing nullity of resolutions

As entrepreneurs and statutory representatives, you certainly want the decisions of your general meeting to stand and not be challenged by anyone. Below are some proven tips on how to minimize the risk of apparent (null) resolutions:

• Check for compliance with the law: Check each draft resolution in advance for compliance with the law and the articles of association. Ask yourself: Does the general meeting have the power to make such a decision? Does the proposal conflict with any mandatory provisions (e.g., rules for the distribution of profits, rules for the protection of capital, prohibitions in the law)? If you are unsure, consult a lawyer or have a legal audit of the proposed resolutions carried out.

• Strict compliance with formal requirements: Ensure that the general meeting is convened correctly (compliance with deadlines, agenda, form of invitations) – this will prevent "ordinary" invalidity. To avoid apparent invalidity, it is particularly important to comply with the required form of the resolution. For matters requiring a notarial deed, arrange a notary in good time and observe the 60-day deadline for drawing up the deed. Do not try to circumvent the legal form – saving on notary fees is not worth it if the entire resolution becomes ineffective as a result.

• Clear and comprehensible wording: Formulate draft resolutions specifically, unambiguously, and positively. Avoid vague wording or conditional phrases that may not be understood. Anyone who reads the minutes of the general meeting must know exactly what was decided. If in doubt, divide the matter into several separate resolutions or add details to the explanatory report.

• Respect the division of powers: As a majority shareholder, you may feel that you "can decide everything," but the law sets limits. Do not try to use the general meeting to resolve operational business issues or usurp the powers of the board of directors/managing directors. Instead of directly interfering in the management of the company, use other tools – for example, you can make recommendations or express your opinion to the management, or change the composition of the bodies, but do not vote on specific commercial contracts or debt forgiveness unless permitted by law. Internal compliance and training will help you understand the scope of the general meeting's powers.

• Professional recording and assistance: Ensure that you have a high-quality minute-taker (or a notary, if necessary) at the general meeting. A lawyer present at the general meeting can point out any errors or illegal proposals for resolutions in real time and prevent them from being adopted. Prevention is always easier than resolving disputes later.

• Use of protest and legal defense: If you are a minority shareholder and the majority pushes through a resolution that you consider unlawful, raise a protest in the minutes. A protest is a prerequisite for subsequently challenging the validity of the resolution. Although a protest is not a prerequisite for apparent resolutions, it will help you document your disagreement. You can then file a lawsuit to determine nullity so that the court formally declares that the resolution is non-existent – we recommend this especially if the other party claims the opposite and takes controversial steps in accordance with the resolution.

As potential clients of our law firm, you should know that the validity of a general meeting resolution is a fundamental prerequisite for legal certainty in a company. Null and void decisions can cause serious complications, but with a careful approach, they can be avoided. We will be happy to help you set up processes to ensure that all decisions made by your bodies are secure, lawful, and valid. If you are unsure, do not hesitate to contact us – prevention and timely legal advice are the best defense against seemingly valid resolutions and their consequences. Your business deserves a solid and valid foundation for decision-making.