Change of shareholders in a limited-liability company
What document constitutes grounds for entry in the commercial register of sale of at least 10% of the shares in a limited-liability company? A legal adviser analyses a resolution on this issue by the Supreme Court of Poland.
In a ruling dated 6 June 2012 (Case No. III CZP 22/12), the Supreme Court addressed an issue that had not been resolved since entry into force of the Commercial Companies Code in 2001: In order to enter a change of shareholders in a limited-liability company holding 10% or more of the shares, is it sufficient to submit a list of shareholders, or may the registry court also require submission of the share sale agreement?
The regulations do not provide a clear answer to this question. The Commercial Companies Code itself does not address at all the basis for registering a change in shareholdings. However, there is a provision in the rules governing the authority of the management board which requires the management board to file a list of shareholders with the registry court after any change in the share ledger (Art. 188). There are also a few provisions referring to registration of a company and its sole shareholder (Art. 166 §§ 2 and 3, 167 §2 and 168), but they do not answer the question presented either.
The National Court Register Act contains further regulations concerning the obligations of the management board in connection with a change in shareholdings. Art. 38(8)(c) of the act provides for an obligation to register a change with respect to shareholders individually or jointly holding 10% or more of the shares in the company’s capital, stating the number and total par value of the shares held. The act also provides for a presumption of the correctness of information entered in the National Court Register (Art. 17), thus entitling the registry court to review not only whether the application meets legal requirements in terms of form and content (Art. 23(1)), but also whether the information identifying a natural person or other entity is correct, and whether the information submitted to the registry court is consistent with the actual status if the court has reasonable doubts in this respect (Art. 23(2)).
It was determining when the court has “reasonable doubts” in this respect that caused the most discrepancy in practice. Some courts (particularly in Warsaw) made entries solely on the basis of the new list of shareholders signed by the management board, while others always required submission of the share sale agreement, which significantly prolonged the registration procedure and entailed additional costs for the applicant.
In its resolution, the Supreme Court held that it cannot be determined a priori whether the entry of change in shareholder data may be made on the basis of a list of shareholders or other document. This must be determined on a case-by-case basis. The court pointed out that both a list of shareholders and a share sale agreement constitute evidence of a legal event, and the court has discretion in how it assesses such evidence (under Civil Procedure Code Art. 233 §1 in connection with Art. 13 §2). There is no regulation introducing any evidentiary limitations in the case of registration of changes in shareholders, apart from the requirement in Civil Procedure Code Art. 6944 to submit documents for entries in the National Court Register in the original or a certified copy.
The approach taken by the Supreme Court in its resolution appears the most reasonable and is also fully supported by the regulations. On the one hand, the court held that if the registry court does not have doubts with respect to the change in shareholdings covered by the application, it should make the entry on the basis of the list of shareholders enclosed with the application. However, the court stressed, the fact that it is permissible to make an entry on the basis of the list of shareholders does not deprive the registry court of the right to require submission of further documents in order to verify the accuracy of the data in the list of shareholders. The summons to submit further documents must be justified by the court’s doubts, and not by the type of document submitted by the applicant.
This ruling should help make the practice in this area more uniform, particularly by reducing the number of courts that automatically demand submission of a share sale agreement every time there is a change in the register concerning the shareholders.
However, bearing in mind the previous rulings by the registry courts, a practical tip may be offered to companies: Since transfer of shares may be proved by any document demonstrating that the transfer has occurred, in the case of more extensive agreements or agreements containing a confidentiality clause, it is worthwhile to prepare, in addition to the list of shareholders, a notarial excerpt reflecting the statements of the parties concerning their intention to transfer the rights to the shares. This can save time and money, and also permit the company and the shareholder to maintain the confidentiality of vital business matters.
Natalia Kobyłka, Corporate Law, Restructuring and Business-to-Business Contracts practices, Wardyński & Partners
The Polish version of this article was published on 13 December 2012 in Rzeczpospolita.