Company must be notified of acquisition of shares
The transaction of acquiring shares in a limited-liability company typically ends upon signing of the share sale agreement, but the acquirer’s duties do not end there.
If the acquirer does not notify the company, it may be barred from participating in the shareholders meeting.
Scant attention is often paid to post-closing actions by the acquirer of shares. That is a big mistake. The acquirer must be extremely careful to carry out all formalities associated with acquisition of shares in a limited-liability company.
Art. 187 and Art. 6 §§ 1 and 2 of the Polish Commercial Companies Code are of vital importance in this respect.
Under Art. 187, the interested parties must notify the company of transfer of shares, a portion of shares or a fractional interest in shares, presenting evidence of the transfer. The transfer is effective as against the company from the time the company receives the notice together with evidence of the transaction. This means that even though the shareholder has acquired the shares, it may not participate in the shareholders meeting until the relevant documentation has been filed with the company. The same applies to pledge or usufruct of shares.
Additionally, under Art. 6 §§ 1 and 3, within two weeks after a company obtains a dominant position in another company, the dominant company is required to notify the subsidiary that it has obtained a dominant position. Failure to comply with this obligation results in suspension of the right to vote the shares held by the dominant company representing more than 33% of the share capital of the subsidiary.
If the shareholders meeting adopts a resolution in violation of this notification requirement, the resolution will be regarded as invalid unless quorum requirements were met and the resolution obtained a majority of votes excluding the invalid votes.
The shareholder should also apply to the management board for entry of the transfer in the company’s share register and the National Court Register.
Although the transaction is typically closed upon signing of the share sale agreement, these actions to be taken following the transfer are equally important and may have serious consequences for the operations of the company.
Łukasz Koziński, Corporate Law practice, Wardyński & Partners