Danuta Pajewska

Share transactions and the right to vote the shares of a public company

It may happen that a shareholder of a public company is not entitled to vote its shares at the company’s general meeting.

Transactions involving the purchase and sale of shares in companies listed on the Warsaw Stock Exchange may be conducted at trading sessions by submitting buy and sell orders through a brokerage, as well as directly between the buyer and seller. In the latter case, both parties must maintain a securities account and notify their brokers of the transaction so that as a result of the transaction the shares are moved from the seller’s account to the buyer’s account. In the case of transactions at the exchange the shares are automatically moved from one account to the other.

It should be borne in mind, however, that the acquisition of shares does not always convey the right to vote the shares. The Commercial Companies Code provides that only persons who were shareholders of the company 16 days before the date of the general meeting (the registration date for participation at the general meeting) are entitled to participate in the general meeting of a public company.

Therefore if the share transaction occurred after this date, and the seller had already registered its participation at the meeting, the seller will be entitled to vote the shares it has sold even though it is no longer a shareholder at the time of the general meeting. Therefore the buyer of the shares should remember that if it wishes to participate in the meeting and vote the shares it has purchased, it should obtain a proxy from the seller and an assurance that the seller will not appear at the general meeting and attempt to vote the shares, and will not revoke the proxy.

Significantly, such proxy may be obtained only in a transaction in which the buyer and seller are known to one another. It will not be possible to obtain a proxy if the transaction is carried out during a trading session at the stock exchange, when the buyer and seller are not identified.

Danuta Pajewska, Capital Markets and Financial Institutions practices, Wardyński & Partners