What does a shareholder have the right to know about a public company?
At a general meeting of a listed company, shareholders have a right to ask questions about the company’s affairs, but management is not required—or even allowed—to answer some of them.
Retail investors often complain that when they raise questions about corporate matters at general meetings of listed companies, management refuses to answer. So it is worth reviewing the types of information that a shareholder may demand from the authorities of a public company.
The right to information for shareholders in public companies is defined in the regulations governing the capital market. There are many detailed types of information that shareholders are entitled to know and the company authorities are required to provide.
In Poland, the informational requirements at public companies are dispersed among several legal acts. Chief among these are the Act on Public Offerings and Conditions for Introducing Financial Instruments into an Organised Trading System and on Public Companies dated 29 July 2005, the Act on Trading in Financial Instruments dated 29 July 2005, and the Commercial Companies Code. The rules set forth in the Code of Best Practice for Warsaw Stock Exchange Listed Companies also play an important role.
These regulations attempt to balance a shareholder’s right to information sufficient to make rational investment decisions against the company’s duty to protect confidential information concerning the company. In public companies, the rule is uniform investor access to company information, meaning that all shareholders and other market participants should have the opportunity to obtain the same information about the company’s operations, at the same time.
Art. 428 of the Commercial Companies Code requires the management board of a joint-stock company to provide information about the company during the general meeting of shareholders. Such information is to be provided, only upon request of a shareholder, if justified in order to assess the matters included on the agenda for the meeting. (In practice, the management boards of some companies interpret the connection between the question and the agenda very strictly and use this as a basis to refuse to answer questions.) The management board does not have a right to release information that could expose the company or an affiliate to a loss. The management board may also refuse to provide information if it could expose board members to criminal, civil or administrative liability.
The board may respond to questions directly, at the general meeting, or, if there are important reasons, in writing within two weeks. A response is considered to be provided when it is published on the company’s website. This is particularly important for public companies, which are required to maintain a website.
In the event of improper refusal to respond, the shareholder may seek a court order requiring the company authorities to respond. The Commercial Companies Code also enables shareholders to obtain information apart from the general meeting. Upon request of a shareholder, the management board may (but is not required to) provide information in writing if there are no grounds for refusal. When information is provided in this manner, the management board is required to report it at the next general meeting.
Shareholders of public companies are in a somewhat more favourable position than shareholders of non-listed joint-stock companies, because under law public companies are subject to extensive reporting requirements. Public companies are required to release confidential information (understood to mean information that could have a material impact on the share price), as well as current reports and periodic reports (quarterly, semi-annual and annual). A public company is also required to identify shareholders holding more than 5% of the votes.
The Act on Public Offerings is regarded as a specific regulation with respect to the Commercial Companies Code, and thus modifies the rights of shareholders in the code, in that sense that when a public company provides information requested by a shareholder, it must take into account the manner, scope and time for disclosure provided in the act.
Public companies that claim compliance with the Code of Best Practice for WSE Listed Companies are committed to building and maintaining proper investor relations. To this end, they should require members of the management board and supervisory board to be present at the general meeting in order to answer questions from shareholders.
Danuta Pajewska, partner in charge of the Capital Markets practice and the Financial Institutions practice at Wardyński & Partners