When can a resolution on surcharges be detrimental to a minority shareholder

In the limited liability company, the majority shareholder owned 80% of the shares and the minority shareholder 20% of the shares. Initial cooperation went well. However, in November 2018, the majority shareholder announced to the minority shareholder that he was closing production in Poland and transferring the production lines and the remaining assets of the limited liability company to his subsidiary in another country. At the same time, the majority shareholder made an offer to “buy” the minority shareholder’s shares for PLN 1, which was rejected.

As a result, within a month the majority shareholder convened a shareholders’ meeting at which he voted for additional payments in the ratio of PLN 2.4 million for himself and PLN 600,000 for the minority shareholder. The majority shareholder indicated that the surcharges were needed to keep the limited liability company afloat and to cover losses in 2018. On the other hand, he himself did not pay the surcharges in cash, but converted previously granted loans to the limited liability company. The minority shareholder challenged the resolution on surcharges, pointing out, inter alia, that the loss had been increased as a result of the accelerated phasing out of production and the abandonment of profitable orders, and that the remainder of the loss could be covered from the sale of the company’s substantial assets. In turn, the surplus from the sale of the assets should be divided among the partners in the proportion in which they hold shares in the limited liability company’s share capital. Such action by the minority shareholder violates good morals and harms the minority shareholder.

24.08.2020 r. The Regional Court of Warsaw annulled a resolution on surcharges imposed on a minority shareholder of a limited liability company in the amount of PLN 600,000. The court held that the action of the majority shareholder, who led to the adoption of the surcharge in a situation where the minority shareholder had a month earlier refused to ‘sell’ its shares to the majority shareholder for PLN 1, ‘should be seen as an attempt to force the plaintiff to sell its shares in the defendant company in order to accelerate the process of extinguishing the company’s operations and transferring its assets to an affiliated company’. At the same time, the Court shared the argumentation of the minority shareholder and found that the additional payments were not necessary in a situation where the management board was aiming to extinguish the company’s operations and transfer the production line abroad and that the necessary funds for the company could be obtained from the sale of assets. Adopting the surcharge in such a situation therefore constituted a breach of good morals and harmed the minority shareholder, justifying the revocation of the surcharge resolution.

The above judgment shows that a minority shareholder can successfully defend itself against corporate blackmail applied by the majority shareholder. The behaviour of the judge is also very pleasing, as in the course of the evidence proceedings, he pointed out that the circumstances that occurred after the resolution on surcharges was passed are irrelevant, whereas in the justification of the judgment, he shared the minority shareholder’s position and the case law indicated by him, e.g. the judgment of 16.04.2004, IV CK 607/04, that also the execution of the resolution may constitute harm to the shareholder.