Special auditor and trade secrets

In connection with the harmonisation of Polish law with European law, the Act on Public Offering[1] granted a shareholder or shareholders holding at least 5% of the total number of votes in a public company the right to propose a draft resolution on the appointment of a special auditor who may examine a specific issue related to the company’s incorporation or the management of its affairs[2]. If the general meeting fails to adopt a resolution on the appointment of a special auditor, the shareholder(s) may, within 14 days of the adoption of the resolution, apply to the registry court for the appointment of a special auditor.

This power is an extension of the company’s shareholders’ right to obtain information about the company. Nevertheless, it is not absolute, which is also argued by the doctrine, which points out that the registration court, when considering the application, is not bound by the statutory grounds, but may decide it on the basis of the rules of equity[3].

A very interesting and also very dangerous situation arose in one of the public companies I represent. One of the competitors acquired a stake in the public company, allowing him not only to request the appointment of an auditor, but also to elect the Supervisory Board in groups. This shareholder led to the appointment of two of its representatives to the Supervisory Board, one of whom explicitly indicated in a statement that he was engaged in activities competing with the public company. Consequently, the public company, citing the protection of its interest, has consistently refused to provide information constituting company secrets.

Accordingly, a shareholder, who is a competitor of the company, first submitted a draft resolution for the appointment of a special auditor and, after the resolution was not adopted, applied for its appointment by the registry court. At the same time, this shareholder would like the special auditor to be an entity that had previously provided him with services within the capital group and the auditor would “examine” such sensitive data of the public company as: “budgets for individual projects and margin calculations” or “verification of the individual costs incurred by the company in the execution of individual projects in relation to the requirements of the clients, as defined in the contracts with the clients“. No further explanation is needed as to the consequences for the public company of disclosing the aforementioned data to a competitor, who, of course, as usual in such situations, explains its request by alleged irregularities at the public company. The company defended itself before the registration court by protecting its business secrecy.

Furthermore, the registry court stated: “the scope of examination of the company indicated in the application is questionable. For it should be stated that information on tendering and purchasing procedures, business models or budgets for individual projects constitute company secrets of the participant, which are subject to special protection. Moreover, it should be stated that the fact that the applicant and the participant are engaged in competitive activities is undisputed in the present case. The request for the appointment of a special expert is a manifestation of the shareholder’s right of individual control of the company and is in the nature of a supervisory power. However, in order to prevent the shareholder himself from using the information obtained against the interest of the company, it is necessary to provide the company with safeguards against the misuse of this right. The fact that the shareholder is engaged in competitive activity, as well as the fact that the function on the supervisory board of the participant and the management board of the applicant is held by the same person, makes it highly probable that the institution referred to in Article 85 of the Act on Public Offering will be used against the interest of the participant”.

The above decision of the registry court can only be summarised in one sentence: “Nothing to add, nothing to take away”.

[1] the full name of this Act is the Act on Public Offering and the Introduction of Financial Instruments to Organised Trading and on Public Companies.
[2] Article 84(1) of the Act on Offering.
[3] So, inter alia, A. Szumański, Financial instruments, offer, public companies, art. 84 SPP T. 19, 2006, issue 1, or M. Mataczyński [in: T. Sójka]Commentary to the Act on public offerings and introduction of financial instruments to the organised trading system and on public companies, [in:] Capital Market Law, Commentary, art. 85, Lex 2015, similarly also M. Dyl [in: A Chłopecki, M. Dyl] Law on Public Offering and the Introduction of Financial Instruments to the Organised Trading System and on Public Companies, Commentary, art. 85, Lex 2014.