Court Declares Resolution To Increase Share Capital Of Public Company Invalid

The District Court in Warsaw declared invalid the resolutions of the general meeting of one of the companies listed on the alternative stock exchange (NewConnect) on the share capital increase and amendment of the articles of association. The basis for the finding was the defectiveness of the management board’s opinion justifying the reasons for deprivation of pre-emptive rights and failure to indicate the issue price.

RKKW’s client brought a claim for the annulment, or alternatively the revocation, of two resolutions of the general meeting of a company listed outside the regulated market under the alternative trading system formula (NewConnect). The resolutions were aimed at significantly increasing the share capital of this company with the exclusion of the pre-emptive right of the company’s largest shareholder (who, however, was not the majority shareholder).

According to RKKW’s client, these resolutions were adopted in violation of the law. RKKW’s client argued that the opinion presented by the management board to justify the exclusion of the pre-emptive right did not meet the requirements of Article 433 § 2 of the Companies Act, and that the resolution on the increase itself was defectively structured, i.e. it did not specify the issue price of the shares. The client also argued that the very adoption of the challenged resolution was clearly intended to disadvantage the non-controlling shareholders, as it led to their dilution.

The District Court in Warsaw fully shared the arguments of the RKKW client. In the court’s opinion, it is not sufficient for the fulfilment of the requirements of Article 433 § 2 of the Companies Act to present any opinion to the general meeting concerning the deprivation of pre-emptive rights. The opinion should be reliable and duly justify the exclusion of the pre-emptive right. The court also pointed out that the resolution on the share capital increase must explicitly specify the issue price. This price cannot be presumed, as it is of significant importance for the company and its shareholders. As the main claim was upheld, the court did not examine the alternative claim.

The judgment is not final. The client is represented in the litigation by advocate Katarzyna Półtorak and attorney-at-law Konrad Oleszczuk, and the project is coordinated by Karol Szymański, managing.