RKKW’s client wins dispute over share capital increase with final verdict

The Court of Appeal in Warsaw has dismissed an appeal against a favorable verdict for RKKW’s client finding that resolutions of a general meeting of a company listed on NewConnect were invalid. The resolutions regarded an increase in share capital and an amendment to the Articles of Association. The verdict is final.

The dispute between the parties started in the beginning of 2021, when the general meeting of a company listed on the alternative trading system (NewConnect) passed a resolution on a very significant share capital increase and amendment to the Articles of Association. Our client challenged both resolutions, indicating that they were adopted in violation of the law and were intended to harm one of the shareholders. The District Court in Warsaw shared our argument in its entirety and suspended the enforceability of the challenged resolutions. The court explained that the opinion of the company’s management board intended to justify the exclusion of the pre-emptive rights right did not meet the requirements of Article 433 § 2 of the Companies Act, and that the increase resolution itself did not contain all the elements specified in Article 432 § 1 of the Companies Act. The same arguments were cited by the District Court in Warsaw in the verdict, in which it found that the contested resolutions were invalid.

The defendant company appealed against this judgment. It accused the court of first instance of a number of procedural violations and incorrect application of Article 433 § 2 of the Companies Act and Article 432 § 1 of the Companies Act. It also argued that the management board’s opinion on the exclusion of pre-emptive rights could not contain more information, as this would violate regulations defining the rules of communication between issuers and the market, and that the missing elements of the increase resolution could be derived by interpreting the resolution from its other provisions. The Court of Appeal in Warsaw rejected these arguments and fully shared the legal and factual findings of the court of first instance, and consequently dismissed the appeal.

The verdict is final.

“The Court of Appeals’ judgment is of momentous importance for practice, as it clearly indicates that the necessity, arising from the Companies Act, for the management board to present to shareholders an opinion justifying the exclusion of pre-emptive rights in connection with the issuance of new shares in the company, is not just a formal requirement, but a qualitative one. The content of this material is intended to provide a basis for existing shareholders to form an assessment as to the reasonableness and adequacy of the share capital increase proposed for their consideration. Within the framework of this case, the RKKW team undoubtedly demonstrated that the company’s management board was not up to the above task substantively” – commented Karol Maciej Szymanski, Managing Partner of RKKW.

The client was represented in the litigation by attorney-at-law Katarzyna Półtorak and attorney-at-law Konrad Oleszczuk, while the project was coordinated by Karol Szymanski, Managing Partner.