The Commercial Companies Code provides that the articles of association may be subject to the agreement of the company or otherwise limit the divestment of the share, part or fraction of the share and the retention of the share 1 . The most common in practice other means of such restrictions are the establishment of the right of priority or the right of first acquisition of shares. Let us look at how both institutions function in practice.
The above-mentioned institutions, despite certain common features, are of a different nature (see also judgment of SN dated 4 February 2011, III CSK 198/10, OSNC-ZD 2011, No 4, item 90) 2 .
Right of priority – who and when is entitled
The right of primacy is a broader institution than the right of pre-emption, as it concerns any sale of shares and not just a sale agreement regulated by Act dated dated 23 April 1964 Civil Code (Journal of Laws, item 93, i.e. dated 10 May 2018 Journal of Laws of 2018, item 1025), called hereinafter “k.c.” ³. The right of priority and the rules on its application shall be laid down in the articles of association.
According to the decision of the Court of Appeal in Katowice dated 4 February 2005 (And ACa 1433/04, (a) where the shareholder has divested the participation, the priority right conferred on the other shareholders excludes the possibility of offering shares for sale to the person third, The other partners should be informed of their intention to divest so that they can react first to changes.
Disposal of participation among or outside partners requires the consent of all or individual partners 4 , the resignation from the exercise of the right of priority is the same as giving consent.
If the partners wish to exercise their right of priority within a certain period, they may declare their intention to acquire a share and this is the treatment, in contrast to the declaration of exercise of the right of pre-emption, as an offer to purchase the shares 5 .
By Article 182 k.s.h. omitting the right of priority of other partners allows recognition of a contract concluded with a person third for being ineffective against a legitimate partner.
There is no doubt that such a solution gives much better protection to the rightful partner than the claim of compensation on the basis of Article 471 k.c.
The power to investigate ineffective legal action is not directly regulated Article 182 k.s.h., but according to the Supreme Court judgment of 7 September 1993 „the sale of shares concluded without the authorisation of the company (to which the shareholders' meeting is appropriate) is an unsuccessful activity, both in relation to the company and in relations between the parties.
Such an agreement may take effect only if the relevant authorisation is expressly granted." 6 .
The right of pre-emption and the contract of sale with a person third
As regards the right of pre-emption, according to the case law 7 "the right of priority of acquisition of shares in the Polish limited liability company. is not the same as the right of preemption to which the provisions apply Article 596 and next Civil Code".
As already indicated above, in the case of a reservation in the articles of association of priority rights to shareholders, the shareholder selling shares is obliged to offer first to the member entitled by the law of priority. In the case of a right of pre-emption, there is an obligation to notify the rightful partner of the possibility of concluding a sale contract under specific conditions, previously proposed to the person third 8 .
In the case of the right of pre-emption, the shareholder intending to dispose of his shares shall include with a potential acquirer of a contingent interest sale agreement. Partners entitled to the right of pre-emption may then make a statement that they exercise their right. If they do so, a contract of sale of the same content shall be concluded between the shareholder selling the shares (at present the partner) and the eligible partner, as the contract concluded by the former partner with the person third.
The penalty for breach or non-compliance with obligations under the right of pre-emption shall be the compensation liability of the obliged person. The breach of obligations under the right of pre-emption does not render the sale contract concluded by the obliged person ineffective. third 9 .
In conclusion, in the case of the right to acquire shares in a limited liability company, a conditional sale contract with a person is first concluded third, and is subsequently presented to the rightholder of the first purchase, who may acquire shares under the terms of the contract in question. It is different in the case of a right of priority according to which before selling shares to a person third the shareholder is obliged to offer them to eligible shareholders 10 .
Bibliography:
- 1 Article 182(1) Act dated 15 September 2000 (Journal of Laws, item 1037, (Journal of Laws of 2019, item 505)
- 2 . Kidyba Andrew, Comment updated to Article 1-300 Commercial Companies Code, Published: LEX/el. 2019
- 3 [3] Ibid
- 4 . Matuszczak M., Law of priority of derivative acquisition of equity rights in capital companies, Warsaw 2013, p. 17 i n
- 5 . Turkish Bożena, The Law of Privilegation and the Law of Preemption of Share Rights in the Capital Company , ABC- Practical commentary, Lex
- 6 . Judgment of the Supreme Court of 7 September 1993 (II CRN 60/93), OSNC Directive 1994/7–8, item 159.
- 7 SA in Poznań from 12 March 2008 (And ACa 140/08, nopubl.) According to SA in Katowice with 4 February 2005 And ACa 1433/04, nopubl.)
- 8 . Malarewicz-Jakubów A., Priority of acquisition of shares and shares and the right of preemption in the light of the Civil Code, [in:] Trade Law Institutions in the Future Civil Code, T. Mróz, M. Stec ed.), Warsaw 2012, p. 593–594.
- 9 . Civil code. Volume II. Comment to Article 450-1088. Introductory provisions, ed. prof. dr hab. Krzysztof Pietrzykowski, Legalis 2018
- 10 . Turkish Bożena, the Law of Privilegation and the Law of Preemption of Share Rights in the Capital Company, ABC- practical commentary, Lex
Author: Hanna Żołnierkiewicz
Lawyer in the Legal Department. From 2017 associated with Russell Bedford Dmowski & Partners Law Firm Sp.k. He has experience in legal services to entrepreneurs in terms of merger, division and transformation of companies, bankruptcy, restructuring and capital market law. He runs the day-to-day handling of commercial law companies, including drafting corporate documentation, both in Polish and English. He also represents clients before the general courts in economic and civil law cases.