The cessation of the legal existence of a capital company at the initiative of its partner should be considered as a final solution in the event that other measures which could cure the situation in the company are impossible or very difficult. Therefore, according to Article 271(1) KSH judicial dissolution of the company at the request of a shareholder is possible, provided that the circumstances specified in the Act are met i.e., when the company's objective has become impossible or other important reasons have arisen due to the company's relations.
Inability to achieve the company’s objective
It follows from the wording of this provision that the inability to achieve the objective of the company was considered by the legislator to be one for important reasons due to the company's relationship justifying its dissolution. This impossibility must apply to any activity provided for in the contract of the company for which the company was established (the subject of the activity) must be of a lasting and objective nature.
However, the very existence of even a lasting conflict between the shareholders of a capital company does not mean that there were grounds for resolving it. They only occur if the existing conflict significantly and permanently affects the functioning of the company, the relationship of the company or the rights of shareholders
In the judgment dated 12 January 2018 (II CSK 207/17) The Supreme Court indicated that the legislature provided for under Article 271(1) KSH’s dissolution procedure, in principle, applies when a crisis occurs in a company which, in terms of legal importance, is comparable to the inability to achieve the company’s objective, and the conflict of shareholders does not express that a minority shareholder is voted on, but that the company’s authorities in a particularly bright way, using the majority of the shareholders, deprive it of significant contractual or statutory rights, which makes its participation in the company without object.
Conflict between partners
In literature and case law, the reasons justifying the dissolution of the company indicate that it is not possible to choose the authorities of the company or to obtain an appropriate majority of votes for adoption of resolutions. In the judgment dated 10 April 2008, IV CSK Regulation (EU) 20/2008 The Supreme Court took the view that the inability to achieve the company's objective could be caused by a conflict existing between shareholders, when the friction between two groups of shareholders with a balanced number of votes is not possible to adopt resolutions, which hinders the proper functioning of the company.
Not all use of the position by majority shareholders and marginalisation of a minority shareholder can therefore be regarded as justifying the company's winding-up judgment. It cannot be assumed that the justification for reaching to the final measure, contrary to the clearly expressed will of the other partners, would only be the existence of a settled conflict between them and one only a partner against the background of different visions of the company's affairs and its business strategy.
The relationship between the company's failure to reach an agreed objective between the shareholders and the conflict between the shareholders, as another important reason for the company's dissolution, requires that it be considered that only such a personal conflict in the company, which has a significant and lasting impact on the functioning of the company, the relationship of the company or the rights of the shareholders, can be relevant in the process sought by the shareholder to terminate the company.
With regard to a shareholder who does not have any functions in the company's organs, except in the case described, a balanced vote preventing the shareholders from adopting resolutions, the mere conflict with the other shareholders does not affect the relationship of the company.
Therefore, even a significant and long-standing conflict between shareholders does not prejudge the impossibility of achieving the company's objective and does not justify the shareholder's request to terminate the company (this is the assumption taken by the Supreme Court in the judgment dated 13 March 2013 (reference no. IV CSK 228/12).
Depriving a partner of the partnership rights
An important issue in this issue is that the conflict between partners leads to deprivation one of them, the rights of the company under the law or the articles of association.
It should be pointed out that the mere fact of the management and supervision in the company by other shareholders appointed and acting in accordance with the provisions of the articles of association does not in itself constitute a violation of the rights of a minority shareholder.
This also applies to the company entering into commercial agreements with its own business partners.
The right of a partner to participate in the profits is a property right having direct power in the law. The decision to allocate the profit generated in the financial year is the responsibility of all shareholders who adopt the resolution (Article 231(2)(2) KSH).
The purpose of the dividend profit should depend on the financial situation of the company. The Supreme Court rightly pointed out in its judgment dated 22 April 1934 (reference no.
IC 1868/36, OSNC 1934/4/163), that the loss of a share of profits over a number of years may constitute a reasonable basis for the dissolution of the company at the request of the injured partner if these gains are distributed in the form of various remuneration allowances between the partners employed in the company.
It is therefore important whether the benefits received by the other shareholders are equivalent to their benefits to the company, whether the cooperation of the company with its shareholders or persons who are members of the board is carried out in the interests of the company or to the detriment of the company. This applies to the remuneration received in the company for acting as members of the company's organs,
It is argued in literature and jurisprudence that the implementation of a procedure aimed at the winding up of a company by a court at the request of a shareholder is justified only if the obstacles to the company's activities cannot be removed by other means than by winding up the company and dividing its assets, and it is impossible for the shareholder to withdraw from the company or divest his shares for a price corresponding to its value, and the recovery of the above rights in another way is extremely difficult see SA judgment in Białystok dated 25 January 2018, I AGa 27/18, Cf.
also mentioned Supreme Court rulings: dated 24 April 1937, C I 1863/36 and dated 10 April 2008, IV CSK 20/08).
Therefore, where one that the shareholders are dissatisfied with their participation in the company by reaching for the most far-reaching measure causing the company to lose its legal status, is justified only if there is no other possibility of eliminating the conflict between the shareholders in the company.
In the light of the above, it must be concluded that the inability to achieve the objective of the company, which justifies its dissolution by the court, can be caused by a conflict existing between shareholders, where, as a result of friction between two groups of shareholders with a balanced number of votes, it is not possible to adopt resolutions, which hinders the proper functioning of the company.
However, the very existence of even a lasting conflict between the shareholders of a capital company does not mean that there were grounds for resolving it. They only occur if the existing conflict significantly and permanently affects the functioning of the company, the relationship of the company or the powers of shareholders.
The reasons for the company's relations justify its dissolution when they lead to a crisis situation comparable in importance to the company's inability to achieve its objective; this may be a loss of the company's ability to act as a result of a permanent conflict of shareholders with a balanced number of votes.
Author: Maciej Tuszyński
Legal Manager in the Legal Department. Lawyer, member of the District Bar Council in Warsaw, graduate of the Faculty of Law and Administration of the University of Warsaw. He specializes in commercial and civil law law. He has professional experience, which includes litigation and comprehensive legal advice on the day-to-day service of economic operators, in particular commercial law companies. As part of his work at the law firm, his practice focuses on corporate, civil and economic matters.