All are free to call – The practical aspects of the General Meeting
As opposed to the Management Board or the Supervisory Board, the General Mee ting of a joint stock company engages in actual activity once, or a few times at the most, in the scope of the year. When it does operate, its actions must conform with strictly formalised procedures.
The joint stock company must be prepared to duly comply with these procedures, in that failure to do so may compromise the legal validity of decisions taken in the course of the General Meeting. Irregularities may open the way for legal challenge of the tainted resolutions and/or for liability of Management Board members. Key elements of the procedure include the calling or convening of a General Meeting, amendment of the General Meeting agenda by the shareholder, and verifying the authority of parties taking part in the General Meeting.
The General Meeting of a publicly listed company is called by way of an announcement posted on the company’s website and in accordance with the company’s declared arrangements for publication of current statements – at least 26 days before the General Meeting date. The Polish Commercial Companies and Partnerships Code does not expressly indicate whether this 26-day period ought to be counted as including the day on which the announcement is released or the day of the actual General Meeting session (and neither does the Polish Civil Code, which does not provide for counting deadlines backwards). The legal doctrine and the judicature yet have to dispel the doubts surrounding this issue. The practical implications are quite far-reaching; the Supreme Court has clearly indicated that an error in scheduling of the General Meeting date (running afoul of the statutory timeframe) may constitute a basis for challenging all the resolutions adopted at such General Meeting. In practice, publicly listed companies adopt a number of different strategies in this respect. A conservative approach, and one which is approved by the Central Securities Depository of Poland, is to announce General Meetings a full 26 days before they are to be held, i.e. without counting the day of the actual General Meeting and taking the day of announcement as the first day counted towards the deadline.
A similar degree of caution is called for with respect to the 18-day deadline for effectuating changes to the original agenda. Whatever the original agenda, a shareholder may – within 21 days prior to the General Meeting – request that this agenda be expanded (such requests often deal with changes to the composition of the Supervisory Board). Circumspection is advised, and the company should closely track its incoming correspondence. If the agenda is not duly modified, validity of the entire General Meeting may be compromised. In this connection, it should be borne in mind that the basis for honouring a shareholder’s request is comprised in a deposit certificate issued in the shareholder’s name, and not in a registered participation right certificate, as some companies state in their General Meeting announcements. In the eyes of the law, the latter assume validity only as at the record date; in practice, however, some brokerage houses have issued such certificates before the record date in what is an incorrect practice which may compromise validity of the resolutions.
The General Meeting is a body for all “resolute” shareholders, and it is the shareholders who are expected to be the active party and to demonstrate their legitimation to take part in the General Meeting. The mere fact of share ownership will not be sufficient – the right to take part in the General Meeting extends to persons who hold shares and who – not later than on the first business day following the record date – applied to the investment firm for issue in their name of a certificate attesting to her right to take part in the General Meeting. Only the, as it were, sum total of these events provides grounds for generation by the Central Securities Depository of an aggregated list of persons entitled to participate in the General Meeting on the basis of which the company then draws up the list of shareholders. Such an arrangement is open to errors and accidental omissions in the handling of information flows. One of the questions which arise is that of what should be done with a shareholder who was late in registering for the General Meeting. Should he be admitted to the General Meeting, or should he be barred from participating ? To put the issue in different terms, this is a question of where priority should be accorded – to formal legitimation, or to substantive legitimation ? To the formal requirement to register, or to the substantive status of being a shareholder ? In this context, it should be noted that refusal to let a shareholder participate in the General Meeting always leads to invalidity of the resolutions. Of course, the same effect may be produced if an unauthorised shareholder is allowed to take part in the General Meeting, but only where the given resolution would not have passed without the votes cast in favour by that shareholder. In other words, this is a question of striking a balance – of assessing the risk and determining which legal interest is more deserving of protection. Depending on the distribution of power and the exigencies of the moment, the company may always cancel the General Meeting and then call another one.
Another material issue is posed by the possibility of shareholders granting powers of attorney in electronic form. For these purposes, electronic form, as an alternative to written form, departs beyond an electronic declaration of intent with a secure electronic signature – any and all digitalised forms qualify. At the same time, security of the company must be guaranteed, and wanton or unauthorised activity must be prevented. Accordingly, the company is legally required to take measures geared at identifying the shareholder so as to ascertain validity of the powers of attorney. The permitted means for granting powers of attorney in writing ought to be defined in the General Meeting rules; where no such rules have been formulated, information on this matter should be provided by the Management Board in the announcement calling the General Meeting. It will suffice if the shareholder granting such powers of attorney dispatches notice to that effect to the e-mail address specified in the announcement along with scans of documents identifying the shareholder as a duly empowered principal and identifying his proxy. Verification of the validity of granted powers of attorney in electronic form proceeds by way of checking that the documents presented in electronic form are complete and juxtaposition of their details with those set out in the shareholder list and in the National Court Register extracts. It will also be important to specify until when the shareholders may send in such information; where no deadline has been set, the inbox associated with the e-mail address specified in the General Meeting announcement must be monitored on an ongoing basis until actual commencement of the General Meeting.
The law provides for voting by shareholders on a long-distance basis, either by electronic means or by post. In order to resort to this possibility in practice, the company must perform some actions in order to ensure that the shareholder benefits from the rights extended to him by the Commercial Companies and Partnerships Code. And thus, as regards long-distance voting by electronic means, a provision to this effect must be included in the company’s articles of association; as regards correspondence voting, it must be provided for in the General Meeting rules. It should be borne in mind that, under the Commercial Companies and Partnerships Code, a ballot cast via means of long-distance communication may not subsequently be withdrawn. A ballot cast by electronic means shall be deemed effectively cast once it has been received by a device on the company’s end. As even this cursory overview makes clear, the attendant issues may, in practice, become the subject of dispute, so the convenience afforded by solutions such as long-distance voting comes at the price of a certain legal risk.
A vote cast by post, meanwhile, may subsequently be withdrawn by way of a declaration served on the company – either by post, or personally by the shareholder concerned – before the ballot on the resolution in question is called. A vote will also be effectively withdrawn if, subsequent to the casting of a vote by post, another form concerning the same resolution is sent out. More complex issues are posed by the question of withdrawing a vote cast by post by electronic means where the company’s articles do not provide for voting be electronic means. The legislature does use the word “declaration” here, which may be taken as suggesting that a shareholder who cast her vote by post should also be able to make a declaration concerning withdrawal of that vote by electronic means. In the interests of efficiency, the company’s General Meeting rules should subject the possibility of withdrawing a correspondence vote by electronic means to a clearly defined deadline.