Recognition of decisions of the general meeting of the Company invalid in Ukraine

Is it possible in Ukraine to recognize a decision made at general meeting of shareholders when it’s made regarding matters that are subject to competence of the Supervisory Board?

Answer:

Ukrainian legislation provides a number of unconditional grounds for recognition of decisions made at the general meeting of company’s shareholders (hereinafter – general meeting) as void. They include:

• A decision that was made at general meeting with violation of quorum that is set for conduction of the general meeting or particular decision (Articles 41, 42, 59,60 of the Law of Ukraine on companies);
• A decision which was made at the general meeting regarding matters that were not included in agenda which was approved and presented to members (Article 43 of the Law of Ukraine on companies);
• A decision that was made at the general meeting regarding change of charter capital if the procedure of provision of the required information to shareholders (members) was not held in compliance with Articles 40, 45 of the Law on companies.

In each particular case other violations of general meeting conduction procedure will be considered by the court from the perspective of their real influence on legality of certain decisions. Besides, the court considers the fact whether this decision violated rights and interests of a shareholder (member) of a company. If a commercial court finds out no facts of such violation it will be unable to satisfy such lawsuit.

At the same time Article 98 of the Civil Code of Ukraine provides that the general meeting is entitled to make decisions regarding all matters related to company’s activities  even if they are subject to competence of the executive body.

Judicial practice provides a wide interpretation of this regulation and supports the right of the general meeting to make decisions regarding all matters related to company’s activities despite the body which is competent in such matters (supervisory board, director, board of directors, etc.). It was pointed out, that provisions of charter (charter documents) of a company which limit this right are not subject to application. Thus, a decision of the general meeting cannot be recognized as void only due to the fact that matter regarding which it was made is subject to competence of other company’s body. Its validity will depend on other factors: compliance with the quorum, inclusion in agenda, etc. The company instead and not its members (shareholders) acts as a defendant in cases related to recognition of decisions of general meetings as void.

The lawsuit should include a claim regarding recognition of decision of the general meeting as void instead of recognition of its protocol as such.