The desire to remove one of the shareholders from a limited liability company may be for a variety of reasons. The Polish Commercial Companies Code offers two principal solutions to that issue.
The first way is to have the shareholder excluded by a court on the grounds of material reasons. The exclusion request needs to be made by all the other shareholders, with their shares accounting for more than half of the share capital. Consequently, a majority shareholder cannot be excluded under this procedure. Further, unanimity of the other shareholders is always required – all the shareholders have to request exclusion. However, this rule can be modified under the company’s articles of association, with the right to request exclusion being granted to a smaller number of shareholders, but even then their shares still have to represent more than half of the share capital, and the action for exclusion needs to be brought against all the remaining shareholders.
The main issue with this shareholder exclusion procedure is the need to meet the requirement of material reasons. This term is quite vague, and hence it raises interpretation concerns. While since the Commercial Companies Code is in effect, a list of circumstances that are likely to be deemed material reasons by the court has been developed, each situation of this sort needs to be meticulously studied as unique, and it is only on these grounds that the decision can be made whether or not the reasons cited can indeed be deemed material reasons. This is how the court will decide whether to accept the shareholders’ request and exclude the unwanted shareholder or to dismiss it, with the shareholder remaining at the company.
The other way to remove a shareholder from a limited liability company is to effect a mandatory redemption of the shares held by the shareholder. This occurs without the consent of the shareholder whose shares are being redeemed. However, in this case, it is necessary for the company’s articles of association to include the relevant clause, providing for the conditions of and procedure for the mandatory redemption. It is particularly important for these conditions to be correctly stated. They must be specific and lend themselves to objective verification. If they are incorrectly stated, the action can be deemed an attempt at circumventing the law. It is a matter of dispute whether such conditions can relate to the shareholder himself or herself, his or her culpability, or inappropriate conduct. That is why each case needs to be reviewed in detail and the conditions carefully chosen.
A mandatory redemption of shares is effected under a resolution of the meeting of shareholders, which needs to provide the legal grounds, amount of remuneration, and the reasons for the share redemption. The remuneration cannot be below that stipulated under the statute.
An automatic redemption is a special type of mandatory redemption, which happens when the company’s articles of association provide that shares are redeemed upon occurrence of a specific event, with no resolution of the meeting of shareholders required. If the event occurs, the management board should adopt without delay a resolution to reduce the company’s share capital, unless the shares are redeemed against net profit.