JŠK Legal Flash

The end of vague definition of the company’s scope of business

The Supreme Court ruled that the definition of scope of business "Manufacturing, trade and services not listed in Annexes 1 to 3 of the Trade Licensing Act" in the articles of association is too vague and therefore invalid due to uncertainty. The affected companies are obliged to update their founding documents to include a clear definition of their scope of business and to update this information in the Commercial Register. The registry courts may also officially request companies to fulfil this obligation under the penalty of their dissolution with liquidation. Newly established companies will also have to meet the condition of certainty when defining their scope of business, otherwise they cannot be registered in the Commercial Register.

(NS 27 Cdo 3549/2020)

8. 6. 2021

Supreme Court overturned criticised judgment on the invalidity of shareholders' agreements

Although the Supreme Court acknowledged that a shareholders' agreement that would bind them to give instructions to members of the board of directors in matters of business management and to ensure that these instructions are automatically carried out would be invalid, it did not agree with the High Court as regards other issues. According to the court, it is necessary to distinguish the company's business management from its strategic management. Unlike business management, the general meeting may issue instructions to the board of directors in matters of strategic management. The Supreme Court recalled the priority of interpretation, which does not lead to the invalidity of the agreement. This means that even if a matter of business management were involved, the agreement would not be invalid if the shareholders' obligation were interpreted as an obligation of intercession with the members of the board of directors or as a "guarantee of a certain result". In these cases, the shareholders may assume the obligation in relation to the actions of the board of directors, which, inter alia, will enable the members of the board of directors to comply with the duty of care. These conclusions must be considered when drafting shareholders' agreements, or a group can be established within which instructions regarding business management can be given.

(NS 27 Cdo 1873/2019)

4. 5. 2021

The Supreme Court ruled for the first time on the pre-emptive right of shareholders to subscribe for shares under the Business Corporations Act

The pre-emptive right of shareholders to subscribe for the company's shares when increasing the registered capital can be excluded only if it is in the important interest of the company. It follows from the judgment that neither the need for the company to secure enough funds for the implementation of a specific project nor the capitalisation of some shareholders' receivables from the company can be regarded as an important interest. If a company wishes to raise funds by subscribing for new shares, it cannot differentiate between shareholders and simply exclude some shareholders from subscribing for new shares. Nor can the capitalisation of shareholders' receivables be regarded as an important interest if it follows from the factual circumstances that the receivables of the respective shareholders arose for a specific purpose. As the subscription of new shares only by some shareholders marginalises the share of other shareholders, the exclusion of some shareholders from the share subscription must not be misused as a tool to purposefully weaken the position of these shareholders.

(NS 27 Cdo 155/2019)

22. 4. 2021
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