Majority decides / Grounds for cancelling an AGM decision / Third parties to the company can challenge the AGM decision / How we can help you
The majority decides
The supreme governing body of any company in Romania, irrespective of its type (e.g. joint-stock company, limited liability company, etc.) is the general meeting of the associates/shareholders, a deliberative body that expresses its point of view during the general meeting meetings by means of the resolutions/decisions adopted.
As a general rule, decisions of the general meeting of members/shareholders are taken on the basis of a majority of the votes cast, within the limits of the law and the articles of association.
By way of exception, certain resolutions can only be adopted by a unanimous vote of the members/shareholders (e.g. when the articles of association of a limited liability company are to be amended).
Resolutions adopted in accordance with the provisions of the law and the articles of association are generally binding on all members/shareholders, including those who opposed the adoption of the resolution or were absent from the deliberations.
In this sense, the majority will is imposed and is binding on the minority will.
Grounds for annulment of an AGM decision
For a resolution of the general meeting of shareholders to be legally adopted and to produce the corresponding legal effects (e.g. increase of share capital, change of the object of activity, removal of directors, etc.), it must cumulatively meet: (i) the requirements imposed by law and (ii) the requirements imposed by the company’s articles of association.
Whenever an AGM resolution breaches either the requirements imposed by law or the requirements imposed by the articles of association, it can be challenged on grounds of illegality before the courts.
In practice, there are a number of reasons that lead to the annulment of an AGM resolution, of which we mention by way of example:
- the non-convocation of all associates/shareholders;
- improper convening of members/shareholders (e.g. agenda items generically entitled “Miscellaneous”);
- non-compliance with the conditions concerning the minimum number of associates/shareholders present at the date of the meeting;
- failure to respect the minimum number of votes cast and/or the unanimity rule;
- breach of a mandatory legal requirement;
- breach of the provisions of a court judgment.
Some of the grounds for nullity of the AGM resolution can be invoked before the courts only within a legally binding time limit (e.g. 15 days from the moment of the communication of the AGM resolution), while other grounds can be invoked at any time (e.g. even after some years have passed since the meeting was held).
Proceedings for the annulment of an AGM resolution fall within the jurisdiction of the court in whose district the company in question has its registered office.
What needs to be emphasised is that a resolution of the general meeting of members/shareholders can only be reviewed by the courts as to its legality and not its appropriateness.
For example, a resolution approving the distribution of the entire profit to reserves or a resolution to distribute the entire profit for investment purposes is a resolution adopting a measure of appropriateness, in which case a minority shareholder cannot successfully challenge it on the grounds that the profit should have been distributed as a dividend.
Third parties to the company can challenge the AGM decision
As a general rule, AGM decisions affect the rights and/or interests of the company’s shareholders, which is why they are usually the ones interested in challenging illegal AGM decisions.
However, the law also recognises the right of third parties (e.g. creditors of the company) to challenge AGM resolutions made in violation of the law and/or the articles of association.
How we can help you
Our lawyers can provide you with legal assistance and representation before the courts in any kind of case involving the annulment of an AGM resolution, regardless of the type of issuing company (e.g. limited liability company, private limited company, listed company, national company, etc.).
Additional information regarding the cancellation of AGM decisions