Minority Right to Provide Information and Annulment of a Resolution of a General Meeting of Shareholders of a Public Limited Company

Legal Insight

December 2022

Archontoula Tsogia, LL.M

Summary: One of the most important minority rights of a joint stock company is the right to information, which is satisfied, upon request of a shareholder or shareholders of the company, by the Board of Directors at the meeting of the General Meeting of the shareholders of the company, under the strict conditions set forth in Art. 4548/2018. In this note, we refer to the possibility for the requesting shareholder or shareholders to bring an action for annulment of a resolution of the AGM, which was taken without the due information having been provided beforehand.

2. Order - Conditions

According to Art. 137 par. 2 a) of Law No. 4548/2018: "[...] 2. A decision is also null and void if it was taken: a) without providing the information due, which relates to the subject matter of the decision taken, and was requested in accordance with Article 141 by shareholders who request the annulment of the decision, in accordance with paragraph 3 [...]", and in accordance with para. 3 of that Article: "[...] In case (a) of paragraph 2, only the shareholders who requested the information may request its annulment if they represent one twentieth (1/20) of the paid-up capital [...]".

Consequently, in order for the decision taken by the General Meeting to be annulable under that provision, the following conditions must be met:

- A shareholder or shareholders, who have the required number of shares required under Art. 141 par. 6 or 7 of Law No. 4548/2018, have submitted to the Board of Directors of the company, legally, properly and in due time (at least 5 full days before the General Meeting), a request for information, in accordance with the procedure provided for in Art. 141 ν. 4548/2018. For example, the submission of an oral question by a shareholder to provide information during the meeting of the General Meeting does not constitute a legitimate request and, therefore, the refusal by the chairman of the General Meeting does not constitute a ground for annulment.

- The company's Board of Directors may unlawfully refuse, expressly or implicitly, to provide information at the General Meeting or provide incomplete or inadequate or false information, even though it is obliged to provide it. Accordingly, there should not be a compelling substantial reason for the Board's failure to provide the requested information, which the Board should have invoked and recorded in the minutes of the General Meeting with reasons.

- The information requested and not provided or provided inadequately must relate to the matter in respect of which the contested decision was taken (the decision which the court is called upon to annul).

- The information requested must be 'due', that is to say, objectively necessary for the assessment of the items on the agenda. It is not necessary for the requesting shareholder(s) to prove that the contested decision of the general meeting was actually affected by the failure to provide the information.

3. Indicative cases of information that may or may not be requested.

a) Information admissibly requested:

- Information on the circumstances and procedure followed for the purchase of a specific, named asset (e.g. a property) or the circumstances and procedure for the conclusion and execution of a specific, named company contract. 

- Disclosure of the amounts, and any benefits, paid to either directors or officers of the company.

- An analysis of a specific line item in the financial statements for the corporate fiscal year, which is being presented for approval. 

- Income and expenditure relating to a specific, named asset of the company.

- On a capital increase, specific information on the amount of the company's borrowings, its net worth, its assets, its existing property.

- In the case of information on the progress of the company's affairs to which a large minority is entitled, information of a general nature is requested (e.g. communication of data on the company's transactions with customers, suppliers, credit institutions, data on the composition of the company's assets, its holdings in other limited liability companies, the return on its investments, etc.).

b)  Information not admissibly requested:

- Analysis of all items in the annual financial statements (non-specific).

- Information on any remuneration or compensation received by any person who dealt with the company during the last financial year (not specified).

- Disclosure of any credit agreement of the company with any person (unspecified).

- Disclosure of a report of the Board of Directors on a certain area of corporate activity (not specified).

- Announcement of payments to relatives or spouses of directors, directors or employees of the company. 

4. Absorbing essential reason

The overriding substantial reason is the sole reason that justifies the Board's failure to satisfy the minority shareholders' right to receive the information legally and timely requested by the Board. It is defined as the reason which, objectively assessed, is significant for the company and sufficient to justify the refusal to provide the information in question. A more specific illustrative case study follows:

- Significant damage to the company's interests is considered to be the overriding substantial reason and whether and to what extent the requested information may cause such damage is to be determined, in its sole discretion and based on the judgment of the prudent administrator of the company, by the Board of Directors of the company. This damage to the company's interest may be pecuniary or non-pecuniary (damage to the company's reputation, limitation of its growth opportunities, risk of leakage of confidential information or business secrets, etc.) and may also result from the existence of an agreement between the company and a third party (e.g. a contract containing a confidentiality clause). Indicative examples are: information on ongoing negotiations with customers and suppliers, prices of raw materials, specific costing of major customers or suppliers and individual terms of their cooperation, technological know-how, protection of tax and banking secrecy, etc. 

- The case where the applicant for information has already demonstrably received the information in question from another, equally valid source of information justifies the non-provision of the information by the Board. In particular, the law mentions the case of representation (direct or "indirect") of the applicant shareholders on the Board. of the company, provided that the respective members of the board of directors have received or have actually had the opportunity to receive the relevant information in an adequate manner (Article 141(6)(b) and penultimate paragraph and (7)(c) of Law 4548/2018). Such a case also exists when information is requested which is published by the company (e.g. on its website, in accordance with the legal provisions on mandatory disclosure) and accessible to third parties.

- Where only the interests of third parties outside the company are satisfied.

- Where there is an objective legal impossibility to provide the requested information (e.g. possible breach of banking or tax secrecy).

Cases where there is no compelling substantial reason:

- Insignificant damage to the company's corporate interest. 

- Assessment by the Board of Directors that the request for information in this case does not seek to satisfy the statutory purpose of the right, but exclusively or mainly to serve extra-corporate purposes, or that the request in question, because of the applicant's motives, is contrary to corporate loyalty and the provision of Art. AK 281 on the improper exercise of a right (see Art. 96 et seq. of Law 4548/2018). cannot consider that there is an abuse or that there is no legitimate interest of the applicant on the grounds that the right to information is exercised without there being an "objective need" of the applicant, or that the requested information is contrary to the interest of the majority of the shareholders, or that it satisfies only the personal interests of the applicant, which it considers not to be in line with the interests of the company or the other shareholders (Athens Single-Member Court of First Instance 13709/1979).

- The existence of a risk of bad debts for the company.

- The justification that the requested information is derived from comparative tables annexed to the Board of Directors' and auditors' reports.

- Invocation by the Board of Directors of the preparatory period set (5 full days before the first meeting of the General Meeting) for any incomplete information provided to the applicant or applicants. Any inadequacy of the time limit, lack of staff, and the amount of costs involved in gathering the information do not constitute 'substantial justification'.

5. Refusal to provide information and reasons

The Board of Directors must refuse to provide the legally and timely requested information with a reasoned decision (refusal), which is recorded in the minutes of the General Meeting and is subject to judicial review (Court of Appeal of Dodoni 96/2013, Court of Appeal of Piraeus 857/2007, Court of Appeal of Dodoni Dωδ 227/2004). An incomplete answer is also equated to a refusal (MAPRATH 13709/1979). A decision of the General Meeting is voidable when the negative answer of the Board of Directors to a request of the shareholders for information on the course of the company's affairs and the company's assets (Art. 141 par. 7a of Law 4548/2018) is not justified. The challenge as to the validity or otherwise of the grounds for refusing to provide information, pursuant to Art. 141 par. 8 ν. 4548/2018, can be resolved by an appeal either by the applicant or by the Board of Directors to the Single-Member Court of First Instance of the company's headquarters, which will hear the case in the procedure for interim measures (Athens Court of First Instance 2206/2017 and Athens Court of First Instance 3810/2010). The validity of the refusal is judged on the basis of the registered reasons (reasons for refusal), as recorded in the minutes of the General Meeting. Subsequent invocation of additional or new reasons for refusal by the Board of Directors is not permitted. 

Both the unjustified refusal to provide the information and the insufficiently justified refusal to provide it by the Board of Directors give the requesting shareholders a right of action under Art. 141 para. 8 ν. 4548/2018 [in another view, this provision is not applicable, but a regular action for the provision of information or a request for control (MAPRATH 13709/1979) may possibly succeed] and the right to bring an action for annulment of the contested decision under Art. 137 para. 2a' of Law No. 4548/2018. Failure to record the refusal in the minutes is considered as if the refusal in question had not been given, i.e. there is no response from the Board and therefore, the decision may be challenged as described above.

It is noted that the refusal to provide the requested information is a management act of the Board of Directors (article 92 et seq. of Law 4548/2018) and therefore requires a decision of the latter. 

6. The action for annulment

The decision of the General Meeting, as set out above, may be annulled only by bringing an action before the Single Judge Court of First Instance of the company's registered office within a four-month limitation period from the adoption of the decision in question or from its registration in the G.E.M.H., if it is submitted to publicity by law.

The action shall be brought against the company by the shareholder or shareholders who have requested, in accordance with the provisions of Art. 141 ν. 4548/2018, the information that was not provided and that represents 5% of the paid-up share capital (it is not required that the action be brought by all the shareholders who requested the information), which must be proven by the plaintiff or plaintiffs both at the time of bringing the action and at the time of filing the proposals. It should be noted that, although the shareholder has an individual right to information under Art. 141 par. 6 ν. 4548/2018, however, by law the shareholder has the right to bring such action only if he/she represents at least 5% of the paid-up share capital. This is in order to avoid the dilatory use of the right to bring a cancellation action against the interests of the company and in order to serve exclusively the individual interests of each shareholder. If the required percentage is not achieved, the shareholder will be entitled to bring an action under Art. 137 para. 4 ν. 4548/2018.

Furthermore, the applicant must either have been absent from the General Meeting, at which the information due was not provided and the contested decision was taken, or he must have been present but opposed the adoption of the contested decision; on the contrary, his attendance at the General Meeting and his failure to oppose the adoption of the contested decision is considered an implicit waiver of the request for information. According to the prevailing view, the shareholder's non-attendance at the General Meeting does not necessarily have to be causally linked to the ground for annulment. With regard to the requirement of opposition to the contested decision by the shareholder present, it is noted that it must be expressed explicitly and clearly and must relate to the contested decision (Rhodes Multi-Member Court of First Instance 130/2015), but it is not required to be accompanied by a certain justification. The silence of the shareholder is interpreted as acceptance of the resolution and any mere negative vote is not considered as an opposition. A vote in favour of the resolution, following an express prior opposition to it, is understood as a revocation or waiver of the declaration of opposition and excludes the right to challenge the contested resolution by the shareholder in question. 

In any case, the absence of the shareholder requesting the information from the General Meeting or his failure to oppose the contested decision constitutes contradictory conduct and any action by him to annul the decision would be completely abusive. 

Shareholders who have not exercised their right to information pursuant to Art. 141 par. 6 and 7 are not parties to the proceedings, but may intervene in them by virtue of their status as shareholders (CCP 81 et seq.). 

The contested decision of the General Meeting, which was taken without the information requested being provided, is annulled by the issue of a final and conclusive judgment. The question of the validity or otherwise of the refusal of the Board of Directors to provide the information is considered to be an incidental question, if the appeal under Art. 141 par. 8 ν. 4548/2018, as mentioned above. 

7. Instead of an epilogue

The information provided to the shareholder by the managers of the company is of great importance for the shareholder himself, both for the more effective exercise of his individual corporate rights, with the right to vote predominating, and for the assessment of his participation in the company and, therefore, for the making of important investment decisions on his part, with regard to his staying or leaving the company. And through the control exercised over the directors, it acts as a protection of the corporate interest. At the same time, and in particular in order to safeguard certain particularly 'sensitive' information concerning the progress of corporate affairs, the legislator has placed strict restrictions on the exercise of the right to information and has given the board of directors the power to refuse to provide such information under certain conditions, stating its reasons for doing so. 

The importance given by the legislator to the right to information is confirmed, in particular, by the fact that if, contrary to the legal provisions, it is not satisfied by the Board of Directors of the company, the shareholder or shareholders who have exercised it have the possibility, by means of an action, to request a court decision annulling the decision in question taken by the General Meeting.