October 2024

Decision of the Multi-Member Court of First Instance of Athens regarding the Claim of a S.A. (Société Anonyme) against the Heirs of Board Members based on Void Loan Agreements

Decision no. 2628/2024 of the Athens Multi-Member Court of First Instance has been published, which accepted the main claims of our client's lawsuit—an anonymous company—ruling that the parents of the defendant, who were shareholders of the company while alive, during the period they served as members of the Board of Directors, entered into informal loan agreements with our client for a total amount of €1,340,000.00. These agreements exceeded the limits of ordinary transactions and were executed without the required authorization from the general assembly, rendering them automatically null and void under Article 23a of Law 2190/1920.

Consequently, the ruling determined that the defendant, who is also a shareholder in our client’s company, is primarily obliged, as an heir of her parents, to return to our client the amount of €670,000.00 (the portion corresponding to her inheritance share), based on the provisions regarding unjust enrichment (Articles 904 et seq. of the Greek Civil Code).

Specifically, following an audit conducted by the temporary administration appointed in 2018 to our client’s company, a deficit of €1,340,000.00 was identified in its cash accounts. This amount was recorded in the company's last published balance sheet for the year 2012 as "claims against management bodies." In relation to this amount, eight (8) payment orders were issued to the parents of the defendant, who were then shareholders and members of the Board of Directors of the company, with the stated reason being "for his/her facilitation."

The relevant decision particularly accepted, among other things, that: "The combination of the expressions noted in the payment orders 'for facilitation' and the entry in the 2012 balance sheet that the amount in question was assumed by the parents of the defendant as 'claims against management bodies,' leads to the conclusion that this was a transaction entered into with these individuals, which was not a gift (otherwise it would not have been noted and calculated as a claim) and specifically involved informal loan agreements. However, as detailed in the aforementioned legal reasoning under III, such contracts between the company and its founders or members of the Board of Directors are automatically void. Therefore, there is no lawful cause for the enrichment of the defendant’s parents from the assets of the plaintiff company, and hence the defendant, as their heir and in accordance with the succession, is initially obliged to return it."