Persons Entitled to Participate in the General Assembly of a Société Anonyme (SA)
Entitlement to Participate in the General Assembly of an SA (Article 124 §1 of Law 4548/2018): The General Assembly is the supreme body of the SA. Τhe right to participate in its proceedings is therefore of fundamental importance, as it does not merely constitute a (simple) right of attendance; rather, it is a necessary condition for participating in discussions on the agenda items and for exercising a number of shareholder rights—most important of which is the right to vote. It is therefore reasonable for us to be concerned with the question: who are the ones entitled to participate in the General Assembly of an SA?
The regularity of the formation of the General Assembly
Any shareholder who has (and proves) their specific capacity on the day of the meeting is entitled to participate in the General Assembly (art. 124 §5, sub-paragraph a). The Chairman of the General Assembly is responsible for verifying the regularity of its formation as well as the identity and legitimacy of those present (art. 129 §2).
Accordingly, a prerequisite for participation in the proceedings of the General Assembly is, in principle, shareholder status and proof thereof, provided that no additional procedural requirements for shareholder legitimization have been laid down in the articles of association (according to art. 124 §3).
Shareholding and voting rights
To be entitled to participate in the General Assembly, a person must be a shareholder during its proceedings. However, the possession of voting rights is not required, as shareholders holding non-voting shares are also entitled to participate in the General Assembly. It is clarified, however, that such shareholders are not counted for the formation of a quorum (Article 124 §1(c))—that is, neither in the numerator nor in the denominator of the relevant fraction, as expressly clarified in the Explanatory Report to Law 4548/2018 on Article 124. Moreover, shares without voting rights are likewise not counted for the formation of a majority.
Participation of legal entities-shareholders
Shareholders of an SA that are legal entities participate in the General Assembly through their representatives (Article 124 §1(c)).
The relevant provision of Law 4548/2018 aims to eliminate doubts that had arisen under the wording of the previous legal regime. Under that regime, the “appointment” of representatives was required, giving rise to controversy as to whether a legal-entity shareholder could participate in the General Assembly through its legal representative or only through a specially authorized person.
Given, therefore, the omission of the law to refer to an ” appointment” of a representative, it should be accepted that any legal entity-shareholder is represented at the General Assembly by its legal representative. In the case of, for example, an SA-shareholder, by the Board of Directors or by a substitute body thereof. The authority to represent the legal entity at the proceedings of the General Assembly naturally requires appropriate legalization and the relevant supporting documents. In the case of an SA-shareholder, as a rule, the articles of association and the relevant minutes of the Board of Directors (published in the competent Business Registry) are sufficient to establish such authority.
Participation based on a court order
Disputes may arise concerning a person’s shareholder status and/or their ability to participate in the General Assembly. A court decision resolving such issues—whether temporarily, provisionally, definitively, finally, or irrevocably—may grant or recognize the relevant authority to participate.
If a subsequent court decision (whether rendered in interim proceedings or by a higher court) overturns an earlier decision, the resolutions adopted at the previous General Assembly are not affected for that reason alone. This is because even the temporary regulation of a situation by interim measures (such as participation and voting in the General Assembly) is considered irrevocable for the purposes of that Assembly.
Beneficiaries: persons who are not shareholders
There are also some cases, expressly provided for by law, in which third parties are entitled to participate in the General Assembly. Such cases include the participation of the usufructuary (where usufruct exists over shares) and the pledgor (when there is a pledge on shares) , provided that no different arrangement—permitted by the articles of association—has been agreed between the parties (Article 54 §2).
These cases should not be confused with the participation of shareholders’ representatives, who are not considered “third parties.” Nor should they be confused with the simple attendance of third parties at the General Assembly, such as members of the Board of Directors, auditors, external accountants, legal counsel of the SA, executives or associates, or other persons attending with the permission of the Chairman (Article 127). Such persons do not “participate” in the General Assembly but merely attend its proceedings in order to assist.
Proof of shareholding
It is not sufficient for share ownership merely to exist; it must also be proven.
Proof of shareholder status differs from the previous legislative framework. Law 4548/2018 abolished the mandatory preliminary legalization procedure, the institution of share blocking, and the obligation of prior notification to the company regarding participation in the General Assembly. Consequently, the obligation of the Board of Directors to prepare a list of shareholders entitled to participate in an upcoming General Assembly was also abolished.
Under the previous regime, this procedure aimed to facilitate shareholders in proving their status and to assist the Board of Directors in verifying such status and compiling the relevant list. In practice, however, it proved excessively bureaucratic and, in most cases, devoid of substantive value.
Today, shareholder status may be proven by any appropriate means on the date of the General Assembly. This is due both to technological developments allowing faster and more direct identification of shareholders and to the legislature’s assessment that the former procedure was unnecessary (see the Explanatory Memorandum to Law 4548/2018 on Article 124).
Proof may be provided by presenting the shares certificates (equity securities) owned by the shareholder during the General Assembly, provided that the SA has issued and delivered such certificates. It should be recalled that, in principle, an SA is obliged to issue and deliver share certificates [Article 40 §3(a)], although the articles of association may exclude or limit this obligation [Article 40 §4(a)]. If the SA has failed to comply with this obligation, the consequences of such omission cannot be borne by the (innocent) shareholder.
Proof of the shareholder status can be provided by the shareholder presenting their own shares during the General Assembly which it owns – provided, of course, that the SA has issued and delivered such to its shareholders. Let us remember here that the SA is obliged, in principle, to issue and deliver to the shareholders share certificates (art. 40 §3 sub. a). However, the articles of association may exclude or limit the specific obligation of the SA (art. 40 §4 sub. a). However, the SA itself may not have fulfilled its relevant obligation. The consequences of such an omission cannot be borne by the (innocent) shareholder.
Where the issuance of shares is excluded, restricted, or omitted, the articles of association must also specify the method for proving shareholder status (Article 40 §4(b)). If no such statutory regulation exists—or in any other case where shares have not been issued—proof of shareholder status is based on the entries in the shareholders’ book, supplemented where necessary by documents held by the shareholder [Article 40 §4(c)].
In the case of shares issued in book-entry form (dematerialized shares) – (art. 40 §5), a shareholder vis-à-vis the SA is the person registered in the records of a central securities depository or, alternatively, the person identified as such through registered intermediaries (art. 40 §6).
Registration in the shareholders’ book
According to the law (art. 40 §2 sub -paragraph e), a shareholder vis-à-vis the SA is considered to be the one who has been registered as such in the shareholders’ register. However, this is a formal legitimization of the registered shareholder. At the same time, the existence and possession of shares is declarative (and not constitutive) of their status as such. Consequently, registration in the shareholders’ register and any possession of shares are not always sufficient (evidentiary) conditions for someone’s participation in the General Assembly. The person claiming his participation in the General Assembly is required to be substantively legitimized.
For example, where usufruct exists over shares, the right to participate and vote in the General Assembly should belong to the usufructuary, if the latter is the one who claims such participation. I n this case, the bare owner, although registered as a shareholder, is not entitled to vote unless otherwise agreed. The bare owner may exercise voting rights only if this has been agreed upon—explicitly or implicitly—when the usufruct was established and provided that such arrangement is not prohibited by the articles of association. The same may also apply where shares are pledged and the secured creditor participates in the General Assembly instead of the shareholder registered in the shareholders’ register.
It is also possible for a person to acquire shareholder status on the very day of the General Assembly, before registration in the shareholders’ register has taken place. In such a case, the new shareholder’s legitimization may be established by documents evidencing the acquisition of the shares (e.g. a share transfer agreement) or by any other appropriate means.
Participation in the General Assembly of an SA—particularly the exercise of rights during its proceedings and, above all, the exercise of voting rights—is of critical importance both for the shareholder and, especially, for the SA itself. Determining whether to accept or reject a person’s participation is not always straightforward. An incorrect decision may lead to invalidity, with potentially serious consequences. The matter becomes even more complex when additional procedural requirements are imposed by the articles of association. These issues, however, will be addressed in our next article.
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (January 14th, 2024).
Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.