The Board of Directors is in fact of fundamental importance for SAs (Read: The Board of Directors of the SA: Operation, Power, Members).
Introducing the chapter on General Assembly of SAs, (GA), we will be focusing in the particular importance and value of the highest body of the SA and of course the limitations of its power.
General Assembly of SAs: The scope of its decisions and powers
The General Assembly is established by law (: art. 116 law 4548/2018-as previously in force) art. 33 of Codified Law. 2190/1920) as the “highest body” of the SA (see Explanatory Report on art. 116, paragraph a, Law 4548/2018). The hierarchical organization of the SA is therefore demonstrated, at the highest level of which the General Assembly is located. It constitutes a collective body, the members of which are, exclusively, the shareholders of the company (in practice: owners of the SA and bearers of the financial risk of its activity).
The characterization of the General Assembly as the highest body of the SA derives from and is consistent with the nature of the responsibilities granted to it and recognized by the law: The General Assembly “…is entitled to decide on every corporate matter” (: art. 116).
The General Assembly of the SA has the power and authority, among other things, to elect (and freely recall) the Board of Directors (and the auditors) of the SA. To also exercise control and supervision over the activity of said bodies and persons – who are accountable for the actions of the respective management period. After the end of each corporate year, it approves (or not) their overall management. Therefore, the Board of Directors of the SA functions, in principle, as an executive body of the decisive will of the General Assembly (more precisely: of the majority of shareholders).
It would not be an exaggeration to note that the General Assembly is responsible for taking the most important (in terms of importance and gravity) decisions regarding the existence, activity and course of the company. Even regarding its dissolution. In fact, regarding certain decisions, its responsibility is exclusive (especially art. 117 – for which our next article).
Participants and decisions
The decisions of the General Assembly are, of course, made by the shareholders. Directly linked to the shareholder status is the right to appear (in person or by proxy) and actively participate in its meetings. Shareholders have the opportunity to request information – on the occasion of an upcoming meeting or during the work of the General Assembly. During its conduct, in fact, they have the right to take the floor and ask questions – in the framework predetermined by law. The ultimate purpose of all individual rights of this nature is, in principle, the creation of the necessary conditions for the documented exercise of the right to vote for each of the items on the agenda. It is assumed, of course, that they hold the right to vote either as full owners of their shares or, for example, as usufructuary or pledged creditors. During voting, it is not possible for them to participate, automatically, when they are deprived of the right to vote (e.g., holders of non-voting preference shares).
In order for the decisions of the General Assembly to produce legal results, the quorum and majority percentages must be met for the adoption of each decision, as provided for in the law and the articles of association. The voting of an individual shareholder (but not the sole or majority shareholder) has no consequences. It simply contributes to the formation of the corporate will, as expressed by the General Assembly. The decisions of the General Assembly, of course, are binding on all shareholders, regardless of whether they abstain, are absent or disagree (art. 116, sub. b).
The action of the General Assembly (in contrast to the permanent nature of the Board of Directors) is periodic. The body meets – but also exists to take decisions according to the law and its articles of association – only when convened for this purpose. Its convening is sometimes mandatory (:ordinary General Assembly) and sometimes when it is deemed necessary by the circumstances (:extraordinary General Assembly). It is important to provide the shareholders with the opportunity to participate in decision-making without necessarily holding a meeting or even by simply signing the relevant minutes (see art. 135 and art. 136 respectively).
Separation of Powers Board of Directors & General Assembly of SA
The management of the SA belongs, first of all, to the Board of Directors. The General Assembly, however, has the ability/power to intervene in the relevant competence of the Board of Directors. However, different views have been developed regarding the extent of this intervention. According to the prevailing (and correct) view, the General Assembly has broad and general competence. Furthermore, (art. 116 and 86) margins for (positive or negative) intervention by the General Assembly in the work of the Board of Directors are recognized.
It is important, however, to note that the GM’s power of intervention cannot lead to arbitrary usurpation of powers that have been assigned to other corporate bodies. In this context, the complete removal of the Board of Directors’ (legally derived) managerial power is excluded (after all, this would result in the Board of Directors being irresponsible ). But what is the point of such a choice by the GM? It would be simpler for it to choose (and elect) a new Board of Directors, which it would express and which would operate according to its directions (that and its substitute bodies)…
It is possible to limit the scope of the power of the Board of Directors on the basis of a statutory (and, therefore, general) provision. However, the limitation of the obligations of the members of the Board of Directors, as well as the alteration of their liability regime, are not issues that are amenable to statutory regulation. Any limitation of the duties of the Board of Directors is, however, tolerated by a specific-relevant decision of the General Assembly. Such a decision, usually, will concern a specific act (or unit of competences) of the Board of Directors. Regardless, however, of any theoretical concerns, the influence of the decisions of the Board of Directors should be considered, as a rule, a given, as the majority shareholders are the ones who elect – and maintain in power – the members of the Board of Directors. They, in turn (the members of the Board of Directors), express and defend the interests of the majority shareholders, which, as a rule, they promote. Sometimes even before the corporate equivalents.
It is possible that the articles of association require prior information and/or consent or (ex post) approval of the General Assembly for the performance of specific management actions by the Board of Directors or substitute bodies. Especially when decisions are to be taken that by their nature create risks for the company (such as the transfer/sale of significant assets). It is accepted, and rightly so, that the General Assembly is not only entitled but also obliged to intervene in defense of the interests of the shareholders (Greek Commercial Code 2263/2003).
The decision-making by the General Assembly beyond the limits of its authority does not create any obligation of compliance or commitment towards the Board of Directors. Of course, given the fluidity of the relevant limits, the scope for shareholder intervention must be assessed on a case-by-case basis and always in accordance with the prevailing circumstances. Greater freedom of intervention by the General Assembly in matters of corporate organization is recognized, provided that it is an unlisted company. On the contrary, in listed companies, given the asymmetry of interests between the General Assembly and the Board of Directors, the involvement of the General Assembly is understood in decisions that (in terms of subject matter and importance) escape the current management of the Board of Directors.
Binding Force of General Assembly Decisions – Conditions
The decisions of the General Assembly produce, according to the aforementioned, binding results and develop legal consequences for all shareholders of the SA. And this, regardless of whether the shareholders participated or not in the crucial meeting (and/or vote). Regardless, in fact, of whether they voted for or against.
Binding force, however, is produced by the legal decisions of the General Assembly. Legality is examined at two levels: (a) compliance with the legal decision-making process and (b) compliance of the content of the decision taken with the law and the statutes.
In particular, the General Assembly takes valid decisions if it has been convened, constituted and decided in accordance with the legal forms and the (possibly existing more specific) statutory provisions. In the event that a relevant defect is found, the decision will be voidable. This practically means that it will produce, normally, legal effects, until it is voided by a final court decision (: art. 137).
As for its content, in the event that the decision taken contradicts the law and/or the statutes, it will be invalid (art. 138 – however, the possibility of curing the invalidity is provided for under §4 of the same article).
Shareholders – as already mentioned – have the possibility to make a decision without a meeting. Either remotely at the General Assembly using electronic means (art. 135) or through the countersigning of minutes without a meeting (art. 136). Similarly, the decisions of the previous paragraph are also binding on dissenting shareholders. However, in the case of countersigning of minutes, for the decision to be valid, it is required that it bear the signatures of all shareholders.
Finally, in the event that more than one class of shares has been issued in the SA, for the legal adoption of certain decisions by the General Assembly (e.g. to increase or decrease the share capital), relevant approval is required from the special meeting of the class of shareholders affected by the specific decision. Similarly, a decision of the special meeting is required to be taken by the shareholders representing preferred shares upon a decision of the company to abolish or limit their privilege (art. 38 §7).
There is no doubt that the General Assembly of a company is the highest body of the company. However, this does not mean that it can abolish or replace its other bodies. It also does not mean that it can operate without rules. Moreover, its operation and decisions are subject to judicial review for their legality. We must be particularly careful in this regard at all stages: convening, conducting, decisions. However, for its exclusive competence, decisions, 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.