Shareholders’ Rights before the General Assembly of the SA
Shareholders’ Rights before the General Assembly of the SA (art. 123 of Law 4548/2018): It It is extremely important to ensure the proper preparation of shareholders and the effective protection of their specific rights before the meeting of the General Assembly, the supreme body of the SA. The legislator, through the rules and the for its convening aims at them. In this context, shareholders are ensured access to specific information relating to the items on the agenda. The present article addresses these matters.
Shareholders’ Rights: Obligation to Provide Shareholders with Annual Financial Statements & Board and Auditors’ Reports
Content of obligation
The of the SA approves its annual financial statements and the relevant reports of the Board of Directors and the auditors. In this context, the SA is obliged to make these documents available in advance to its shareholders, irrespective of the percentage of their participation or any lack of voting rights. This obligation is fulfilled by the Board of Directors at least ten days (as a rule) before the ordinary General Assembly (Article 123 §1). In calculating this mandatory (and non-reducible) ten-day period, neither the day of the ordinary General Assembly nor the day on which the documents are made available to shareholders is included.
The relevant provision is similar to the corresponding provision of the former Law 2190/1920. However, (subject to Article 123 §2, paragraph e), a prior request from the shareholder is no longer required.
Purpose of the Obligation
The establishment of the above obligation aims to prepare shareholders appropriately for their participation in the ordinary General Assembly of the SA. In particular, it enables them to form a clear view of the financial position of the SA prior to the meeting. It also facilitates the exercise of voting rights, where such rights exist. It is evident that this obligation operates in a complementary manner to the other information rights of shareholders, whether individual or minority rights.
Methods of Disclosure
The SA fulfills its above obligation by posting the relevant information on its website – provided, of course, that it maintains one (art. 123 §2 sub -paragraph a).
If the SA does not maintain a website, the information is sent to shareholders, provided that they have notified the SA of their contact details in a timely manner (art. 123 §2 sub -paragraph b). The method of transmission is at the discretion of the Board of Directors. However, that discretion is subject to review for abuse (Article 281 of the Civil Code), as it must ensure valid and timely information of shareholders. As a rule, sending the information by email or by ordinary letter to the address declared by the shareholder is sufficient. More stringent methods (such as registered mail or service by a bailiff) should be selected where special circumstances so require (e.g. pending litigation, bad faith on the part of the shareholder, or the need to prove the time of dispatch).
Any transmission by letter must take place at least fifteen days before the regular General Assembly.
Once the SA proves the timely and lawful dispatch of the information—where the shareholder has requested it to be sent—the obligation is deemed fulfilled, and the shareholder is no longer entitled to raise objections.
Finally, where shareholders have failed to disclose their contact details to the SA in a timely manner, the relevant information is provided only upon their request to the company (Article 123 §2 in fine).
Breach of Obligation
In the event of a breach of the above obligation, the decision of the General Assembly adopted thereafter is voidable (according to the prevailing view) (art. 137 §1, sub -paragraph a).
Support for this position arises from an a contrario interpretation of Article 137 §5(e). Specifically, this provision explicitly excludes the possibility of seeking annulment of a General Assembly decision in the cases referred to in Article 123 §§3–5. However, it makes no reference to §§1 and 2 of the same article, which concern the obligation to make available to shareholders the annual financial statements and the reports of the Board of Directors and the auditors.
On this basis, any shareholder holding at least 2% of the share capital (Article 137 §3(a)) is entitled to seek annulment of a General Assembly decision adopted in breach of the statutory obligation to provide information, provided that they opposed the adoption of the relevant agenda item.
If a shareholder has incorrectly, through their own fault, communicated their contact details to the SA (or failed to notify the SA of a subsequent change), they are not entitled to complain, and the relevant decision of the General Assembly cannot be annulled (Decision 2090/2004 of the Athens Multi-Member Court of First Instance).
In any event, the shareholder retains the right to seek the provision of the above information from the Board of Directors—although the latter may refuse—through the procedure of interim measures (Decision 11323/1987 of the Athens Single-Member Court of First Instance).
Shareholders’ Rights: Additional Shareholders’ Information Obligations Before the General Assembly
For both listed and unlisted companies
In addition to the above obligation regarding the regular General Assembly, the law also provides for additional information obligations. These arise from the day of publication of the invitation to convene (each) General Assembly until the day of its holding.
Specifically, both listed and unlisted companies—following the extension of the obligation to unlisted companies under the current legal framework—must, from the publication of the invitation until the day of the General Assembly, make available to shareholders at their registered office (or, in the case of listed companies, post on their website – art. 123 §5 sub -paragraph a), at least the following additional information (art. 123 §3):
(a) the invitation for convening the General Assembly,
(b) the total number of shares and voting rights, including any separate totals per class of shares, and
(c) the forms to be used for voting by proxy or agent, and, where provided, for voting by correspondence and for voting by electronic means (unless such forms are sent directly to each shareholder).
Especially Regarding Listed Companies
For listed companies, the law provides for additional information obligations, with the aim of further facilitating the effective participation of shareholders in the General Assembly.
Specifically, SAs whose shares are admitted to trading on a regulated market must, from the date of publication of the invitation until the day of the General Assembly, make available to shareholders at their registered office or post on their website (art. 123 §5 sub -paragraph a) the following (art. 123 §4):
(a) the documents to be submitted to the General Assembly,
(b) a draft of a proposed decision for each item on the agenda; alternatively, a comment from the Board of Directors – if no decision has been proposed for approval, and
(c) any draft resolutions that may have been proposed by the shareholders (in accordance with art. 141 §3), immediately upon their receipt by the company.
Furthermore, listed SAs have the possibility to post the immediately above information that concerns them (of art. 123 §§ 3 and 4) on their website (art. 123 §5 sub -paragraph a).
Where, for technical reasons, it is not possible to access forms for voting by proxy, by correspondence, or by electronic means via the internet, the SA must indicate on its website the method for obtaining the forms in paper format and must send them free of charge to any shareholder who so requests (Article 123 §5 in fine).
Breach of Additional Information Obligations
Unlike the violation of the aforementioned obligations to provide shareholders with the annual financial statements & reports of the Board of Directors and the auditors (§§1 and 2 of art. 123), any violation of the above additional obligations (§§3-5 of art. 123) does not affect the validity of the decision of the General Assembly. However, the Board of Directors is liable for compensation to shareholders, if damage is proven to be causally linked to the relevant violation (see, in this regard, Explanatory Memorandum of Law 4548/2018 on art. 123).
The protection of minority shareholders of an SA and their proper preparation for an upcoming General Assembly presuppose their timely and adequate information. The law imposes specific obligations on the SA and its Board of Directors in this respect. Breaches of these obligations are not without consequences—sometimes even significant ones. It is the responsibility of the Board of Directors to ensure their diligent and faithful observance.
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.