Successful appeal in revocation of resolution on partnership conversion

We are pleased to announce another success for our law firm before the Court of Appeal in Warsaw. This time, we successfully secured the complete revocation of a resolution on the conversion of a partnership to a capital company.

The resolution on the conversion of a limited partnership to a limited liability company envisaged significant changes in the positions of the partners. In particular, the articles of association included provisions for the complete exclusion of the shareholder’s right of control (Article 212 of the Code of Commercial Partnerships and Companies), the granting of control powers to a supervisory board appointed for an indefinite period, the introduction of a drag-along clause combined with the compulsory redemption of shares, and the imposition of substantial additional payments by the shareholders.

On behalf of our client, a shareholder of the company, we filed a claim for the declaration of invalidity or revocation of the resolution on conversion. The court of first instance did not accept the plaintiff’s arguments; however, the Court of Appeal identified a violation of good practices in the case. The court acknowledged that the resolution was intended to harm the shareholder and revoked it in its entirety. In its judgment, the court clearly emphasized the fundamental importance of the shareholder’s right of control. According to the court, the exclusion of this right marginalizes the shareholder, preventing them from overseeing other shareholders, gaining insight into the company’s contracts, customer billing issues, and established margins, and assessing the company’s financial basis for requesting additional payments.

This judgment demonstrates how important it is to obtain legal advice already at the stage of drafting the articles of association and evaluate the risks connected with them being possibly challenged in court. 

On behalf of the law firm, the case was handled by Katarzyna Reszczyk-Król, PhD.