Control of the limited liability company’s activities by a shareholder

Experience / 13.12.2016

The Law Firm represented a Client – a limited liability company, in a case concerning the control of the activities of this company by one of its partners, who is an investment fund.

The dispute between the shareholder and the company arose from the fact that the shareholder, relying on Article 212 § 1 of the Commercial Companies Code, demanded that the company inspect its documents, in particular those related to its core business of leasing commercial space. In connection with the refusal to provide access to these documents, after exhausting the “intra-company” procedure (Article 212 § 3 of the CCC), the shareholder filed an application with the registry court to oblige the management board to provide access to the company’s documents for inspection.

In the course of the proceedings, the Law Firm’s lawyers argued that if the documents had been made available to the shareholder, he could use them for purposes contrary to the interests of the company, and thus cause significant damage to the company. Such a view was based on a factual situation in which the real beneficiary of the fund, i.e. the applicant, was an entity directly involved in activities competitive to those of the company.

The registry court shared the Law Firm’s position, as did the court of second instance. The above dispute shows that a limited liability company is not obliged to provide shareholders with access to complete documentation in every case. This is because, in a particular state of affairs, such access may give rise to the fear of using the documents for purposes contrary to the company’s interests, and thus causing the company significant harm. Such grounds may arise, in particular, when a shareholder is engaged in competitive activities. As the above case confirms, such fear may also arise when the documents may be used not by the shareholder himself, but by the real beneficiary, who, as it were, hides behind the entity that is the direct shareholder.

In the circumstances described above, cooperation with the law firm allowed the Client to maintain commercial confidentiality and not to share the Client’s confidential information with the shareholder, and thus the real beneficiary.