More access to company books
By : Lejb Fogelman
You can't seem to pick up the paper these days without seeing yet another story of secret business dealings by the top management of big companies. These sorts of actions are inherently contrary to shareholders' interests in having access to information needed to assess their investment. While the informational sources for public companies is fairly broad, shareholders in private companies have a shallower pool of information. The Commercial Companies Code ("CCC") and recent amendments to the Act on Public Trading in Securities ("Securities Act") introduced a few additional sources for official company information. Neither of these, however, will get you the keys to the secret safe.
Traditionally, the best sources for information about a Polish company have been outside of the company. The quest typically begins with a trip to the registry court where companies must file certain basic corporate documents and information.
If you could not find what you needed at the registry court, the next stop is usually one of the official publications. By law, a company must publish certain announcements in Monitor Sadowy i Gospodarczy. Additionally, a company may decide, or may be required in its charter, to make announcements in some other manner. The financial statements of bigger companies may be found in Monitor Polski B, which is also the place to look for current and periodic reports of public companies.
When it comes to getting information firsthand from a company, the rules vary. In the smaller, more closely held (at least theoretically) limited liability companies, a shareholder may at any time inspect the company's books, request the preparation of a balance sheet or demand explanations from the management board. However, if a supervisory board or audit commission has been established, the direct informational right of a shareholder may be limited or even abolished. As joint stock companies must have a supervisory board, the shareholders of these companies do not have a right of direct supervision and, accordingly, have no right to march into a company and inspect its books.
Perhaps recognizing that a supervisory board might not always be interested in the same information as a shareholder, Article 428 of the CCC allows shareholders to request information directly from the management board. Upon request, the management board must provide during a shareholders meeting or in certain instances within two weeks after the meeting shareholders with information concerning the company, if this information is necessary to assess a matter included on the shareholders meeting agenda. In practice, it may be difficult to evaluate what information is necessary, particularly if the information is secret.
The CCC allows the management board to refuse disclosure of information that could harm the interests of the company, a related company or a subsidiary. In particular, a management board may decline to disclose technical, trade or organizational secrets of the company or any information that could render a member of the management board subject to criminal, civil or administrative liability if disclosed.
The management board may also provide shareholders with information about the company at times other than the shareholders meeting, but the same restrictions on disclosure mentioned earlier apply. The management board should only disclose in writing information requested by a shareholder outside of a shareholders meeting. The management board should then include this information in the documents to be submitted at the next shareholders meeting. However, any disclosure of information outside the shareholders meeting should be considered in light of the general rule in the CCC that shareholders be treated equally in similar circumstances.
What happens if the management board refuses to disclose requested information? The shareholder should note an objection in the minutes of the shareholders meeting and may file a claim with the registry court within one week after the meeting. The shareholder may also file a claim to seek publication of information that was provided to another shareholder outside the shareholders meeting.
With public companies, the management board should consider prior to disclosing any information to shareholders whether it would be deemed confidentional under the Securities Act and whether the company should publish a report disclosing this information.
Recent amendments to the Securities Act give shareholders of public companies another source for information. The shareholders meeting of a public company may, following a motion proposed by a shareholder or shareholders holding at least 5% of the total number of votes at the shareholders meeting, adopt a resolution calling for the appointment of a special auditor to examine a particular issue related to the incorporation of the company or its business activities. The resolution should specify the purpose and extent of the examination, the documents that the company should make available to the auditor and the opinion of the management board on the resolution.
If the shareholders meeting rejects the resolution for the appointment of a special auditor, curious shareholders should not lose heart. Those shareholders proposing the resolution may, within 14 days following the vote on the resolution, apply to the registry court for the appointment of an auditor. In this case, however, the right of shareholders is subject to some limitations that may be used to inhibit the obstructive shareholder. Upon the request of the management board, the court requires that the applicants give security as a condition to the appointment of an auditor. If the examination reveals that no legal violation occurred, the court may, again upon the request of the management board, forfeit the security to the benefit of the company.
The management board and the supervisory board of a public company must give a special auditor access to documents specified in the resolution of a shareholders meeting or the court decision and provide all necessary explanations.
After the examination, the auditor must submit a written report on the results of the examination to the company's supervisory and management boards. This report must be disclosed to the public in the form of a current report.
In summing up, those two new regulations give shareholders additional access to company information. The question that remains is how they will work in practice. If shareholders will have to wait a long time for a court decision when a company refuses to disclose information, the information sought may be out of date.
This article was prepared by Lejb Fogelman, the managing partner of Hunton & Williams' Warsaw office, with the assistance of Daniel Kaczorowski, an associate attorney.
