Partial interpretation of an "existing understanding between shareholders in a public company"

Pursuant to Article 158a of the Act on Public Trading in Securities (the "Article") the shareholders of a public company are obliged to disclose any existing written or oral understandings between them regarding the joint acquisition of the company's shares, any concerted voting of shareholders in general meeting on matters of significance for the company, and any pursuit of a long-term joint policy regarding the public company's management. Different interpretations made by commentators and the lack of relevant court decisions mean that neither lawyers nor shareholders have been able to determine the type of cooperation necessary to establish existing unde rstanding between shareholders under the Article. As a result there have seen a large number of controversies. Shareholders of public companies have relied upon this Article to state that certain other shareholders have acted in accordance with an understanding which had not been disclosed to all shareholders with the result that the resolution of the general shareholders meeting be declared null and void. The existing conflict between the management board of one Polish public company and a group of its share holders which were interested in increasing their representation on the supervisory board brought about a solution which could be helpful in the interpretation of the Article. The group of shareholders requested the convening of a shareholders meeting in which they intended to adopt a resolution to change the composition of the supervisory board. The ma nagement board stated that this request was proof of an existing under standing between the shareholders and filed an application with the court to restrict the voting rights of the shareholders. The provincial court agreed with the arguments of the management board. This decision was criticized by, inter alia, the Polish Securities and Exchange Commission and lawyers specializing in capital market law. The appeal court overruled the decision and stated that general request to convene a shareholders meeting should not be treated as an existing understanding between shareholders. This d ecision is an important step in the process of interpreting this Article. According to experts' opinions, such an interpretation would help minority shareholders to defend their rights without giving rise to the claim that there is an existing understanding between minority shareholders. For further information please contact Lejb Fogelman or Jaroslaw Grzesiak. Dewey Ballantine Grzesiak Limited Partnership, Stock Exchange Building, ul. Ksiazeca 4, 00-498 Warsaw, Tel +48 22 690 6100, Fax +48 22 690 6222, w ww.deweyballantine.com