Pre-emptive rights and laggard courts cramp company goverance

Delegates to Friday's Corporate Governance conference organized by the Foundation for Accountancy Development in Poland (FRRwP) argued that pre-emptive voting rights were responsible for distorting the images of companies . They commended the provisions of article 325 of the amended Commercial Code, which calls for eliminating such rights. According to the new code, each share would entitle the holder to no more than two votes. Yet a problem arises regarding the elimination of the privileges of those shareholders currently enjoying pre-emptive rights. The standards of the Organisation for Economic Co-operation and Development (OECD), to which Poland is a signatory, state that the privileges of shareholders can be reduced or eliminated only if an appropriate compensation is paid. Delegates also agreed that the inefficiency of Polish courts is responsible for inhibiting the smooth governance of corporations in Poland. The amended code allows any shareholder to file a lawsuit in a commercial court if he believes that a decision taken at a shareholders' meeting could harm the company. This privilege, according to delegates, could further paralyze the business development of the company in question, since even merger controversies remain delayed in the inefficient court system for wastefully long periods of time. (Prawo i Gospodarka, Oct. 21-22, p.15).