Transactions in the real estate market, in which the party is a capital company, are not uncommon, and as a result, as the Supreme Court (II CSKP 144/22) has ruled, the counterparty of the company must account for the risk of nullification of such a transaction. “When a company shareholders’ assembly or general assembly does not authorize a transaction, or such approval is challenged, there is a risk that the transaction will be invalid” – says Paweł Szumowski, a member of the Corporate Law and Mergers and Acquisitions team at the Wolf Theiss law firm in Poland.
As a rule, the transfer or acquisition of key assets of capital companies, such as real estate, requires obtaining the approval of the shareholders’ assembly or general assembly. It is also possible to revoke the requirement for shareholders approval in the text of the contract or the company’s statute if shareholders or stockholders wish.
The decision to apply or remove the requirement for obtaining such approval is made at the time of company creation. However, there is no problem to change the primary approach and make the appropriate amendment to the contract or the company’s statute. It is important to remember about art. 229 Commercial Companies Code, which introduces additional time frames for obtaining approval for acquisition. According to this, a contract for the acquisition of real estate or a share in real estate or fixed assets for a price exceeding one quarter of the company’s share capital, not less than PLN 50,000, concluded within two years from the date of company registration, requires a resolution of the partners unless the contract was provided for in the company agreement.
Real estate developers and other companies dealing with the real estate market primarily waive the requirement for approval to transfer or acquire property. This makes real estate trading easier. However, many companies reserve the right to acquire or transfer property as a way to protect significant assets against unauthorized actions by the management – notes Paweł Szumowski from Wolf Theiss.
If appropriate exclusions are not introduced in the contract or company’s statute, each transaction involving a real estate transfer will require the approval of the shareholders’ assembly. It does not matter whether the property is used for the company’s business activities or is simply part of its fixed assets.
To facilitate real estate trading, the legislator allows the approval of the shareholders’ assembly or general meeting to be issued even two months after the transaction (Art. 17§2 Commercial Companies Code). However, in such a situation, the principle of limited autonomy of commercial law would not apply, and Art. 157 Civil Code, which states that the ownership of real estate cannot be transferred under condition or with a time reservation, would not apply. However, the Supreme Court seems to approach this issue differently in its ruling (II CSKP 144/22). It states that in the case of concluding a preliminary contract, the absence of shareholders’ assembly resolution prevents the entitled party from successfully claiming the conclusion of the promised contract. This position of the Supreme Court could be considered as an interpretation against article 17 § 2 Commercial Companies Code. It would introduce significant uncertainty as to the validity of real estate transactions, which the shareholders’ assembly or general meeting gave subsequent approval. It seems that this was not the intention of the Supreme Court – emphasizes Iwona Huryn from the Real Estate and Construction team at the Wolf Theiss law firm.
In addition, as rightly pointed out by the Supreme Court in the discussed decision, the approval contained in the resolution of the shareholders’ assembly or supervisory board is one of the elements that collectively form the company’s declaration of intent. This declaration of intent of the company is a component of the legal act performed by the company. Thus, the approval contained in the resolution of the shareholders’ assembly or supervisory board is an element that will always be required for the effectiveness of the legal act, regardless of whether it comes from the will of the parties or as a result of enforcing a claim to make a declaration of intent.
Buyers who risk and acquire real estate without the consent of the shareholders’ assembly or general meeting must reckon with the annulment of the legal act. Such a risk is also borne by buyers who have not checked whether the resolution was passed or can rationally assume that the resolution about the approval for the transaction will be challenged. Only the company’s counterparties acting in good faith do not have to fear the negative effects of a lawsuit to annul the resolution. They benefit from the code protection, which ensures that the annulment of such a resolution has no effect against them. Therefore, it is worth verifying before making a disposing act with the company whether the resolution on consent to make a transaction involving real estate has been given, what is its content and whether a challenge can be expected. However, in any case, if the resolution has been nullified, the executed transaction also becomes void by law – comments Paweł Szumowski.
As experts emphasize, the Supreme Court in the discussed ruling is putting significant pressure on the role the approval of the shareholders’ assembly or general meeting plays for the validity of a legal act, which is required by law. The sanction of nullity for such “incomplete” legal acts ensures the security of real estate trading, for example, in the event of the company management acting in bad faith. The decision, however, introduces doubt as to the determination of the moment when such approval for the real estate transfer or acquisition transaction should be granted, although it seems that this interpretation of the Supreme Court’s thesis will not be repeated.
Source: https://managerplus.pl/ryzyko-niewaznosci-umowy-nabycia-nieruchomosci-analiza-orzeczenia-ii-cskp-144-22-44598
