On 20th January 2020 the Romanian High Court delivered its judgement referring to whether the decisions adopted by the special meeting of shareholders can be challenged in court with action for annulment.

The issue arose from a court decision in Bihor, due to a lack of an accurate legal framework regarding the special meetings of shareholders.

Article 116 of the Companies Law states that” (1) The decision of a general meeting to modify the rights or obligations regarding a category of shares produces effects only after the approval of this decision by the special meeting of the holders of shares in that category. (2) The provisions of this section regarding the convening, quorum and holding of general meetings of shareholders shall also apply to special meetings. (3) The decisions initiated by the special meetings will be subject to the approval of the corresponding general meetings”.

Article 132 of the Companies Law states that ” (1)The decisions taken by the general meeting within the limits of the law or the constitutive act are mandatory even for the shareholders who did not take part in the meeting or voted against it. (2) The decisions of the general meeting contrary to the law or the constitutive act may be challenged in court, within 15 days from the date of publication in the Official Gazette of Romania, Part IV, by any of the shareholders who did not take part in the general meeting or who voted against it and asked to insert that mention in the minutes of the meeting”.

The provisions of the Companies Law refer only to the general meetings of the shareholders and do not expressly mention nor refer that the decisions of the special meetings are to be subject to the same rulings regarding the possibility of challenging them in court.

The shareholders holding preferential shares with priority dividend (these shares give the holders preferential rights to dividends but not the right to vote in the general meeting), can meet in special meetings under the conditions established by the constitutive act. The decision of the special meetings of the shareholders regards only the category of shares held but such decisions need to be approved by the general meeting of the shareholders.

Having this in mind, the issue arises in knowing if the decisions that were taken as a result of a special meeting are to be challenged in court by the ones who have the power to do so ( i.e.: a shareholder who voted against and asked to have inserted that mention in the minutes of the meeting) or the decisions of the special meetings cannot be challenged and only the decisions of the general meetings have that prerogative.

The second interpretation could lead to situations when the rights of the shareholders holding preferential shares with priority dividend would be violated. For example, if the special meeting was not legally summoned such irregularities could not arise and the decision taken by such a special meeting cannot be challenged in court because if the general meeting for the approval of the decision of the special meeting (that was held without being legally summoned) would meet all the requirements (including conditions regarding the summoning) then the requirements regarding the special meeting could not be analysed or investigated.

The legislative void regarding the special meetings of the shareholders could have led to situations where decisions of the special meeting of the shareholders cannot be challenged in court and some could, depending on the interpretation of each court.

Noticing the different possible interpretation, the High Court of Cassation and Justice concluded (Decision no. 7/ January 20th, 2020) that in the interpretation and application of the provisions of art. 132 referred to in art. 116 of Companies Law, the decisions adopted by the special meeting of shareholders can be challenged in court with an action for annulment.

This case will now clarify the position regarding some of the rights of shareholders with different classes of shares.

Oana Panduru/Nicholas Hammond,

Bucharest

April 2020