GENERAL SHAREHOLDERS’ MEETING FOR THE MINORITY SHAREHOLDERS OF THE S.A.

José DutilhManaging Partner, LeQuid, The J.Dutilh Law Firm For Social Impact

 Remember:

  • It is important to identify yourself correctly.
  • Ask for information up to 7 days before the Meeting.
  • Request the information for 25% of the share capital to avoid being denied.
  • 5% of the share capital to request the appointment of Accounts Auditor.
  • 5% of the share capital to request a notary presence in the Meeting.
  • 5% of the share capital to request the complement to the call in 5 days from publication.
  • 1% of share capital to contest an agreement

The General Meeting is the corporate organ in which the will of the partners is formed and in which they exercise their rights. Below we will refer to a series of recommendations to get the Board to convene and develop effectively and without unexpected incidents.

Discriminatory treatment of minority shareholders is common, resulting in the approval of agreements detrimental to them. The law provides for a series of rights that they may exercise to prevent abuse. It is good to know them to prevent and avoid violation of their rights:

1. Make sure that they are correctly identified on the attendance cards (if any).

2. Ask for the information and/or clarifications deemed pertinent in relation to the items on the agenda and prior to holding the Meeting:

  • The deadline for submitting the request for information is 7 days before the meeting. You can also ask questions in writing.
  • The directors are required to respond in writing until the day of the meeting.
  • While the Meeting is being held, requests for clarifications can be made that are considered convenient. If they cannot respond in the moment, directors have 7 days from the end of the meeting to do so.
  • Directors are required to provide the information unless:
    • It is understood as unnecessary for the protection of shareholder rights or;
    • There are reasons to believe that it will be used for purposes outside of the business or;
    • The advertising is harmful to the company.
  • Also, make sure that the shareholders requesting information represent at least 25% of the share capital (unless a lower one is established in the articles of association), since in that case it cannot be denied.

If a shareholder understands that their right to information has been violated, he/she may:

  • Require compliance with the obligation to report as well as the damages that this infraction may have caused (if the breach is during the Meeting).
  • Challenge the agreement concerned if the violation is prior to the Meeting and is considered essential, relevant or determinant for the exercise of the right to vote. The judge will rule in an incident of prior ruling on the relevance, or lack thereof, of the violation.

3. Request (the shareholders representing 5% of the share capital), if deemed appropriate, the appointment of an Auditor to revise the annual accounts when the company is not required to designate them and even request their replacement when there is just cause (art. 265 and 266LSC).

4. Request the presence of a notary at the Meeting to record minutes, whose fees shall be borne by the company (art. 203.1 LSC). Shareholders who represent 5% may do so up to 5 days before the Meeting.

5. In the five days following the publication of the call, request the complement to the call (for 5% of the share capital) if they estimate that there is a point of the day that should be included and has not been included in the announcement of the call.

6. During the meeting, respect turn-taking.

7. Bring the Shareholder Register to avoid a possible violation of the right to vote.

8. Verify that the content of the Meeting minutes is correct, by making use of the power to intervene in the act provided for by law (article. 202 LSC).

9. In cases where a vote is taken against an agreement, record its opposition in case of a possible challenge by considering it as contrary to the law, articles of association or public order (art. 206 LSC). An express formula could be as follows: “I hereby state my opposition to the adopted agreement with the understanding that it damages, for the benefit of the majority, the general interests of the company.”

10. Exercise the right of separation if one of the legal causes is fulfilled[1]or statutes that allow it. The deadline is one month from the publication of the agreement or receipt of the communication (article 348.2 of the LSC).

[1] When the corporate purpose is substantially replaced or modified; extension of the partnership; reactivation of the company; creation, modification or early termination of the obligation to perform ancillary services, unless otherwise provided by the statutes or any other that as established in the statutes.

LEQUID