The need to address the subject
As the declaration of nullity or voidness of a corporate resolution concerns a form by which a company is bound, the same entails significant internal and external repercussions in its life. However, the set of rules that establishes the effects of such declaration contains exceptions and it is therefore necessary to examine who and how, may be affected by a declaration of nullity or voidness of a corporate resolution.
Brief characterisation of corporate resolutions and their effectiveness
Partners’ resolutions are internal acts of the corporate bodies that, as a rule, only have effects in the limited scope of the company.
A resolution of the partners is legally attributable to the company and the judicial declaration of nullity or voidness of the resolution, after becoming res judicata, is binding on all the members of the personal fabric of the company (partners), as well as on all corporate bodies.
This is expressly stated in Article 61(1) of Código das Sociedades Comerciais (Companies Code): “the decision declaring the nullity of or voiding a resolution has effects against and in favour of all the partners and bodies of the company, even if they have not been a part of or intervened in the action.”
Once a resolution is declared null or made void, as a rule, as far as each partner and the corporate bodies are concerned, it is as if the same had never been taken and the effects the same may possibly have brought about are destroyed.
However, certain resolutions, inasmuch as the same are ac companied by executive acts of the management and representative bodies, may have external effects and affect the legal sphere of third parties who are unrelated to the company and thus trusted the validity of the resolution.
Non enforceability of the declaration of nullity or voidness of the corporate resolution
In light of the above, and because the declaration of nullity or void ness of a corporate resolution also vitiates the acts of implementation carried out in compliance with the latter, the law, in certain cases, feels the need to protect the interests and expectations of parties that could be harmed by such declaration by means of a system of non enforceability of the declaration of nullity or voidness of a corporate resolution against such parties.
For that purpose, in accordance with Article 61(2) of Código das Sociedades Comerciais, the law requires that parties that may benefit from the system of non enforceability of the declaration of nullity or voidness of a corporate resolution, fulfil two conditions:
- Being “third parties” and;
- Being in “good faith”.
For the purposes of the law, “third parties” are all those who are not partners nor members of corporate bodies, despite the fact that the partners and those members may also be third parties, if, vis-à-vis the company, they assume a position that in abstract appertains to such third parties, such as, for example, the position of buyer, seller or borrower.
Consequently, in order to benefit from the non enforceability of the declaration of nullity or voidability of a corporate resolution, the Portuguese law requires the third party in question to be in “good faith”, that is, requires that the third party, when concluding the contract with the company, be reasonably sure of the validity of the resolution that underpins the transaction or be unaware (not due to carelessness) of its invalidity.
Accordingly, it is for the company or by the person relying on the invalidity of the resolution to prove that the third party knew or, under the circumstances, could not be unaware of its invalidity; in order to protect the interests of the company, this proof is made substantially simpler where the action for the declaration of nullity or voidability had been registered prior to the conclusion of the transaction, inasmuch as such makes not being aware of the situation almost impossible.
Below are practical examples of the protection of the interests of third parties:
- The annulment of the resolution of election of t he directors is without prejudice to the rights acquired in good faith by third parties who negotiated with those directors;
- The declaration of nullity of the resolution that eliminated the pre -emption right of the partners in the subscription of new holdings in the context of capital increases is without prejudice to the acquisition of holdings by third parties in good faith.
Nullity or voidness of a resolution setting out the granting of donations
The nullity or voidness of a resolution stipulating a donation is an exception to the above stated non enforceability, since the rights acquired by third parties in good faith are always affected.
Considering the costless nature of donations, and because they are in conflict wit h the main purpose of commercial companies which is profit -making, partners’ resolutions authorising the board of directors to make donations are null and void and the donations thus made are also null and void as a result of the company not having the leg al capacity to perform those acts, unless:
- The same are justified by a specific custom or season or
- The same are necessary for the pursuit of the purposes of the company;
Nullity or voidability of a resolution on the distribution of corporate assets as profit or reserves
Article 34(1) of Código das Sociedades Comerciais extends to the partners the non enforceability of the declaration of nullity or voidness of a corporate resolution in one case only.
Indeed, the law establishes that the partners who have r eceived corporate assets as profit or reserves under a null resolution, do not have to return those assets if they were in good faith when the resolution was taken, that is, if they were unaware, through no fault of theirs, of the flaw of the resolution to distribute the assets of the company (although such proof is more difficult).