One of the positives the new Act on Business Corporations (the ʻʻABCʼʼ) brings is undoubtedly the elimination of the problematic provisions of Sections 196a and 193(2) of the current Commercial Code. Just to remind you, these provisions prefer protection of the company over protection of third parties; this has lead to absurd situations when e.g. the absence of company’s consent or of an expert opinion caused invalidity or ineffectiveness of property transfers e.g. within a concern, although the price was set on arm´s length basis. Similarly absurd consequences occured in case of providing collaterals etc. Not to mention the arduous development of court’s practice on this subject, in which case a change for the better could be registered only recently.
In the new regulation, Section 193(2) disappears without replacement, while Section 196a is replaced by new, more moderate regulation.
The new regulation is found primarily in Section 255 of the ABC. The regulation applies only to joint stock companies and is, therefore, no longer applicable to limited liability companies. The range of persons from which the company will acquire property under Section 255 of the ABC is significantly limited, in comparison to Section 196a of the current Commercial Code. Newly, the regulation applies only to acquisition of property from founders or shareholders of the company and not to asset transfers e.g. between concern members. Another novelty is the time period within which it is necessary to have the value of the acquired property assessed by an expert and obtain the approval of the acquisition by General Meeting, this period being two years from the establishment of the company. The expert no longer needs to be named by court and the approval of General Meeting may be subsequent (the latter applies even today).
The price paid for the acquired property must not exceed the value determined by the expert opinion, i.e. it does not need to be the exact amount. Nevertheless, the first conflicts of opinion arise at this point. While the obvious and logical intention of ABC´s authors was to modify these regulations just for acquisition of assets with the value exceeding 10 % of the registered capital, in the light of the definition of assets in the new Civil Code (the ʻʻNCCʼʼ), opinions are heard now that Section 255 of the ABC will also apply to alienation of assets. Such opinions are expressed by judges of the Supreme Court, so it seems that also in respect of this provision, we may expect surprising development depending on the future Supreme Court’s practice. It should be added that Section 255 of the ABC makes no reference to provision of collaterals, credits or loans; but again, it is a question how far the interpretation of this provision by courts will go.
The consequences of violation of the rules set out in Section 255 of the ABC are much less dramatic than the consequences of violation of Section 196a of the Commercial Code. In case of absence of approval by General Meeting, relative nullity of specific legal act may be invoked within the statutory deadlines. At this point, I can nothing but sigh with regret over the special regulation set out in Section 48 of the ABC, which introduces the possibility to invoke relative nullity in this situation and, therefore, overbalances Section 162 of the NCC, which prefers protection of third parties. In case of acquisition of property for a price higher than the price determined by expert, the ABC explicitly states that it is a violation of due care of proper manager of those board members, who voted for such transfer, and also regulates the obligation of the other party (shareholders/founders) to return the part of the price paid by the company which exceeded the expert opinion amount. In case the expert opinion was not prepared at all, it is possible, within 3-month subjective period (10-year objective period), to demand payment of any unpaid part of the price determined by the subsequently used expert. After this period expires in vain, it is possible to withdraw from the contract.
Although there are many reasons to criticize the NCC and the ABC, and despite the expected problems with interpretation of Section 255 of ABC, this change is, from the perspective of day to day legal practice, a big leap to the better.