Failure to pass a discharge resolution may violate personal rights

Court of Appeal in Warsaw in the judgment of September 23, 2020 (no. I ACa 617/19) stated that failure to pass a discharge resolution is not a neutral situation for a member of the body. As a consequence, lack of discharge resolution may violate personal rights – analogically as in the case of refusal to grant discharge.

Refusal to grant discharge and infringement of personal rights.

It has been firmly established in the case law that a resolution of the general meeting refusing to grant discharge may lead to an infringement of honour and good name of the person concerned. There should be no doubt that the assessment expressed in a resolution refusing to grant discharge may affect the person concerned, and at the same time put that person in a bad light in the public perception, particularly if the assessment is unfair and concerns someone who has previously enjoyed a good reputation and was regarded as an expert in his field (see e.g. the judgment of the Supreme Court of 19 Oct 2012, no. V CSK 439/11, the judgment of the Court of Appeal in Warsaw of 29 Dec 2016, no. VI ACa 1012/15). It is necessary to consider whether failure to adopt a resolution on granting discharge may have the same consequences.

Lack of discharge resolution may violate personal rights.

The problem indicated in the subtitle has already been noticed by the doctrine, which assumes that a violation of personal interests of a member of a governing body occurs not only when a “negative” resolution not to grant discharge has been adopted. It is stressed that an analogous assessment should be made of the failure to adopt a resolution on the subject, since from the point of view of the average recipient it is the negative assessment of the board member’s activity expressed by failure to grant discharge that matters. Failure to pass a resolution to this effect suggests that the member of the governing body, since he has not been granted discharge, has committed an irregularity in the performance of its function (B. Ostrzechowski, Naruszenie czci w wyniku nieudzielenia absolutorium w spółce kapitałowej, Przegląd Prawa Handlowego 2018, Nr 8, pp. 34-35). The aforementioned problem has become also the subject of judicial consideration. The circumstances of the case were as follows.

Failure to pass a discharge resolution isn’t a neutral situation for a member of the body

During the ordinary general meeting (the “OGM”) of a public company no resolution on granting discharge to a member of the company’s supervisory board (the “plaintiff”) was adopted. Neither was a resolution not to grant discharge. In view of the above, the plaintiff decided to bring an action for infringement of personal rights.

The regional court dismissed the action in its entirety. The court indicated that the failure of the OGM of the company to grant discharge to the plaintiff, i.e. the failure to adopt a resolution, does not infringe his personal rights. A possible infringement could occur only if a resolution not to grant a vote of acceptance was adopted, which would constitute a negative assessment of the plaintiff’s activity. The regional court emphasised that the failure to adopt either a resolution to grant discharge or a resolution not to grant discharge constitutes an indirect, neutral position, therefore it cannot infringe personal rights. The plaintiff did not agree with this decision and filed an appeal against the verdict.

Court of Appeal in Warsaw allowed the appeal and reversed the judgment of District Court. In the judgment of September 23, 2020 (no. I ACa 617/19) the court stated that analogically to adopting a resolution on refusal to grant a vote of acceptance, failure to adopt any resolution, despite submitting the resolution to a vote, may be deemed as an omission infringing the good name and honour of a member of a corporate body (only if the failure to adopt the resolution was discretionary in nature and omitted obvious facts or occurred against obvious facts relating to the function held by the member of the body).

Violation of personal rights may occur as a result of both actions and omissions. As a rule, failure to pass a resolution to grant discharge may have the same negative effects as passing a resolution not to grant discharge.

In the opinion of the Court of Appeal in Warsaw, failure to adopt a resolution to grant discharge is not always neutral from the standpoint of protecting personal rights of a member of a governing body. Therefore the mere fact that formally the resolution to refuse the plaintiff’s discharge was not adopted cannot constitute an obstacle to the recognition that the plaintiff’s personal rights were infringed. The granting of discharge is tantamount to recognizing the actions of these persons as correct. Refusal to grant discharge – whether in the form of a so-called negative resolution or through abstention by a majority of voters – is in fact a refusal to express such a positive assessment of the actions of members of the company’s bodies.

Kornelia Łuczejko, Senior Associate, attorney-at-law