In July, we report on corporate litigation again. This time, we have selected a decision (Case No. 27 Cdo 2745/2024) concerning a motion for an expert review of the company’s relations with its affiliates.
A report on the company’s relations with its affiliates is a document prepared by every company that has a controlling entity. It is a tool to protect the company’s shareholders and creditors. Its basic purpose is to provide information on whether the controlled company has suffered harm in connection with the control exercised by the controlling entity (typically the majority shareholder). Alternatively, it describes the advantages or disadvantages of such a controlling relationship.
In the present case, the company prepared a report on its relations, which was discussed in accordance with the law at the company’s general meeting. However, its content did not meet the statutory requirements. In such a case, qualified shareholders may request the court to appoint an expert to review the document for accuracy and determine whether the controlling entity has caused harm to the company.
A qualified shareholder exercised this right, requesting the court that an expert be appointed to review the report on the relations with the company’s affiliates, which had been prepared incorrectly. However, six months before this motion, the company filed a new, revised version of the report in the collection of deeds, which was intended to correct some of the alleged defects.
The Supreme Court stated that although proceedings are pending for a possible review of the original report and its defects, unlike the lower courts, it concluded that these proceedings must take into account the new revised report and the fact whether the new report has remedied some of the defects of the previous report alleged in the motion.
It is sufficient that the shareholders had a chance to familiarise themselves with the revised version. It can be inferred from the Supreme Court’s reference to its previous case law that, for the shareholders to have a chance to read the report, it is sufficient that the company simply files the new revised report on the relations with its affiliates in the collection of deeds, without it being discussed at the general meeting.
In our view, this decision is a message to companies that they can still remedy their past shortcoming, i.e. the failure to fully prepare and file the report on the relations with their affiliates. This should be taken into account in any possible proceedings that may follow to appoint an expert to review the report.
