Disputes between shareholders – concerning the management of the company, access to information, the distribution of profits, or the continued membership of one of the shareholders – are one of the most common sources of corporate litigation, with specific resolution mechanisms provided for in the Commercial Companies Code. This article forms part of the Corporate Law area of Araújo & Associados.
Challenging shareholder resolutions – the 30-day time limit
Where a shareholder considers that a resolution passed at a general meeting is invalid, they have, as a rule, only 30 days to bring the relevant action for annulment.
Expulsion of a shareholder
In private limited companies, the law provides specific grounds for the expulsion of a shareholder, including disloyal conduct, or conduct seriously disruptive to the functioning of the company, which has caused or may cause significant losses. Expulsion may also be based on failure to comply with the obligation to pay in share capital, or failure to comply with the obligation to make supplementary contributions, where these have been called for. The company contract may also provide for other grounds for expulsion relating to the person or the specific conduct of the shareholder.
The right to information and judicial inquiry
One of the most important rights, and one frequently at the origin of corporate disputes, is the shareholder’s right to information about the management of the company. In private limited companies, any shareholder is entitled to ask the manager for true, complete and informative information on the management of the company, as well as to inspect, at the registered office, its accounting records, books and documents – an inalienable right, which cannot be excluded or unjustifiably limited by the company contract. In public limited companies, the regime is different and more restrictive: the right to information is reserved, as a rule, to shareholders holding a stake equal to or greater than 10% of the share capital. Where the information requested is refused, or where the shareholder has reason to believe that the information provided is false, incomplete or unclear, they may apply to the court for a judicial inquiry into the company.
Civil liability of managers and directors
Managers and directors are civilly liable to the company for damage caused by acts carried out in breach of the legal or contractual duties incumbent on them, unless they show that they acted in an informed manner, free from any personal interest, and according to criteria of business rationality – a standard close to what legal scholars call the business judgement rule. An action for liability may be brought by the company itself, by resolution of the shareholders, or, under certain conditions, directly by shareholders representing a certain percentage of the share capital, where the company does not bring it.
Disputes between shareholders and other related matters
Many corporate disputes originate in gaps or ambiguities in the articles of association or the shareholders’ agreement, a matter developed in the article Shareholders’ agreements – what they should contain and what they are for. Where the dispute culminates in the exit of a shareholder, questions may also arise as to the valuation of the shareholding, which are also relevant in mergers and acquisitions, described in the article Mergers and acquisitions in Portugal – what you need to know.
About Araújo & Associados
Established in 1980, with offices in Porto and Lisbon, Araújo & Associados provides legal advice on the resolution of corporate disputes, in Portuguese, English, French, German and Spanish.
Frequently asked questions about disputes between shareholders
How long do I have to challenge a shareholder resolution that I consider invalid?
As a rule, only 30 days, counted, depending on the case, from the close of the general meeting, from the sending of the minutes or from the moment the shareholder became aware of the resolution.
Can a shareholder of a private limited company be expelled for disloyal conduct?
Yes, disloyal conduct, or conduct seriously disruptive to the functioning of the company, which causes or may cause significant losses, is one of the grounds for expulsion.
Do I have the right to inspect the company's documents and accounts even if I am not a manager?
In private limited companies, yes – any shareholder is entitled to request information on the management of the company and to inspect its accounting records, books and documents.
In a public limited company, does every shareholder have the right to ask for information on management?
Not necessarily. In public limited companies, the right to information is, as a rule, reserved to shareholders holding a stake equal to or greater than 10% of the share capital, a more restrictive regime than that applicable to private limited companies.
Can a manager be held personally liable for management decisions that harm the company?
Under certain conditions, yes, unless they show that they acted in an informed manner, free from personal interest, and according to criteria of business rationality.
Contact us
For more information on disputes between shareholders, or to book a legal consultation, you can contact us through our Porto or Lisbon offices, by telephone, email or via the form on the website. We provide legal advice in Portuguese, English, French, German and Spanish.