A Joint Stock Company ("JSC") is a company capital of which is divided into shares of equal value and the liability of each shareholder is limited to the value of the shares owned by him; hence..he shall not be asked about the debts of the company except within the limits of those shares.

In order to regulate the rights of all shareholders in the JSC, an Articles of Association ("AoA") must be established for each company and once published in the Official Gazette, it becomes the governing law for all matters related to company matters.

According to the Companies Law, the shareholder may unilaterally object before the court against the decisions of ordinary and extraordinary general assemblies, if he is able to prove that he was present at the time of convening the assembly and had objected to the assembly's resolution. In all cases, the lawsuit shall be prescribed after the lapse of one year from the date of the general assembly's resolution to approve the report of the Board of Directors ("BoD") unless such BoD's acts constitute a criminal offense ("misdemeanor or a felony").

However, if the dispute raised by the shareholder affects the public and common interest of the company and is against the interest of the BoD or any of its members, then, the lawsuit may only be filed on behalf of the total shareholders presented in the General Assembly and upon its resolution. Moreover, each shareholder who wishes to raise such dispute must notify the BoD at least one month before the next General Assembly, and the BoD must include this proposal in the agenda of the Assembly.

We refer below to one of the cases handled by our office, and which was initiated by one of the shareholders requesting the liquidation of their company. This resulted in the Cairo Economic Court of Appeal ruling for the inadmissibility of the claim due to its incorrect filing, which was contrary to requirements prescribed by the law, further stating in its ruling that the plaintiff had not followed the necessary procedures required by the AoA to litigate against the company, particularly since this dispute concerned the company's public interest. The court clarified that in accordance with the AoA of the company, which is binding to the shareholders, the dispute should have been submitted to the General Assembly of the company for the issuance of a resolution prior to filing the lawsuit. Furthermore, filing the lawsuit without submitting such a request to the General Assembly is contrary to the manner prescribed by law.

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Lastly, the purpose of this article is to shed light on one of the important procedural conditions that must be followed before raising a dispute by the shareholder against a company, its board of directors or any of its members, since the failure to follow these procedures, is likely to lead to the inadmissibility of the case, This may disable the shareholder from taking such legal action upon the lapse of one year from the date of the defected resolution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.