(republished from daily.nb.org)
Summary: One of the key pillars of Greek corporate law is the protection of minority shareholders against abuses by the majority, which typically controls the management of the company. This protection is ensured not only through specific mechanisms set out in Law 4548/2018 (e.g., minority rights, derivative actions, etc.), but also through the minority's right to request the annulment of General Meeting (GM) decisions taken in abuse of majority power.
1. Introduction
In a previous article, we analyzed how majority shareholders may seek financial advantages by exploiting the minority (see here). On the other hand, the law provides the minority with several rights to safeguard its interests in the company. Notable among them are minority rights such as the right to information (see here and here), the right to request a special audit (see here), and the ability to request a derivative action (either by the board of directors or a court-appointed representative).
One of the most significant tools available to the minority—and the focus of this article—is the right to request the annulment of a General Meeting decision taken through abuse of majority power. This article examines abusive GM decisions through relevant case law examples.
2. Cases of Abusive GM Decisions
2.1. General Remarks
According to Article 137(2) of Law 4548/2018: "A decision may be annulled if it was taken [...] in abuse of majority power, in accordance with the provisions of Article 281 of the Civil Code". This provision, referring to the Civil Code's rules on the abusive exercise of rights, offers judges broad discretion to evaluate shareholder behavior as abusive. Below are common cases of abusive conduct that have led to the annulment of GM decisions.
2.2. Profit Hoarding and Dividend Underpayment
This refers to situations where the majority shareholders approve high remuneration for the company's management—appointed by themselves—often linked to the company's profits, while simultaneously deciding not to distribute dividends or only distribute a small portion to shareholders.
A notable example is Supreme Court decision 1462/2023, where:
- The majority shareholders, acting as co-CEOs, reduced company profits by a) awarding themselves disproportionately high bonuses unrelated to the financial performance, and b) inflating operating expenses to receive disguised compensation.
- They carried forward almost all of the €5,716,763.30 profits to the next fiscal year while distributing only €100,000 in dividends.
- The minority shareholder had provided personal guarantees and pledged mutual fund shares to secure company credit.
- The case involved a small, closely held family-owned S.A.
Taking these factors into account, the court ruled the GM decision null and void due to abuse of majority power.
Similar findings were reached in Appellate Court of Thessaloniki decision 587/2023, which annulled a GM decision not to distribute dividends, approve €450,000 in profit-based bonuses to board members, and carry forward €3,190,058.30 in profits—despite total profits amounting to €3,410,122.08.
2.3. Disposal of Key Corporate Assets
GM decisions that approve the sale of major company assets without serving an obvious business purpose can also be considered abusive.
A prime example is Athens First Instance Court decision 1130/2020, which annulled a GM decision to sell the company's power generation and sale division—its main source of revenue—at a price below its appraised value. The sale proceeds were insufficient to cover outstanding company obligations, and no concrete, funded, or implementable investment plan existed for a new real estate division.
2.4. Favoring Affiliated Companies at the Minority's Expense
Often, majority shareholders transfer assets from one company to another under their control, to the detriment of the minority.
In Athens First Instance Court decision 2191/2011, a GM decision was annulled where project design tasks—within the company's capabilities—were assigned to a different company controlled by the same majority. That company was focused on construction, not design, and would outsource the work to third parties.
The court ruled that: "The GM's approval of the task transfer was a clear abuse of majority power, exceeding good faith and the economic purpose of the right, and was not in the company's interest but rather aimed to benefit the affiliated company."
2.5. Share Capital Increase Aimed at Shifting Control
A share capital increase may be abusive when its purpose is to dilute the minority, and the increase is not objectively necessary. If the majority knows the minority cannot afford to participate, the intent to alter shareholder structure and weaken the minority becomes evident (see Athens First Instance Court decision 5885/2010).
Key criteria:
- No concrete business need justifies the capital increase.
- Majority shareholders know the minority cannot participate due to financial constraints.
- The sole aim is to shift control and marginalize the minority.
We have analyzed such cases in detail in another article (see here).
3. Final Remarks
The right of the minority to seek annulment of abusive GM decisions is perhaps its ultimate safeguard against a dominant majority. However, such a legal action only leads to annulment, as courts cannot dictate the content of a new decision or compel the majority to act. Still, the pressure from a successful annulment can serve as a strong deterrent against future abuse.
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.
