By: Tomáš Kreisl
September 30, 2025 4 min read
The High Court in Prague dealt with a case (Resolution No. 7 Cmo 23/2025) concerning the invalidity of a decision of the Supervisory Board.
The dispute was preceded by the making of a shareholders’ agreement and a decision of the Supervisory Board to remove one member of the Management Board and elect a new one. However, the Supervisory Board did not respect the provisions of the shareholders’ agreement in its decision-making. The decision, in violation of the shareholders’ agreement, allowed the majority shareholder to gain control of the company and its subsidiaries. The plaintiffs also argued that the respective decision of the supervisory board was contrary to good morals, honesty, loyalty to the company and due diligence and that it constituted an abuse of rights.
The Court of First Instance held that decision of the Supervisory Board may be invalidated on the grounds of breach of good morals if the Supervisory Board dismisses a member of the Management Board in breach of the shareholders’ agreement if the members are shareholder nominees. However, the members of the Supervisory Board voted unanimously for the removal of the member of the Board of Directors, including the member nominated by the plaintiff. There was therefore no breach of good morals in this decision. It thus considered irrelevant the claim that the Supervisory Board meeting was not held in accordance with the Articles of Association, since all three members of the Board had agreed to the time, place and agenda of the meeting.
Here, the High Court held, obiter dictum, that a shareholders’ agreement binds only those who entered into it, not their nominees on the company’s governing bodies. Breach of a shareholders’ agreement may be grounds for invalidity of a decision, but only if it is breached directly by a party to the agreement. Violation by a third party does not lead to nullity. These conclusions should therefore be taken into account when making shareholder agreements and filling elected bodies of the company.
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