Invalidity of a Resolution of the Board of Directors

A resolution of the board of directors may be incorrect either in form or in contents if the articles of association or regulations of the Limited Liability Companies Act have not been applied to the resolution. A resolution may be in violation of law or the articles of association as to its form, for instance, if:

• it lacks quorum;

• the provisions on disqualification are breached; or

• the majority required for the decision-making is lacking.

A resolution may be in violation of law or the articles of association as to its contents, for instance, if:

• it is decided to acquire own shares with assets beyond the means available for profit distribution; or

• it is decided upon illegal distribution of the assets of the company.

There is no specific time for invoking the invalidity which means that the incorrect resolution does not become valid on the basis of lapse of time. Instead, a formal defect may be corrected, if, for example members that were not invited to a certain meeting afterwards accept the resolutions made in the meeting.

It is not possible to demand for a nullification or amendment of an invalid resolution. No one has the right or the obligation to execute an incorrect resolution of the board of directors. Nevertheless, an invalid resolution binds the company if, for instance, a contracting party of the company or other third party may be able to refer to such resolution has been in good faith.