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The Warsaw Voice » Law » November 18, 2002
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Best Practices Mandatory for Public Companies
November 18, 2002   
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On Sept. 4, 2002, the Warsaw Stock Exchange approved "Good Practices in Public Companies in 2002" as binding corporate governance principles for joint-stock companies issuing listed shares and bonds.

The new regulations will come into force upon approval by the Securities and Exchange Commission. Companies already admitted to public trading will have to provide to the WSE, and publish, a compliance statement by Dec. 31, 2002. Undoubtedly, the measures taken by the WSE are aimed at preventing abuse of corporate laws by shareholders during their often brutal internecine struggles. Although the whole document is worthy of note, we shall confine ourselves to mentioning several good practices to be adopted by public companies.

The regulator has sanctioned the principle of priority of majority shareholders over minority shareholders, as entities contributing more capital are also exposed to greater risk. However, minority shareholders must be afforded due protection, and majority shareholders should take the interests of minority shareholders into account.

Generally, exercise of rights and legal institutions should be based on honest intentions and good faith. No actions in abuse of law should be taken.

The Rules of the General Shareholders' Meeting should regulate in detail the holding of meetings and the principles for adopting resolutions and, specifically, the conduct of elections, including elections to the Supervisory Board in the case of voting in separate groups. No resolutions affecting exercise of rights by shareholders should be voted on during the General Shareholders' Meeting as motions on points of order.

Independent board members, i.e. members having no connection with the company or its shareholders as might affect their impartiality, should constitute one half of the Supervisory Board. Criteria for independence should be detailed in the corporate charter, and certain resolutions should require the consent of at least one independent member of the Supervisory Board. Public companies have until the end of 2004 to incorporate such provisions into their corporate charters.

A member of the Supervisory Board may not resign during his term of office as a result of a decision by a shareholder who voted for him, as such decision may be motivated by an intention to make further operation of the Supervisory Board impossible.

Members of the Management Board should remain completely loyal toward the company. Should a member of the Management Board learn of a business opportunity within the company's scope of activity, he should immediately inform the Management Board. Management Board members may use such information for personal gain or transmit it to a third party only if it does not infringe upon the interest of the company.

In the interest of better corporate governance, the best practices adopted by the WSE may well end up (with a bit of luck) being more generally incorporated into the Corporate Charters and Rules also of such companies which are not under obligation. It would be a step in the right direction.

Salans D. Oleszczuk Kancelaria Prawnicza Sp.k., ul. E. Plater 53, Warsaw, tel. (+48 22) 520 63 00, fax: (+48 22) 520 64 00, e-mail: warsaw@salans.com

Zbigniew Korba
The author is an associate at Salans Law Firm. He specializes in corporate law, mergers and acquisitions, e-commerce and banking law.

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