Legal News [August 2023]: New entrepreneur’s definition in the Civil Code
Who is obliged to compensate the former lessee for taking over the customer base and what are the requirements of the articles of association regarding the funds to which part of the profits of a joint-stock company are to be allocated - all these issues were addressed by the Supreme Court. You can read more about these judgments, as well as other case law, in the following lines of the latest Legal News.
- In an earlier ruling, Case No. 33 Cdo 2919/2022, the Supreme Court dealt with the new concept of entrepreneur in the Civil Code and its impact on the assessment of the validity of a legal act in the absence of a public law authorisation to conduct an enterprise. The new concept of an entrepreneur abandoned the previous condition under which a person with a licence to conduct business was considered an entrepreneur. Under the general definition, an entrepreneur is therefore defined by the actual activity and not by whether or not the person has a public authorisation to conduct an enterprise. If a person engages in an activity that has the characteristics of entrepreneurship, he is considered to be an entrepreneur even if he engages in this activity without authorisation. This concept is linked to the provision of Article 5(2) of the Civil Code, which prevents the lack of public authorisation from being linked to the conclusion that a legal act is invalid, unless the party concerned invokes invalidity. Thus, the Supreme Court held that the decision of the Court of Appeal, according to which a loan granted by a person who does not have the appropriate authorisation to grant consumer credit is not consumer credit and therefore the provisions of the Consumer Credit Act do not apply to the matter, is contrary to this provision. The nature or validity of a legal act cannot be questioned against the will of the party concerned simply because the act was performed by a person who is not authorised or prohibited to act.
- In its most recent ruling, Case No. 21 Cdo 445/2023, the Supreme Court considered whether an employee whose employment relationship has been terminated by the employer for cause is entitled to compensation for the period during which the employee receives an early retirement pension at his or her own request. The Supreme Court ruled that if an employee decides to apply for and is granted an early retirement pension, he or she may not engage in paid employment to the extent that it gives rise to participation in the insurance scheme. The law does not allow paid employment to coincide with the payment of an early retirement pension. In such a situation, it is therefore concluded that the employee’s source of income should no longer be the salary from the former employment, but the pension awarded. Therefore, the employee is not entitled to wage compensation under Article 69(1) of the Labour Code from the date on which the pension was granted. The reasons for which the employee decided to apply for an early retirement pension are irrelevant.
- In an earlier ruling, the Supreme Court addressed the issue of what elements should be included in the articles of association of a joint-stock company that establishes funds to which part of the profits are compulsorily paid. Referring to its previous decision (R 9/2020), the Supreme Court concluded that if a joint-stock company intends to establish in its articles of association special purpose funds from profits (to which profits are compulsorily allocated), the articles of association must at least regulate the amount to be allocated to these funds or determine how much of the profits are to be allocated to them, as well as specify the purpose for which the funds are to be used (e.g. whether the funds may be used to make payments to persons other than the company’s shareholders). If the articles of association provide that profits are to be allocated to special-purpose funds, but do not specify the number of profits to be allocated to the funds, such a provision is not binding on the general meeting when distributing profits. Thus, the resolution of the general meeting is not defective if it does not allocate the profits to such funds. On the contrary, if the general meeting allocates the profit to these funds, this is not an important reason for not distributing the profit to the shareholders.
- In its judgment in Case No. 27 Cdo 2048/2021, the Supreme Court addressed issues relating to the legal regulation of mandatory takeover bids, in particular by determining the period applicable to the determination of the price per share in a mandatory takeover bid. The case law established the principle that all (minority) shareholders who hold shares of the same type and who are affected by the obligation of the controlling shareholder to make a public offer to conclude a contract for the purchase of their shares must be treated equally. For this reason, the Supreme Court concluded that the provisions of Section 183c(3) of the Commercial Code should be interpreted as meaning that the last day of the six-month period for determining the weighted average is not the day preceding the day on which the controlling shareholder acquired a controlling interest in the target company, but the day on which the controlling shareholder fulfilled its obligation to make a public offer to conclude a contract. If the controlling shareholder does not fulfil its obligation within the statutory period, the last day of the six-month period shall coincide with the last day of the 60-day period referred to in Section 183b(1) of the Commercial Code.
- The Supreme Court, in its decision in case no. 26 Cdo 3644/2022, dealt with the question of who a former tenant of business premises can claim compensation from for the transfer of the customer base. Section 2315 of the Civil Code, which regulates this issue, does not explicitly identify the entity that is obliged to pay compensation. Systematically, this provision is included in the legal regulation of the tenancy relationship, i.e. a relationship based on an obligation arising from a bilateral legal act, specifically a lease agreement. In principle, the lease agreement binds only the parties to the agreement and acts towards other persons only in the cases provided for by law. Therefore, if it is not expressly stated that the person to whom the lessor has transferred the same business premises for use after the termination of the lease with the terminated lessee (i.e. the new lessee) is (may be) also obliged to pay compensation for the advantage gained by taking over the customer base of the terminated lessee, it is reasonable to assume that the legal act of the contracting parties cannot, in principle, give rise to an obligation to perform for another (third) party without their consent. Thus, the Supreme Court concluded that only the (former) lessor can be sued in a dispute over the payment of compensation for taking over the customer base (CC Art. 2315). This compensation cannot be claimed from the new lessee. This applies regardless of whether the (former) lessor or the new lessee is the beneficiary of the takeover.