Information Note on the Court’s case-law 204
February 2017
Lekić v. Slovenia - 36480/07
Judgment 14.2.2017 [Section IV]
Article 1 of Protocol No. 1
Article 1 para. 1 of Protocol No. 1
Peaceful enjoyment of possessions
Cancellation of shareholding and personal liability for company’s debts after it was struck off the register for failure to comply with statutory requirements: no violation
[This case was referred to the Grand Chamber on 18 September 2017]
Facts – The applicant was a minority shareholder and former managing director of a company that was struck off the court register of companies pursuant to the Financial Operations of Companies Act (FOCA) after a lengthy period of insolvency and inactivity. As a result of the striking off, the applicant’s shareholding in the company was cancelled and, as an active member of the company, he became personally liable (jointly and severally with other active members) for the company’s debts. He paid more than EUR 30,000 from his own assets to settle a claim by the company’s main creditor.
In the Convention proceedings, the applicant complained, inter alia, that his right to the peaceful enjoyment of his possessions had been violated in breach of Article 1 of Protocol No. 1.
Law – Article 1 of Protocol No. 1
(a) Applicability – Two questions arose regarding the applicability of Article 1 of Protocol No. 1 to the applicant’s case: (i) whether measures relating to the company could be regarded as directly affecting the rights of the applicant as a shareholder and (ii) whether the applicant’s shareholding, which was of questionable economic value given the company’s insolvency, could still be considered a “possession”.
As to the first question – whether the applicant had been directly affected – the dissolution of the company meant that his shareholding was cancelled and that he incurred personal liability for the company’s debts. The dissolution had therefore entailed consequences which affected the applicant’s financial interests as a former member of the company and were thus directly decisive for his individual rights.
As to whether the shareholding could be considered a “possession”, ownership of a share implied a bundle of corresponding rights in addition to the right to a share of the company’s assets in the event of a winding up. These included voting rights and the right to influence the company’s conduct. Thus, although in the period between the cessation of the company’s activities and the strike-off the applicant could not extract any pecuniary benefits from the company, he was still entitled to exercise a number of rights which allowed him and other members of the company to engage in a commercial activity, and were thus of a pecuniary nature.
Article 1 of Protocol No. 1 was therefore applicable.
(b) Compliance – The strike-off had complex and diverse legal implications which could not readily be classified in any specific category within Article 1 of Protocol No. 1. The case would therefore be examined in the light of the general rule – enunciating the principle of the peaceful enjoyment of property – set out in that provision.
The domestic legislation, as interpreted by the Constitutional Court regarding the issue of which company members engaged personal liability, was adequately accessible and foreseeable, so the interference complained of had a sufficient legal basis in Slovenian law. The legislation had constituted an attempt to restore stability in the commercial market and there was no reason to doubt that this approach to ensuring a better functioning of the market was “in the public interest”.
As to the proportionality of the interference, the measure striking off the company from the register had not represented an excessive individual burden for the applicant. The company’s disregard for company law and the principles of good corporate governance, which consisted of (a) inadequate capitalisation, (b) failure to observe the law and good business practices, (c) a prolonged state of insolvency, and (d) inactivity on the part of the company’s management, had warranted a strong response by the authorities, including the imposition of personal liability on any member who was found to be responsible for the irregularities in the operation of the company. Furthermore, the irregularities were to a large extent attributable to the applicant himself, as he had been employed by the company for more than four years and was involved in its management, first as its acting director and later as managing director. The domestic courts’ finding that the applicant was an active member of the company and thus liable for the payment of its debts was thus reasonable.
Conclusion: no violation (unanimously).
© Council of Europe/European Court of Human Rights
This summary by the Registry does not bind the Court.
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