Voting Rules at General Meetings: How to Avoid Violations and Corporate Disputes

General meetings of LLC participants or shareholders are the key platform for making important corporate decisions. It is during voting that the future of a company is determined: profit distribution, changes in membership, approval of major transactions, amendments to the charter, and other strategic matters.

At the same time, voting procedures often become the source of corporate conflicts and court disputes. Improperly executed resolutions, violations of voting rules, or breaches of legal restrictions may lead to decisions being declared invalid.

In this article, the lawyers of the Ukrainian Bar and Real Estate Association explain how to properly organize voting procedures, comply with legal requirements, and avoid legal risks.

Basic Voting Rules

For LLCs

The number of votes held by a participant is proportional to their share in the charter capital in accordance with Article 26 of the Law of Ukraine “On Limited and Additional Liability Companies”.

• voting is generally conducted openly unless otherwise provided by the charter;
• quorum exists if participants holding more than 50% of votes are present, unless the charter establishes another requirement;
• most decisions are adopted by a simple majority of votes unless the charter requires a higher threshold.

For JSCs

The number of votes held by a shareholder corresponds to the number of voting shares they own.

• quorum is determined by law and the company charter, usually requiring shareholders holding at least 50% of voting shares;
• certain decisions, such as amendments to the charter or increase of share capital, require a qualified majority of 3/4 of votes or more.

Restrictions on Voting Rights

It is important to remember that there are situations in which a participant or shareholder is not entitled to vote:

• when approving transactions involving themselves or related parties;
• when considering their liability;
• when restrictions are established by law or the company charter.

Such restrictions are intended to prevent conflicts of interest and abuse of corporate rights.

Common Voting Violations

• incorrect calculation of quorum;
• participation of persons who had no voting rights;
• failure to record voting results in the minutes;
• holding a vote without proper notice to participants;
• adoption of decisions without the required number of votes;
• violations of procedures for online voting.

Consequences of Violations

Mistakes during voting procedures may result in serious consequences:

• court invalidation of resolutions;
• blocking of registration actions in state registers;
• challenges to transactions approved on the basis of unlawful resolutions;
• corporate disputes among participants or shareholders.

How to Avoid Violations: Lawyer’s Recommendations

• carefully prepare all documents, including the agenda, draft resolutions, and notices;
• verify the authority of all participants attending the meeting;
• strictly comply with notification deadlines and procedures;
• properly record voting results in the minutes, indicating votes “for”, “against”, and “abstained”;
• use qualified electronic signatures during online meetings;
• involve experienced corporate lawyers in preparing and supervising meetings to identify and prevent risks at an early stage.

Voting procedures are not merely formalities. They form the legal foundation of all corporate decisions. Proper organization of meetings and strict compliance with voting rules ensure stable business operations, protection of owners’ interests, and minimization of legal risks.

The Ukrainian Bar and Real Estate Association is ready to provide professional assistance in preparing, conducting, and supporting general meetings in any format.