In one of the last posts in our Compliance series, we discussed the regulations introduced by the amendment to the Commercial Companies Code, concerning the functioning of supervisory boards of companies. In today's post, we continue the topic of new responsibilities that companies will face in 2023, but this time we will focus on the management board.
As a preliminary note, the amendment to the Commercial Companies Code discussed in this series can be called groundbreaking. It is the largest amendment to the Code in 20 years, revolutionizing the rules of operation of companies:
- both in the internal , concerning the functioning of the company's bodies and their mutual correlation,
- and external , applying to participation in a group of companies and cooperation within the group's interests.
The amendment introduces a number of provisions aimed at strengthening the scope of corporate oversight. The right of the supervisory board of a joint-stock company to request information regarding the company's operations and financial situation translates into the management board's obligation to provide such information. Importantly, the management board is obligated, without further request, to provide the supervisory board with information on, among other things:
- resolutions of the management board and their subject matter,
- the company’s situation, including its assets, as well as significant circumstances related to the management of the company’s affairs, in particular in the operational, investment and personnel areas,
- progress in implementing the designated directions of development of the company's activities, and should indicate any deviations from the previously designated directions, providing justification for such deviations,
- transactions and other events or circumstances that significantly affect or may affect the company's financial situation, including its profitability or liquidity,
- changes to information previously provided to the supervisory board, if such changes significantly affect or may significantly affect the company's situation.
Another element concerning the internal functioning of corporate bodies is the clarification of issues that were already mandatory under Polish law but were previously regulated only by convention. With respect to limited liability companies, this requirement has materialized, among other things, in the form of the obligation to record management board resolutions and the standardization of formal requirements that must be met by minutes of management board resolutions in companies, even in the case of a single-member management board (regardless of the legal regime of the business). It is worth recalling here that the management board is obligated to provide the supervisory board with information on all resolutions adopted and their subject matter at each supervisory board meeting (unless the supervisory board decides otherwise).
The amendment clearly expresses and streamlines the principles governing the liability of management board members. In performing their corporate duties, management board members:
- they must exercise due diligence resulting from the professional nature of their activity,
- have a duty of loyalty to the company,
- are prohibited from disclosing company secrets – even after their mandate expires.
Let's briefly discuss the duty of loyalty, which de facto also includes the obligation to maintain company secrets and to fully (and therefore duly) perform one's duties. In other words, the duty of loyalty is the obligation to avoid situations where personal interests conflict with the company's interests. The essence of this obligation is that a member of a company's governing body must refrain from any actions that are, or may be, contrary to the company's interests.
Let's also recall the Business Judgment , which we discussed in detail in one of our articles . This business judgment provides members of corporate bodies with protection for damage caused to the company as a result of their decisions, which after the fact turned out to be wrong, provided they were made within the bounds of reasonable business risk.
Example:
If, when making a given decision, the company's managers acted honestly, responsibly, taking into account the company's interests and to the best of their knowledge and data adequate to the circumstances, they will not be liable for any damage caused to the company as a result of that decision.
Another aspect introduced by the amendment to the Commercial Companies Code is the expansion of the list of offenses that preclude a person from serving as a management board member. The following offenses have been added to the existing list:
- acting as an intermediary in settling a matter in exchange for a financial or personal benefit or the promise thereof, taking advantage of the performance of a public function,
- accepting material or personal benefits or promises thereof in connection with the performance of a public function,
- granting or promising to grant a financial or personal benefit to a person performing a public function in connection with the performance of that function,
- excess of powers or failure to fulfil duties by a public official that may result in damage to public or private interests.
The powers and responsibilities of the management board presented in the above article are intended to professionalize the performance of functions by its members. Regulating the management board's activities, as well as imposing and sanctioning new responsibilities on its members, appears to be a change that addresses the actual needs of conducting business and translates into greater transparency in the company's operations.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of February 15, 2023.
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