The amendment to the Commercial Companies Code introduces the Business Judgment , i.e. a business assessment of the actions of members of company bodies.
The purpose of introducing this regulation is to provide members of corporate bodies (including members of the management board, supervisory board, liquidators or other persons acting on behalf of the company) with protection for damage caused to the company as a result of their decisions which, after the fact, turned out to be wrong, provided that they were taken within the limits of justified business risk.
A business assessment provides real legal protection for actions taken by company managers, who can rely on this institution if it turns out that their decisions have caused harm to the company. It should be noted that these individuals must have acted reliably and responsibly when making a given decision, taking into account the company's interests, and to the best of their knowledge and data relevant to the circumstances .
This principle allows the management of a given business entity to make decisions freely. This is particularly important for management board members. The introduction of this regulation guarantees that, even in the event of a change in "power" within the company, the existing management board members will not be held liable if they acted within the framework of the Business Judgment Rule . According to the Ministry of State Assets, "the creators of the reform, seeking to introduce the Business Judgment Rule into the Polish economic reality, wish to emphasize that the actions of members of governing bodies should be assessed not retrospectively, through the prism of results, but from the perspective of the correctness of the decision-making process, with reference to the moment of making the decision and the circumstances surrounding it. The introduction of the proposed changes also constitutes a step towards harmonizing the solutions applicable in limited liability companies and joint-stock companies with those implemented in simple joint-stock companies, and there are no arguments for differentiating the regulations in this regard."*
In this construction, it is necessary to assume that the assessment of the actions of corporate bodies should be analyzed at the time of making an economic decision and should take into account circumstances such as:
a) the correctness of making such a decision,
b) due diligence,
c) reliability,
d) loyalty and legitimate interest of the company.
This approach has a key impact on the functioning of economic entities, but also provides an incentive for management bodies to undertake economic activities in general.
Regulations adopted in commercial law cannot contribute to inhibiting corporate decisions and to the fear of liability – persons managing business entities, even despite their knowledge and experience, are not able to predict all the possible consequences of their decisions.
The Business Judgment Rule seems to be a change that responds to the real needs of today's business activities, which are conducted, by definition, in conditions of business risk.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of November 8, 2022
* Ministry of State Assets, https://www.gov.pl/web/aktywa-panstwowe/business-judgement-rule , accessed November 8, 2022.
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