The concept of compliance, as outlined at the beginning of this series, refers to all possible activities within a company aimed at ensuring compliance with laws, regulations, and other normative acts, as well as other standards of conduct . In a previous post, we addressed the most current activities of company bodies related to fulfilling reporting obligations. In today's article, we return to the sphere of responsibilities of company bodies and examine the specific competencies of the management board of a limited liability company .

As a reminder, the management board of a company is its chief executive body , authorized to manage its affairs and represent its members. Legal doctrine assumes that the management board is the body that exercises the company's legal capacity . Through the management board, the company conducts day-to-day operations, both internally and externally, and also submits and accepts declarations of intent and knowledge. The management board is a mandatory body and consists of one or more members, appointed and dismissed by a resolution of the shareholders, unless the company agreement provides otherwise (for example, a management board member may be appointed by the supervisory board after a qualification procedure). Only individuals with full legal capacity, from among the shareholders or from outside them, may be appointed to the management board. A management board member may also be an employee of the company. Unless the company agreement provides otherwise, a management board member's mandate expires on the date of the shareholders' meeting approving the financial statements for the first full financial year of service as a management board member (Article 202 of the Act of 15 September 2000, the Commercial Companies Code, hereinafter referred to as the "Commercial Companies Code"). The mandate of a management board member also expires as a result of death, resignation or dismissal from the management board.

Conducting Affairs

As indicated above, management board members are authorized to manage the company's affairs. Management of the company's affairs, in a broad sense, encompasses organizing the company's activities in accordance with its core business, thereby achieving the goals for which it was established. Management board members perform factual actions strictly related to the organization of the company's activities (e.g., decision-making) and legal actions in the form of resolutions.

The management board's management process is regulated by the Commercial Companies Code and the company's articles of association. It is often the case (particularly in the case of multi-member boards) that internal matters related to the functioning of this body are regulated and systematized in the management board's regulations, provided that their content cannot be inconsistent with the law or the company's articles of association. It is worth noting here that the management board benefits from the so-called presumption of competence, meaning that its authority covers all matters not otherwise reserved by law to other company bodies . In practice, this boils down to the statement that if there is any doubt as to which company body is authorized to perform a given task or authority, and there are no regulations in this regard, it is assumed that it falls within the management board's authority. Regardless of the presumption of competence, the provisions of the Commercial Companies Code sometimes explicitly specify duties and powers that fall solely within the management board's authority.

These include, among others:

Article 182 § 3 of the Commercial Companies Code – which states that in the event of the transfer of a share or a fraction thereof, the company agreement may make the transaction subject to the company's consent;
Article 188 § 1 of the Commercial Companies Code – obliging the management board to keep a share register;
Article 188 § 3 of the Commercial Companies Code – imposing on the management board the obligation to submit to the registry court an up-to-date list of shareholders each time there is a change in the share register;
Article 224 of the Commercial Companies Code – obliging the management board to provide the auditor with the requested explanations and to allow him to review the company’s books and documents, examine the cash position and take an inventory of the company’s assets and liabilities, as well as to provide him with any assistance necessary for this purpose;
Article 235 § 1 of the Commercial Companies Code – granting the management board direct authority to convene a shareholders' meeting;
Article 212 § 1 of the Commercial Companies Code (in fine) – stipulating the obligation of the management board to provide explanations at the request of a shareholder (right of control);
Article 219 § 4 of the Commercial Companies Code – stipulating the obligation of the management board to submit reports and explanations at the request of the supervisory board;
Article 250 item 1 of the Commercial Companies Code – authorising the management board to bring an action to set aside a shareholders’ resolution;
Article 252 of the Commercial Companies Code – granting the management board the right to bring an action against the company for declaring the invalidity of a shareholders' resolution contrary to the Act;
Article 258 § 1 of the Commercial Companies Code – which stipulates the obligation for the Management Board to send a simultaneous call to the existing shareholders to exercise their pre-emptive rights (unless the company articles of association or the resolution on the increase provide otherwise).

Failure to fulfill the statutory obligations incumbent on management board members is subject to penalties. It should be emphasized that management board members who, contrary to their obligations, allow the management board to fail to fulfill its reporting obligations on behalf of the company (including those indicated in points 2-5 above) are subject to a fine of up to PLN 20,000 .

Representation

Representing the company encompasses the management board's performance of external activities and focuses on making and receiving declarations of intent and broadly disclosing the company's position externally, including appearances before adjudicating bodies in court or administrative proceedings, local government and state authorities, and third parties. Pursuant to Article 204 of the Commercial Companies Code, a management board member's right to manage and represent the company's affairs applies to all judicial and extrajudicial activities of the company, and this right cannot be limited with legal effect vis-à-vis third parties. A key issue related to representation is the manner of its exercise. If the management board consists of multiple members, the manner of representation is specified in the company agreement. If the company agreement does not contain any provisions in this regard, the cooperation of two management board members or one management board member together with a commercial proxy is required to make declarations on behalf of the company. Due to the extensive nature of the issue of representation and the need to discuss the commercial proxy's powers in detail, this topic will be addressed in a separate article in the Compliance series.

In summary, the management board has many responsibilities and powers related to the company's operations. Failure to perform or improperly perform some of these responsibilities may result in management board members being held liable for the company's obligations. Before assuming this position, it is advisable to thoroughly familiarize yourself with the responsibilities of the management board and its members, or to secure professional legal services for the company, which will minimize the risk of liability for failure to perform these duties.

This article is for informational purposes only and does not constitute legal advice.

Legal status as of April 13, 2022

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