Obligations of management board members in Polish law
Publication date: March 15, 2024
To establish a limited liability company, the establishment of a management board is required. All members of the management board are required to sign the application for entry of the company into the register. One of the first obligations of the management board is to report the formation of the company to the appropriate registry court. Remaining a member of the management board involves a number of different duties that the member must fulfill.
Duty to represent the company and manage its affairs
The management board of a limited liability company is obliged by the Commercial Companies Code to represent it and manage its affairs. This applies to both judicial and extrajudicial activities. Representation involves the management board performing activities such as submitting declarations of will and other factual or organizational activities. The management board’s right to represent and conduct the company’s affairs towards third parties cannot be limited. In a situation where the company’s management board consists of more than one person, the method of representing the company is specified in its contract. If a dispute arises regarding the repeal or invalidation of a shareholders’ resolution, and the company does not have an appointed attorney, the management board is obliged to represent the defendant company.
Obligation to report company bankruptcy
To declare a company bankrupt, the insolvency condition must be met. The management board’s responsibilities include filing for bankruptcy. Failure to file bankruptcy has negative consequences for company members. Failure to do so may result in civil or criminal liability. Members are jointly and severally liable for the company’s obligations if enforcement against the company turns out to be ineffective. The Commercial Companies Code allows a management board member to be free from civil liability if he or she proves that the bankruptcy petition was filed by the management board at the appropriate time. Demonstrating the initiation of restructuring proceedings and approval of the arrangement are also grounds for releasing a member of the company’s management board from liability for failure to fulfill the required obligation. Demonstration by a member of the management board that the failure to fulfill the obligation to submit a bankruptcy petition was not his fault, or his confirmation of the fact that the creditor did not suffer any damage as a result of this omission are also grounds for such dismissal. Enforcement carried out by compulsory administration is also one of such exceptions.
The Commercial Companies Code also provides for criminal liability that may apply to members of the management board as a result of the above-mentioned omission. Failure to submit an application may result in criminal liability of the management board member, such as a fine, restriction of liberty or imprisonment of up to one year. In order to commit this crime, it is not required that there be a result caused by the omission of this obligation. It is therefore worth noting that this is a key obligation that must be fulfilled by management board members.
Obligation to keep a share register
The Commercial Companies Code obliges the management board to keep a share register. After each change introduced, the management board is obliged to submit to the registry court a new, updated list of shares signed by all members. The agreement may impose an obligation on the management board to grant its consent to the sale of shares in the limited liability company.
Duty regarding conflicts of interest
Another duty of a management board member is to avoid conflicts of interest. Conflicts of interest should be disclosed by the member immediately and he or she should refrain from participating in the resolution of such matters. The key obligation is to avoid a situation in which the interests of the company and the management board member, his or her spouse, relatives, second-degree in-laws, or persons with whom the management board member has personal connections are in conflict.
Reporting obligation
The Management Board submits a report on the company’s activities and financial statements for the previous financial year. In circumstances where the balance sheet prepared by the company’s management board shows a loss that exceeds the sum of the supplementary and reserve capitals and half of the share capital, the management board is obliged to convene a shareholders’ meeting in order to resolve the issue regarding the company’s continued existence. Convening a shareholders’ meeting is the responsibility of the management board. The management board ensures the required access of the supervisory board advisor to the company’s documents. Members of the management board are also obliged to provide information to the advisor of the supervisory board.
Duty of loyalty
A member of the management board is obliged to remain loyal to the company. The company’s secrets cannot be disclosed by him.
Obligation not to undertake competitive activities
A member of the management board cannot cause any activity that would be competitive for the company. This is an important obligation. Participating in or engaging in competitive business without the required consent is prohibited. A member of the management board may not participate in a competitive company as a partner in a civil partnership, a partnership, a member of a body of a capital company or in another competitive legal person as a member of its body.
It is therefore worth noting that members of the management board have a number of different duties related to their performance of this function.
