Amendment of the Commercial Companies Code – liability and rights of the members of management board and supervisory boards

This article discusses further important changes introduced by the amendment to the Commercial Companies Code (hereinafter: “CCC”). They regard mainly the members of management board, supervisory board or review panel. It is worth bearing them in mind, as the amendment implements rules of liability that are completely new for the Polish legal system. We know them from the majority of the common law jurisdictions, such as USA, Canada or England.

1. Business judgement rule

One of the important changes introduced by the last adjustment to CCC is the so-called business judgement rule. It is worth keeping it in mind, as it excludes the liability for damage caused to the company as a result of erroneous decisions of its bodies, as long as these decisions were taken within the limits of justified business risk on the basis of information adequate to the circumstances.
Every member of management board, supervisory board or review panel should maintain due diligence resulting from the professional character of their activity when performing their obligations and to remain loyal towards the company. The above obligations are considered met provided that, when acting loyally with regard to the company, one acts within the limits of justified economic risk, including on the basis of information, analyses and opinions that should be taken into account in given circumstances when performing a careful assessment.
Thus, the circumstances accompanying the decision-making of the bodies will be evaluated. The members of bodies who made wrong decisions while performing the obligations diligently and loyally will be protected in the event of causing damage to the company.
In line with the case law of the Polish Supreme Court, any reckless actions performed without maintaining due diligence stemming from the professional character of the activity shall remain sanctioned (see the decision of the Supreme Court of 24th July 2014, II CSK 627/13).

2. Action or omission in the interest of a group of companies

Additionally, in relation to issue of a binding order, a management board member, supervisory board member, review board member, authorised clerk or liquidator of the company participating in a group of companies will be allowed to invoke action or omission in a specific interest of a group of companies if the company disclosed its participation in a group of companies. These entities will not incur liability for damage caused by performing a binding order, including under Article 293, Article 303125 and Article 483 of the Code of Commercial Companies. This applies both to the bodies of the subsidiary company and, accordingly, to those of the dominant company, operating in the interest of a group of companies.

3. Obligations of supervisory boards

Together with exclusion of liability, however, the amendment brings about a specification of obligations of supervisory boards, which shall include:
• evaluation of reports from activity of the accompany and the financial statement for the previous financial year within the scope of their compliance with account books and documents, as well as with the actual status,
• evaluation of applications of the management board regarding distribution of profit or coverage of loss,
• elaborating and submitting to the meeting of shareholders or the general meeting of shareholders an annual report from results of evaluation referred to above and a report from activity of the supervisory board for the previous financial year (report of the supervisory board).

4. Supervisory board’s right to demand information, documents, reports or explanations.

For the purposes of performing its obligations, the supervisory board will be entitled to examine all the documents of the company, perform audit of the company’s assets and demand the management board, authorised clerks and other persons employed by the company to prepare or provide any information, documents, reports or explanations regarding the company, including in particular its activity or assets.

The object of the demand may also be information, reports or explanations regarding subsidiaries and related entities that are in possession of the obligated body or entity.

The information, documents, report or explanations referred to above would be provided to the supervisory board immediately, but in any case not later than within two weeks from the date of such demand being reported to the obligated body or person, unless a longer period is specified in the demand. The management board would also not be allowed to limit the access of supervisory board members to the information, documents, reports or explanations indicated.

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