The amendments to Poland’s Commercial Companies Code which entered into force on 13 October 2022 standardised the calculation of the terms of management board members, introduced new duties to take minutes of management board and supervisory board meetings in limited-liability companies, and expanded the catalogue of offences resulting in a ban on serving as a member of corporate bodies or as a receiver or commercial proxy. The question is whether the amendment will have a positive impact on the functioning of corporate authorities.
Unification of calculation of the term of office of management board members
The amendment has unified the method of calculating the term of office of management board members in a limited-liability company or joint-stock company when they are appointed for a period of more than a year. Before, two divergent concepts existed in this regard: prolongation and reduction.
Under the prolongation notion, the term of office was calculated according to full financial years, which meant that a management board member served not only for the full financial years, but also for the period from appointment in the year preceding their first full financial year in office, until the date of the shareholders’ meeting approving the financial statements for the last full financial year of the term (commentary to Art. 202, P. Pinior in A. Szumański, R.L. Kwaśnicki & F. Ostrowski (eds.), Commercial Companies Code: Commentary on amendments (Holding Law) (Warsaw 2022)). In practice, this meant that if a management board member was appointed, for example, on 1 May 2015 for a three-year term, he or she served from the date of appointment for three consecutive full financial years. If the financial year in the company coincided with the calendar year, those years were 2016, 2017 and 2018, until the date on which the shareholders’ meeting approved the financial statements for 2018, which could only happen in the following year, i.e. 2019.
Under the reductionist concept, the term of office was calculated in years from the time of appointment of the board member. Thus if, as above, a member of the management board was appointed for a three-year term on 1 May 2015, then he or she served from the date of appointment for three consecutive years, and thus until 2018, and the mandate expired on the date of the 2018 shareholders’ meeting approving the 2017 financial statements. Supporters of this method stressed that the last full financial year of a board member’s exercising this function, as mentioned in Art. 202 §2 of the Commercial Companies Code, was 2017, as Art. 202 §2, applicable to a limited-liability company, and the corresponding Art. 369 §4, applicable to a joint-stock company, did not call for the term be counted in full fiscal years (commentary on Art. 202, R. Pabis in J. Bieniak (ed.), Commercial Companies Code: Commentary (Warsaw 2022)).
Pursuant to the Supreme Court of Poland resolution of 24 November 2016 (case no. III CZP 72/16), the last full financial year within the meaning of Art. 369 §4, in conjunction with Art. 386 §2, is the last financial year that began during the term of office of a member of the supervisory board of a joint-stock company. As a result, the court supported the prolongation concept, reasoning that it “most fully implements the company’s will expressed in the determination of the term of office and appointment of members of the supervisory board, protects its interests, and takes into account all aspects of the interpretation of Art. 369 §4 of the Commercial Companies Code and the factors relevant to determination of the moment of expiration of the mandate.”
According to the court’s interpretation, a mandate cannot be shortened for reasons other than those specified in the act (e.g. resignation of a member), and therefore, if statutory events do not take place resulting in a shortened mandate, the mandate (understood as the right to carry out the functions of a member of the body) cannot be shorter than the term of office (understood as the period for which a board member is appointed to exercise that function).
If the court approved the reductionist concept, there could be a situation where the mandate would be shorter than the term. For example, if a board member was appointed for a three-year term on 9 December 2015, his or her mandate would end with the approval of the 2017 financial statements by the shareholders, e.g. on 6 June 2018, and thus before 9 December 2018, when the term would have expired.
The amendment to the Commercial Companies Code put an end to doubts arising from the application of two different concepts, coming down in favour of the prolongation theory. As a result, a provision was introduced for counting the term of office of a member of the management board of a limited-liability company or joint-stock company, under which the term of office is calculated in full financial years, unless the company’s articles of association provide otherwise. In the justification for the amendment, the parliament stated, “Thanks to this regulation, there will be no doubt that the mandate of a management board member appointed on 1 June 2021, for a two-year term, in a company whose financial year is identical as the calendar year, will expire on the date of the shareholders’ meeting approving the financial statements for the 2023 financial year.” Significantly, the amended regulation is also applicable to the mandates and terms of office of members of corporate bodies that were ongoing as of entry into force of the amendment.
New obligations to take minutes of management board and supervisory board sessions in a limited-liability company
The amendment also clarified the issue of taking minutes of resolutions of corporate bodies. Previously, the legal obligation of management boards of limited-liability companies to take minutes of their resolutions was questionable. Unlike the supervisory boards of limited-liability companies, management boards were not covered by any express obligation to prepare minutes of sessions or resolutions. Some commentators inferred that since the regulations did not explicitly provide for such a duty, the management boards of limited-liability companies were not required to maintain minutes.
Other commentators tried to derive an obligation to take minutes of management board resolutions by analogy with the regulations governing the management board in a joint-stock company, which, prior to the recent amendment, required resolutions of the management board of a joint-stock company to be recorded in the minutes (Szumański et al., supra). Others grounded an obligation to take minutes of management board resolutions on Art. 209 of the Commercial Companies Code, which indicates that in the event of a conflict of interest between the company and a management board member (or a member’s relatives), members of the management board of a limited-liability company may abstain from participating in resolution of the matters and request that this be noted “in the minutes.” According to some authors, the possibility of requesting recording of a dissenting opinion supported the obligation to record resolutions, which would be impossible in the absence of a written resolution.
But under prior law, the doubts regarding the obligation to take minutes of resolutions of the management board of a limited-liability company could not be clearly resolved, due to the gap in the provisions. There were also strong voices asserting that management boards are not required to take minutes of their resolutions. Therefore, the parliament wisely decided to dispel this ambiguity, by providing unequivocally that management board resolutions of a limited-liability company must be included in minutes, while setting forth the minimum requirements for the minutes.
Under the current law, the minutes of a management board session should include:
- Agenda
- Names of the current management board members
- Number of votes cast for each resolution
- Dissenting opinion, if submitted by a member of the management board, along with a justification, if any
- Signature of at least the member of the management board presiding over the session or administering the vote, unless the articles of association or bylaws of the management board provide otherwise.
Minutes of the management board session should also be prepared when resolutions are adopted by telecommunications. This solution is intended to ensure greater transparency in the activities of the management board, for which written minutes have a special evidentiary, organisational and informational value.
However, the requirement to keep minutes does not apply to resolutions adopted in writing, as provided for in Art. 208 §52 of the Commercial Companies Code, as the written procedure for adopting resolutions was provided for situations where the management board makes decisions outside of formal sessions.
For accuracy, the minutes of the management board session should contain the signature of at least the management board member conducting the meeting or managing the vote. The articles of association or bylaws of the management board may impose more far-reaching requirements regarding the signing of the minutes (e.g. a duty for all management board members present at the meeting to sign the minutes), but may not exclude the minimum requirements set forth in the code.
Entry into force of the amendment also affected the regulations for operation of the supervisory board in limited-liability companies. Prior to the amendment, the Commercial Companies Code only indicated that the minutes of a supervisory board session were to be kept, without specifying what form they should take and who was responsible for keeping them. Now, pursuant to Art. 222 §2, the provisions on minutes of the management board shall apply as relevant to the minutes of the supervisory board.
There was also a minor change in the rules regarding voting by the supervisory board of a limited-liability company. Art. 222 §42, introduced by the amendment, now provides that resolutions of the supervisory board are adopted by a simple majority of votes, unless the company’s articles of association provide otherwise.
Summary
The changes in the operation of corporate bodies should be evaluated positively. The parliament introduced an important duty to take minutes of management board sessions in limited-liability companies. The establishment of such a duty will increase the transparency of internal relations within the management board and the company. The minutes have a special informational and evidentiary value, as they reveal the method of voting on individual resolutions, which can affect the responsibility of management board members for their decisions.
Unifying the method of calculating the term of office of management board members in a limited-liability company or a joint-stock company in the case of their appointment for a period longer than one year also serves a good purpose. This put an end to disputes between proponents of the prolongation and reduction concepts, as the parliament unequivocally came down in favour of the prolongation concept. This change is particularly important, as the determination of whether a person continues to hold office has a direct bearing on the effectiveness of acts performed for the company, including contracts. To be sure whether a member of the management board effectively represents the company and is authorised to enter into a contract for the company, the prolongation concept enables a determination of whether the person signing the document for the company is still in the office.
Wiktor Zborowski, adwokat, Jan Kaźmierczak, M&A and Corporate practice, Wardyński & Partners
