Interest of the company in Polish company law

The concept of the company's interest in Poland was an almost unknown category until 2008. The discussion on this subject was only revived by requests to regulate the functioning of capital groups and the doubts raised by the definition of ‘the interest of the group’[1].

The activities in this area of the European Commission have also influenced the native doctrine. The global economic crisis over the years also affected the broader debate on the category of interest of the company. 2007-20102.

The interpretation of the company's interest, seemingly in the field of theoretical considerations, is essential for the practice of company law.

Introduction

In the Commercial Companies Code[3] the interest of the company appears as the centre of corporate governance by its influence on the criterion of behaviour and the determinant of the decision of shareholders of partnerships and members of the bodies of capital companies[4].

It also provides a reason for repealing the resolution of the Capital Company (Article 249 and Article 422 k.s.h.).

The correct decoding of the concept of ‘interest of the company’ is extremely important, in particular for companies operating within a group, where improper balancing of the interest of the company with the interest of the capital group may put a member of the board of directors under criminal responsibility for abuse of rights or failure to fulfil obligations[5].

Grounds for the separation of interest of the company

All commercial companies have a certain degree of separateness. Commercial law companies have full (legal persons – capital companies entered in the register) or limited (damaged legal persons – commercial partnerships and capital companies in the organization).

The separation of the entity and legal personality of the companies makes it possible to have an interest of a company separated from the interests of its owners. The separation (autonomy) of the interests of the company from the interests of shareholders and others is a natural phenomenon[6].

Interest categories

in Polish company law

Civil law, and in particular commercial law, is saturated with the spirit of individualism, which makes it possible to distinguish the existence of various interest groups: the interests of the company, the interests of the shareholders (this is not a uniform category, as each of the partners can have their own goals and interests[7]), the interests of other persons (e.g. creditors). Interest contradiction (e.g. Article 209(377) k.s.h.), ‘interest conflict’ (e.g.

Article 412 (k.s.h.) specify situations where needs or powers at least two entities overlap and pursuing the objective by one of the entities causes interference in the sphere of the other entity second subject and meet with its countermeasure[8].

Based on the practice of operating companies, a common conflict is a conflict of interest between majority and minority shareholders, or a conflict between the interest of the company and the interest of members of its organs[9]. The subject of a serious debate is also the rule of law of groups of companies which, as it stands, gives rise to conflicts between the interests of the companies participating in the group of companies or between the interests of the shareholder of the subsidiary and the interests of the parent company.[10].

The catalogue of factors affecting the interpretation of the company’s interest is listed below.

Purpose of the company

When establishing a company, partners or shareholders undertake to pursue a common objective (affectio societatis). The interest of the company is in line with what serves this purpose[11].

In most cases, it boils down to increasing the market value of the company, producing high dividends for shareholders (shareholders), continuous business development, maintaining a high level of employment, maintaining cooperation with the local environment and achieving a certain market share[12].

„However, the purpose of the company and the ‘interest of the company’ cannot be considered identical.

The Supreme Court indicated that the objective of the company should be taken into account in determining the interest of the company, alongside the interests of shareholders[13]. The interest of the company is not always in line with the interests of individual shareholders or groups of shareholders[14]. The purpose of the company therefore remains only one the factors to be taken into account when defining the interest of the company.

Contract/statute of the company

The Supreme Court also pointed out the important role of the contract/statute of the company in determining the interest of the company[15]. Partners have an impact on the content of the contract/statute at the stage of its formation, but also during the legal existence of the company.

Thus, they can also change the purpose of the company at any time and consequently the interpretation of the interest of the company. It is pointed out that the interpretation of the summary of the company's statutes/contracts is crucial for determining the content of the company's interest[16].

Interest of working groups

within and around the company

Many different interest groups are involved in the company's activities. They can be divided into two essential categories: (i) contract, comprising shareholders/shareholders, management staff and employees, customers, distributors, suppliers, lenders; and (ii) social, including consumers, legislators, pressure groups, media, local communities[17].

Majority

The majority shareholder takes the greatest capital risk and has the most corporate rights in the company. His actions are generally directed towards the development of the company. If a majority shareholder concludes that the company's interests have become contrary to its own interests, he may proceed with the dissolution and liquidation of the company. In principle, the interest of the company will therefore be most closely related to the interest of the majority shareholder[18].

There are also more radical positions, indicating clearly that the interest of the company is in line with the interest of the majority of shareholders (shareholders)[19]. The Commercial Companies Code confers unlimited power on the company. Most can use their powers to force virtually any corporate decision. The regulation of k.s.h. assumes almost unlimited submission of officers to the interests of the capital majority[20].

The majority of its capital operations do not necessarily have to take into account the interest of the capital minority or the interest of persons operating within and around the company[21]. The majority shareholder’s advantage is corrected by the obligation to act in the interests of the company[22].

The legislator introduced restrictions aimed at preventing the company from being maimed. The aim of the standards for the protection of minority shareholders' rights is to contribute to the better functioning of corporate mechanisms in the company.

For example, minority shareholders have the right to challenge a resolution taken by a majority of shareholders (Article 249 and Article 422 k.s.h.).

The role of majority shareholder was also limited by the document Good Practice of Public Companies from 2005[23], as well as slightly softer Good Practices of companies listed on WSE 201624.

The interest of shareholders/majority and minority shareholders forms an image of ‘interest of the general shareholders/shareholders’. According to the case law of the Supreme Court, the interests of all groups of shareholders of the company, in addition to the common objective set out in the contract (statute) of the company, are a determinant of the interest of the company[25].

Interest of company officials

Interest category of majority and minority shareholders not exhaustive a picture of interest groups operating in the company. First of all, the interests of the members of the boards of companies should be pointed out.

It is not possible to completely separate the sphere of an individual who acts as an official of the company from the interests of the company itself[26]. Economic science has developed a number of theories that answer the question of whose business is to be guided by members of the boards of capital companies[27].

The jurisprudence of the Supreme Court indicates that, in the sphere of action of a legal person, the personal interest of the members of its organs is distinct from the interests of the company and may conflict with it[28].

The phenomenon of taking into account managers' own interests in the management of the company is particularly visible in groups of companies.

Interest of other groups operating around the company

The company is an economic organization, the subject of an agreement aimed not only at regulating relations between shareholders, but also at the company's external relations. The activity of the company itself results not only in inter partes relations, but also in relation to individuals third[29].

The interests around the company will include employees or consumers purchasing goods offered by the company. The interested party will be any person or group that can influence the company[30]. However, the impact of groups operating around the company has a marginal impact on understanding its interests.

According to the prevailing position in Poland, the interest of the company is a category of internal relations of the company and the protection of the rights of wider groups, such as creditors, although reported, cannot be the sole determinant of the company's interest[31].

This approach is close to the interpretation used by the Supreme Court[32].

The category of ‘Company interest’ is a general clause and the legislator has not defined what is meant by this category. The lack of a definition of interest as a normative category is a deliberate procedure of the legislator. The Constitutional Court pointed out that clarifying the concept of the company's interest is the task of doctrine and case law[33].

The introduction of a definition of the legal interest of the company could not only give rise to substantive doubts about such a definition, but, more importantly, could influence the efficiency of the application of the law (it would lead to interpretation discussions in which each party would point to its own semantic and axiological concepts). Taking into account the interest of the company, it is necessary to keep in mind the presented catalogue of factors affecting the interpretation of the interest of the company and to consider it ad casum.

It is therefore necessary to examine the substance of the interpretation of the company’s interest in the practice of company law, noting the company’s interest as a corporate governance centre.

Obligation of shareholders and organ members to act in the interests of the company

The proper reading of the interest of the company shall determine the limit of the management comfort in making discretional decisions. The incorrect definition of this term may lead to a conflict between the agency, i.e. conflicts of interest between managers and shareholders.

In the current literature on the interest of the company, the essence of this concept is under-emphasis as determining the responsibility of a member of the board of directors and supervisory board, who bear civil responsibility for acting against the company and thus for acting contrary to its interest, in accordance with Article 293(483) k.s.h.34.

Also good practices of companies listed on WSE 2016 indicate that the members of the board of directors in charge of the company and the members of the supervisory board in supervising the company must act in the interests of the company[35].

The shareholders deliberately leave the managers a certain decision-making loose, and managers seek to protect the full and free use of power to make risky decisions. Therefore, both the company's owners and its managers should seek to properly read the content of their company's interests[36].

In Polish company law, the obligation to act in the interest of the partnership of shareholders of partnerships and members of the board of directors and supervisory board of capital companies is due to the overriding obligation to maintain loyalty to the company.

The company's officers should grant primacy to the company's interests, as otherwise the company would lose its chance of enrichment and could also suffer damage.

An example of this is a situation where a dishonest officer does not make available the assets he manages, such as a valuable patent and acquires it in his own name by stopping it, or by abandoning the company at an excessive price[37].

Supreme Court in its judgment[38] He pointed out that a functional relationship exists between the interests of a member of the management board of the company and the interests of the company itself, but in conditions of conflict between the interests of a member of the management board of the company and the interests of the company itself, the primacy should be granted to protect the interests of the company.

The obligation of loyalty of the company's officers is also recognised in the field of the employee loyalty obligation. The work of the judicature in this area applies to board members employed on the basis of employment relationships.

This obligation requires the employee to keep confidential the information the disclosure of which could cause damage to the company, but also to refrain from using such information in his own interest in a way that could put the interests of the employer (in this case the company's interest) at risk of harm[39].

The interest of the company is therefore vital for the legal and business assessment of the management of the company. The interest of the company is a fundamental criterion for assessing criminal liability for actions against the company (Article 293(483) k.s.h.,

Article 296 k.k.40). The interest of the company is thus a key category in assessing the wrong decisions.

According to the concept of business judgment rule, the manager is entitled to be wrong, but this mistake should be a careful action, based on good faith and acting in the interests of the company[41]. The actions committed to exceeding the limits of economic risk are contrary to the interests of the company and justify the responsibility of the board member on the basis of Article 293(1) k.s.h.42.

It requires that the regulation in question is not applicable, even by analogy to the members of the supervisory board, as the intensity of their loyalty ties with the company is weaker than the members of the board of directors[43].

Determiner of the obligation to refrain from taking action contrary to the interests of the company

The high level of competence and the wide range of influence of the board give rise to the need to regulate cases where the interests of the company are contrary to the interests of the board member or persons associated with it. Accepted under Article 209 and 377 k.s.h.

the structure introduces a solution whereby a board member should refrain from participating in the resolution of such cases. Regulation reflects the concern of the legislature for the interests of the company[44]. These provisions develop the duty of loyalty of board members.

This obligation is the source of overriding duty to refrain from acting contrary to the interests of the company[45]. The aim of the regulation is to ensure that only persons free of conflict of interest participate in decision-making, thus protecting the company from adverse decisions[46].

The Kazuistic indication of examples in which the interests of the company could be jeopardised by the participation of a member of the board of directors in the decision is extremely difficult. There is no conflict of interest where the objective circumstances of the activities undertaken by the company exclude any likelihood of damage in its legal sphere[47].

However, the case law of the Supreme Court shows that a potential (hypothetical) conflict of interests between a company and a hub or close to it is the basis for dismissing an officer from ruling on a given case[48].

This means that it is not necessary to provide evidence or even to demonstrate that the involvement of the administrator affected by the conflict of interest in the adoption of the resolution may have negative consequences for the company.

All the more reason why it is not necessary to cause damage to the company due to an activity decided in a conflict of interests[49].

The obligation to refrain from taking decisions in the event of a conflict of interest should also apply in parallel to the members of the supervisory board[50]. In this case, there is a similarity between the members of the board and the members of the supervisory board.

This is also confirmed by good practices of companies listed on the WSE 2016 a rule which indicates that both a member of the board of directors and a supervisory board shall inform the board or supervisory board accordingly of the conflict of interests or the possibility of it being established and shall not take part in the vote on a resolution on a case in which conflict of interest may arise[51].

Judicial review criterion for resolutions of meetings of capital companies

In the event of the repeal of the resolution of the shareholders of the company from the o.o., the legislator requires "conciliation in the interests of the company" (Article 249(1) k.s.h.), whereas in the event of the repeal of the resolution of the general meeting of shareholders, it is necessary to "conciliate in the interests of the company" (Article 422(1) k.s.h.). The ‘interest of the company’ refers to a legal entity (a legal person), while the condition of ‘interests of the company’ refers to the sphere of business conducted by the company, its relationship with counterparties, funding institutions or other partners.

In view of the inconsistency of the legislator, it is reasonable in this case to consider that both in the company with a limited liability and in the public limited liability company, it is necessary to examine the category of ‘interest of the company’[52]. The provisions on the repeal of the resolutions of the company's meetings are few and probably most often applied in practice by code rules in which the legislature uses the concept of the company's interest.

The Commercial Code adopts a broad definition of reconciliation in the interests of the company. Pre-war writing indicated that a resolution to the detriment of the company’s interests should be regarded as having the effect that the company’s assets or income are reduced or the company’s existence is at risk.[53].

It is now also indicated that reconciliation in the interests of the company should be understood widely. It should be understood that all situations in which the interests of the company are protected by the interests of shareholders.

The representatives of the doctrine shall determine the reconciliation in the interests of the company as any situation where the company is at risk or where the income of the company is reduced or the good name of the company is infringed. It is also stressed that reconciliation in the interests of the company is an accessory to conflict with good habits. It is pointed out that as a rule, reconciliation in the interests of the company will always conflict with good habits[54].

Agreeing in the company's interests occurs when the resolution taken directly worsens the company's financial situation, but also when only indirectly affects its wealth and position on the market. Agreeing in the interests of a company may result in damage to it in both loss and loss of benefit, or only threaten to arise, as well as infringement of non-material goods[55].

The finding of a reason for reconciliation in the interests of the company will always be determined by the objective effect which the resolution is intended to have or has had. The resolution will also be repealed if the intention of the voters to take it was to act for the company's good interests[56].

It is widely accepted that the adverse effects of the resolution may have both a property and a non-material nature[57], Although there is also a contrary view that reconciling the interests of the company would mean only direct or indirect transfer of economic values[58].

It is also pointed out that any resolution that breaks corporate ties with customers is to be considered to be in the interest of the company.[59].

The doctrine remains in line with the broad understanding of the grounds for reconciliation in the interests of the company, indicating that it can be referred to whenever the resolution adversely affects the company's interests, whether by reducing its assets to the benefit of its shareholders, or by preventing the company from developing its company[60].

As an example of the reconciliation in the interests of the company, the situation in which the shareholders of a majority, holding shares or shares in other companies, lead to an adverse transaction with that second the company (so-called cost-effective profit-making), or the granting of excessive remuneration or other unjustified benefits to board members such as business car or private insurance[61].

In the absence of a statutory definition of reconciliation in the interests of the company, this condition is interpreted in the decisions of the Supreme Court and the ordinary courts. In conclusion, it can be pointed out that reconciliation in the interests of the company is seen as an action that reduces the company's assets, limits the company's profits, violates its good name, protects the interests of persons third at the expense of the interests of the company.

Agreeing in the interests of the company occurs when the resolution is taken with the knowledge that its implementation will negatively affect the interests of the company, whether by reducing its assets to the benefit of its shareholders or by preventing the company from developing its company[62].

It is therefore a situation where the resolution protects the interests of partners or persons third at the expense of the company’s interest, e.g. the use of profits for remuneration to the board instead of the necessary development of the company[63].

The Supreme Court also pointed to the moral aspect of the premise of reconciliation in the interests of the company, which can only be considered in terms of the wrong conduct and the reprimand of the intended purposes, to the detriment of the interests of the company[64]. At the same time, the Supreme Court concluded, indicating the relationship between the interest of the company and the interest of the shareholder, that it was unacceptable to identify the interest of the public limited liability company solely with that of the majority shareholder; similarly, it cannot be considered that the defence of a minority shareholder is always motivated by the interest of the company or is taken in its objective interest[65].

Grounds for excluding existing shareholders from pre-emptive rights

The right to collect shares is a corporate right, giving shareholders priority to include new shares issued in connection with an increase in the share capital of the company. Institution of the right to collect shares described under Article 433(2) k.s.h. serves to protect the interests of existing minority shareholders from “distilling” their shares in the company. Depriving of the right to collect is allowed only if it is in the interests of the company[66].

An example of the right to collect shares is an exceptionally bright translation of the theoretical interpretation of the company’s interest into the practice of applying the law.

The adoption of a more common position, according to which the interests of the company are a result of the interests of all groups of its shareholders and the common objective set out in the agreement or statutes of the company, would mean that it is in the interests of the company to assess whether it is in the interests of the company or to deprive shareholders of the right to collect, should also be carried out in the light of the need to balance the diverse and aggravating interests of the shareholders in the company, and when such an assessment is carried out, the benefit of the company (and thus its shareholders) should be confronted, e.g. by the fact that a new investor has been acquired with a detriment on the part of the shareholders, in order to reduce their participation in the company[67].

The doctrine identifies concrete examples in which the exclusion of the right to collect shares may be in the interests of the company.

The following is mentioned above: directing the issue of shares to the employees of the company related to the incentive aspect); the aport issue resulting from the need to obtain certain effects for the company, e.g.

shares in other companies; the public offering of shares preceding the company's efforts to allow its shares to be traded on a regulated market or to an alternative trading system and the consequent need to obtain an adequate distribution of shares required from companies whose shares are listed on those markets[68].

It is also assumed that the exemption is in the interest of the company when new shareholders are to contribute funds, contributions in kind, or other unique services and services which the former shareholders are unable to bring, and when a strategic investor is to join the company[69]. However, in any event, it must be considered whether disposing of shareholders of the right to collect is more beneficial for the company than leaving them that right[70].

The above interpretations of the doctrine coincide with the interpretation of the caselaw[71].

The Supreme Court has ruled that the effectiveness of the statutes of the public limited company authorising the board to exclude or restrict the right of certain shareholders to collect shares – with the increase in the share capital of the target capital – should be assessed primarily for the interests of the company.

The Supreme Court considered that the exclusion of the right to raise shareholders except one a strategic investor is acceptable if it is in the interests of the company[72].

Summary

Given the importance of correctly decoding the content of the company's interest and the multiple contexts. in which it occurs, an image of a concept which is relevant to the law of companies, the legislator has not given statutory wording. Even though first In fact, such an approach seems to be the only reasonable solution.

This is due to the indicated relationship of interest of the company with the essence of the company itself and taking into account the location of a particular company under specific circumstances.

The judgment of the Constitutional Court referred to above cannot be approved[73], according to which clarification of the concept of company interest is the task of doctrine and case law.