Establishment of a proxy for another member of its board of directors to conclude an agreement between and in dispute with a member of the board of directors

The general principle of representation of the Polish limited liability company. is expressed under Article 201(1) Act on 15 September 2000 Commercial Companies Code 1 (hereafter: k.s.h.), according to which the Management Board conducts and represents the company.

Derogation from this rule Article 210(1) k.s.h., which introduces a standard according to which in the agreement between the company and the member of the board and in the dispute with it the company is represented by a supervisory board or a proxy appointed by a resolution of the meeting of shareholders.

A general prohibition on the representation of the Polish limited liability company.

by the members of the board of directors is removed from the aforementioned article if the other party to the contract or dispute shall be represented by a member of the Management Board, the consequence of which is the need to appoint a representative on the basis of Article 210(1) k.s.h.

Both jurisprudence and doctrine in accordance with the principle of admissibility for the establishment of a proxy Article 210(1) k.s.h.

of that member of the board who is a party to the agreement or dispute with the company 2 , However, the issue still remains whether the company’s proxy chosen by the meeting of shareholders in a way Article 210(1) k.s.h. may be another member of its board or norm from Article 210(1) k.s.h.

covers also other members of the management board of the company who are not party to the agreement or dispute with the company.

1. Introduction

The purpose of this Article is to approximate the issues of representation of the company from the o.o. in the agreement or in the dispute between the company and the member of the board in the context of the admissibility of appointment as a proxy in a manner Article 210(1) k.s.h. another board member of the same company.

Note that the wording Article 210(1) k.s.h. in no way directly defines the circle of entities authorised to be that proxy 3 , indicating only where the appointment of a special representative by the meeting of shareholders is necessary. Non-exhaustive nature of the regulation under Article 210(1) k.s.h.

causes numerous doubts as to whether the company’s proxy chosen by the meeting of shareholders in a way Article 210(1) k.s.h. may be a member of her board of directors and is ununiformly judged by doctrine and case law.

Zbigniew Jara notes that the spectrum of differences of views in writing in the above area is so broad that it includes positions according to which the proxy in question under Article 210(1) k.s.h.

(except for exclusion resulting from Article 108 Act on 23 April 1964 - Civil Code 4 , (hereinafter referred to as ‘k.c.’) is a member of the Management Board even if it is second a party to a contract or dispute, since the provision does not contain provisions limiting the circle of entities authorised to act in that role on a model basis Article 214(3) k.s.h.

or Article 4122(3) k.s.h., as well as the views allowing the power of attorney to conclude a contract with a member of the board, without the person concerned, arguing that this would violate the prohibition of action ‘with itself’ 5 .

Nevertheless, despite the large number of positions on this issue, it is possible to distinguish two dominant views.

first of which it is admissible to appoint a member of the board of directors of the company as a proxy for the conclusion of a contract or in a dispute with the company. So far, this approach has prevailed primarily in case law.

On the other hand, second of the views considered in this publication, contrary first, assumes the inadmissibility of appointing a proxy in the mode Article 210(1) k.s.h. any member of the board of directors of the company of o.o. to enter into an agreement with that company or in dispute with it. In the opinion of the supporters of that position, this would constitute circumvention of the standard laid down in the provision Article 210(1) k.s.h. 6 .

With a view to a closer analysis of the issue so outlined, the author of this publication First, briefly details the characteristics of the power of attorney granted by the resolution of the shareholders of the company in the manner of Article 210(1) k.s.h., in order to give further attention to two dominant views on the subject matter, stating that it is possible to establish a proxy for another member of the management board of that company to conclude an agreement between the company and the member of the management board and in the event of a dispute with that member of the management board. Article 210(1) k.s.h.

1. Plenipotentiary given by resolution of the shareholders of the company.

The general principle of representation of the company is formulated under Article 201(1) k.s.h., according to which the board conducts the affairs of the company and represents the company. Article 210(1) k.s.h.

is a derogation from such a principle, providing that in a contract between the company and a member of the board and in a dispute with it the company is represented by a supervisory board or a proxy appointed by a resolution of the shareholders. Regulation Article 210(1) k.s.h.

aims to protect the interests of companies in the event of a conflict of interest between the company and a member of the board of directors entitled to represent the company[7].

It requires that all contracts and disputes between the company and a member of the board of directors be dealt with, both in relation to its function and those which are not related to the performance of the functions of a member of the board of directors but in which a member of the board acts as a person. third to the company[8].

It must also be stressed that the exclusion of a member of the board from representing the company from the o.o.

due to its ‘controversial’ with the company (Article 210 (k.s.h.) may also occur due to a potential conflict or its risk of occurrence, which is due to the need for the company to take a decision or to express a position of legal relevance where the interests of the company and of a member of the board of directors may conflict.

Although, as has already been mentioned, k.s.h.

does not directly impose any entity restrictions on a person who may be appointed as a representative of the company in contracts and disputes with members of the board of directors, it is assumed that both the partner and the person outside the group of shareholders may be the proxy of the company.[9].

The consequence of non-compliance with the principles expressed under Article 210(1) k.s.h. is the absolute nullity of the action carried out, according to Article 58 k.c. 10 .

At present there seems to be a dominant view in the case law, according to which the infringement of this provision, having the character of ius cogens, causes absolute nullity of legal action 11 and not applicable Article 103(1) k.c., which provides for the possibility of confirmation of the actions carried out by the falsus procurator in relation to the so-called limping legal act (negotium claudicans). If the legal act is strictly invalid from the outset, it cannot be confirmed by the competent authority of the company[12].

1. Opinion in favour of authorising another member of the management board on the basis of Article 210(1) k.s.h.

first from the leading views allows the appointment of another board member as a proxy Article 210(1) k.s.h. by the meeting of the shareholders of the company of the o.o. in the agreement between the company and the member of the board and in dispute with it.

The view of the admissibility of giving power of attorney to another member under the procedure Article 210 § by the meeting of the shareholders of a member of the management board of the company with the o.o.

to conclude an agreement with another member of the board of directors dominates the case law of civil and administrative courts[13].

Supreme Court in the justification of the resolution with 23 August 2006 14 points out that the admissibility of setting up a company as a representative of a member of its board of directors has not been legally excluded in any way and that there is no statutory prohibition of such appointment.

Furthermore, the Supreme Court stressed, citing among other things Article 55(1) Act on 16 September 1982 – Cooperative law 15 , that there are already legal provisions in force to ensure that the legal system permits the authorisation of the board of directors of a legal person.

According to that provision, the Management Board may grant one from the members of the Management Board or other person of the power of attorney to carry out legal activities related to the management of the current business of the cooperative or its organisational and economic separation of the unit, as well as the power of attorney to carry out specific activities or activities.

Thus, in the opinion of the Supreme Court, the possibility of giving power of attorney one from the members of the management board of the company does not lead to circumvention of the law and the appointment of a member of the management board of the company as its agent does not result in the cessation or limitation of its function as a hub of the body of a legal person. The granting of the power of attorney alone does not affect the rules of representation of the company by its management.

In the judgment of 1 July 2015, The Court of Appeal in Białystok draws attention 16 , that Article 210(1) k.s.h.

does not specify who may be the proxy of the company and thus leaves the choice of the shareholders (the case concerned the appointment of the proxy of the attorney, but the observations of the Court of Appeal may also be applied to other members of the board of directors of the company).

The Court of Appeal notes in that judgment that, both under the terms of the Commercial Code and k.s.h., in multi-member companies with limited liability, a contract of employment concluded by a proxy appointed by a resolution of a meeting of shareholders who are a member of the company's board of directors with other (other) board members may be regarded as legally effective and without prejudice to the rules generally applicable.

This view is also reflected in the newer statements of the representatives of doctrine.

Zbigniew Jara points out that in multi-member limited liability companies in which the multi-stakeholder board is established, the shareholders should be free to assess whether a member of the board of directors can be a proxy for the company in a legal act which he performs on behalf of the company as the principal[17].

In addition, Andrzej Kidyba indicates that the recipe Article 210(1) k.s.h. concerns the power of attorney of a particular type and only for certain activities, and the authorizing authority is different than usual, which excludes the power of attorney for itself[18].

The cited author states at the same time that if, therefore, the meeting of shareholders considers that the system of checking the conclusion of contracts with members of the board of directors will be implemented, the power of attorney of another member of the board of directors should be considered admissible.

The view of the admissibility of giving power of attorney to another member under the procedure Article 210(1) k.s.h.

also agrees with Małgorzata Dumkiewicz, who states that there are generally no obstacles to the person empowered by the assembly to represent the company in a contract or in a dispute with a member of the board of directors being another member of the board of directors of the company[19].

1. Opinion in favour of inadmissibility of giving power of attorney to another member of the board of directors of the company Article 210(1) k.s.h.

second from the dominant views excludes the admissibility of any member of the Management Board as proxy Article 210(1) k.s.h. by the meeting of the shareholders of the company of the o.o., even if the member of the board of directors would not be a party to the agreement or dispute with the company.

The representatives of the doctrine in favour of this view consistently stress that the admissibility of giving power of attorney to another member of the company's board of directors Article 210(1) k.s.h. would constitute a public bypass Article 210(1) k.s.h. 20 , 21 .

In view of the above, the supporters of this view stress in particular the argument that the objective Article 210(1) k.s.h.

is to ensure the protection of the interests of the company, which consists in eliminating the possibility of acting as a member of the board in a dual role: a representative of the interests of the company and a representative of own interests, thus preventing abuses which could arise in connection with the conduct of a member of the board of directors by his own interest which are contrary to the interests of the company.

They also point out that it is not necessary for a conflict of interests to exist – a potential conflict of interests is enough.

Artur Nowacki argues that such a solution aims to avoid situations where loyalty to another member of the board could outweigh the loyalty of the company, and also prevent possible exchange of favors between members of the board, by cross-representing the company in the activities performed with the company by each of them[22].

The appellant states that Article 210(1) k.s.h. provides for the exclusion from the representation of all board members, and not just the one with whom the dispute is disputed or who is a party, because it is not only about strictly understood actions with itself.[23].

Robert Pabis, on the other hand, points out that if the appointment of another board member were to be possible, the regulation could easily be circumvented. Article 210(1) k.s.h. in such a way that members of the Management Board acting as agents could conclude agreements between them and the company[24].

Critical to the admissibility of appointment as proxy in the mode Article 210(1) k.s.h. is also spoken by Adam Opalski, who indicates that both the sound and ratio of the recipe Article 210(1) k.s.h. exclude the possibility of giving power of attorney in this mode to any member of the Management Board.

The author emphasizes that the purpose of this provision is to definitively exclude managers as affected by conflicts of interest from the representation of the company, and that the granting of power of attorney is not so much a fraud legis act, but contrary to the law[25].

This view is also reflected in part of the caselaw. For example, the judgment of the Poznań Court of Appeal of 29 March 2018 26 .

In that judgment, the Court of First Instance took the view that authorising a member of the board of directors to grant a power of attorney would lead to circumvention Article 210 k.s.h., since the power of attorney would result in a situation where a member of the board, acting as a proxy, performs legal acts for the company.

The Court of Appeal stressed that this could lead to a breach of the company's interests, and the purpose of this provision is to avoid a conflict of interests between the company and a member of the board of directors, who would deal with an important matter of another board member, with whom he has worked daily.

5. Summary

Opinion in favour of authorising another member of the management board on the basis of Article 210(1) k.s.h. has so far dominated primarily in jurisprudence and is now also beginning to gain approval in the latest statements of representatives of doctrine. Adjective view, in favour of inadmissibility of giving power of attorney to another member of the company's board of directors Article 210(1) k.s.h. has so far dominated the doctrine and found the highest approval.

True, there is no denying the accuracy of emphasising a particular role Article 210(1) k.s.h., consisting in ensuring the protection of the company's interests by eliminating the possibility of acting as a board member in a dual role – a representative of the company's interests and a representative of its own interests – however, compelling arguments for the admissibility of giving power to another board member of the company on the basis of Article 210(1) k.s.h.

First, the power of attorney of Article 210(1) k.s.h. is a power of attorney of a particular type and only for certain activities, and the authorizing authority is different from the usual authority, which excludes the power of attorney for itself.

The entity granting the power of attorney is a different body than usual (a meeting of shareholders rather than a board of directors), which basically excludes the situation of giving power of attorney to itself.

Furthermore, it is not possible to ignore the argument that the shareholders should be left free to assess whether a member of the board of directors can be a proxy for the company in legal acts.

After all, if the meeting of shareholders considers that the system of control of the conclusion of contracts with the members of the board of directors will be implemented, the power of attorney of another member of the board should be deemed to be fully acceptable on the basis of Article 210(1) k.s.h.

It should also be borne in mind that Article 210(1) k.s.h. in no way directly defines the circle of entities authorised to be that proxy, but merely indicates in what situation it is necessary to appoint a special proxy by the assembly of shareholders.

If the power of attorney is admissible Article 210(1) k.s.h. the meeting of the shareholders of the company from the o.o. of another member of the board also speaks to practical considerations.

Possibility to appoint a proxy in a mode Article 210(1) k.s.h. also another member of the company's board helps to improve decision-making processes in situations where the circle of persons involved in the representation and conduct of the company's affairs is narrowed, as in the case of family companies.

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5 Z. Jara, Article 210 k.s.h., Z. Jara (ed.), Commercial Companies Code. Comment. Wyd. 3, Warsaw 2020, nb 70 and written there, Legalis/ele.

8 R. Pabis, Comment to Article 210(1)) k.s.h. [w]: J. Bieniak, M. Bieniak, G. Nita-Jagielski, Commercial Companies Code. Comment. Wyd. 7, Warsaw 2020, thesis 1, Legalis/ele. 2019.

11 Vide judgment of the Court of Appeal in Warsaw of 2 September 2015, reference no. VI ACa 1339/14 LEX No. 1814841 .

17 Z. Jara, Article 210 k.s.h., op. cit, nb 72.

18 A. Kidyba, Article 210 [in:] Comment updated to Article 1-300 Commercial Companies Code. LEX Legal Information System, 2020.

19 M. Dumkiewicz, Article 210 [in:] Commercial Companies Code. Comment. Wolters Kluwer Polska, LEX Legal Information System, 2020.

20 M. Rodzinkiewicz, Article 210 [in:] Commercial Companies Code. Commentary, issue VII [online]. Wolters Kluwer Polska, 24 July 2020 [access: 11 August 2020]. Available online: https://sip.lex.pl/#/commentary/587593295/563914

21 A. Szumański, Article 210 k.s.h. [in:] S. Sołtysiński and Others, Commercial Companies Code. Comment. T. II, ED. 3, Warsaw 2014, nb 10, Legalis/ele.

22 A. Nowacki, Article 210 k.s.h. [in:] A. Nowacki, Limited Liability Company. T. I. Comment. Article 151-226 k.s.h., Warsaw 2018, nb 9, Legalis/ele.

24 The President Article 210 [in:] J. Bieniak, M. Bieniak, G. Nita-Jagielski, Commercial Companies Code. Comment. Legal Information System Legalis, thesis 6.

25 The President Article 210 k.s.h. [in:] A. Opalski ed.), Commercial Companies Code. T. IIA. Limited liability company. Comment. Article 151-226, Warsaw 2018.