Entrepreneurs often choose to conduct business in the form of a limited partnership. A common solution is to create a structure of this type of company with the participation of the Polish limited liability company. as a subsidiary. This provides protection against liability for the company's debts and supports the process of tax optimization of the business conducted.
On 7 September 2018 The Supreme Court issued a significant resolution for entities operating on the basis of the structure set out above. In response to a legal question presented by the District Court in Łódź by a decision of 1 March 2018, reference no.
XIII Ga 1087/17, the following: ‘For the amendment of the partnership agreement, in which the subsidiary is a limited liability company, and one from the consultants a member of the board of directors of that company, it is correct to represent the associate by the Supervisory Board or by a proxy appointed in accordance with the procedure Article 210(1) k.s.h., or through the board of directors?’.
The Supreme Court, having examined the above issue in the Civil Chamber, weighed that ‘If a member of the board of directors of a limited liability company is together with that company a partner of a limited partnership, to express consent by a limited liability company to amend the partnership’s contract required on the basis of Article 9 k.s.h.
– applicable Article 210(1) k.s.h.’
According to Article 9 k.s.h. amending the terms of the partnership agreement requires the consent of all shareholders, unless otherwise provided in the agreement
This resolution was adopted on 7 September 2018 on a case under the signature III CZP 42/18. In the case under consideration, the shareholders of the limited liability limited company (complementary of the limited liability company) and a member of the board of directors of that limited liability company were limited liability companies. one I'm with the consultants.
At this point, it should be indicated that according to Article 9 k.s.h. the amendment of the terms of the partnership agreement requires the consent of all shareholders, unless otherwise provided in the agreement. Therefore, if this is not regulated differently in the agreement of the limited partnership to amend such an agreement, both the subcontractors and the limitedaries must agree.
However, according to Article 210(1) k.s.h. in the agreement between the company and the member of the board and in the dispute with it, the company shall be represented by a supervisory board or a proxy appointed by a resolution of the meeting of shareholders. The Supreme Court stated that this provision applies when the agreement of an existing limited partnership is amended.
It is worth recalling that, under the provisions of the Commercial Companies Code, the legislator saw the possibility of a collision between the individual interest of a board member and the interest of a company, giving primacy to protect the interests of the company. Article 210 k.s.h.
therefore introduces a special representation of a limited liability company. The purpose of this provision is to prevent legal acts from being carried out with members of the Management Board in accordance with the normal rules applicable to legal acts.
In the case in question under Article 210(1) k.s.h., it is about any agreement that may be concluded by a company with members of the board.
This therefore applies both to contracts which involve a function and those which are not related to the performance of the functions of a board member but are concluded by a natural person outside the source of its competence.
The objective of regulation Article 210(1) k.s.h., is the protection of the interests of the company and its creditors against adverse disposal of the company's assets by means of contracts between the company and the members of the board of directors
As the Supreme Court pointed out in the judgment dated 3 August 2011, on the I UK Signature Case 16/11, the objective of regulation Article 210(1) k.s.h., is to protect the interests of the company and its creditors against the adverse disposal of the company's assets by means of contracts between the company and the members of the board, and to eliminate situations where there would be a conflict of interest between the company and the natural person (a member of the board of directors) by concentrating those interests in one person who simultaneously serves as a member of the Management Board and who is second a party to the dispute by the company.
Article 210 k.s.h. is also intended to counter the conflict of interests of the parties represented by the same person, and consequently the risk of a breach of interests one of the sides.
It is intended to protect the company's shareholders from the danger of the management body's hub seeking its own benefits, leaving the company's well-being on a further plan.
The purpose of these provisions is, therefore, to protect the company from abuses linked to the management of its own interest, which may even be in clear conflict with the company's interest, without requiring that the conflict actually exists.
This is because it is a potential collision between the individual interests of the board members and the interests of the company itself.
Therefore, the Supreme Court will strengthen the protection of the interests of a limited liability company and prevent conflicts of interests which are possible when a member of the company's board is a member of another organisation (a company governed by commercial law).
Author: Michał Wasilenko
Lawyer, Associate in the Legal Department, member of the Bar Association in Lublin, graduate of the Faculty of Law and Administration at Maria Curie-Skłodowska University in Lublin. He specializes in commercial and civil law law.