On October 13, 2022, the amendment to the Code of Commercial Companies will come into force.
The most important changes will concern, among others, the functioning of the supervisory board in a limited liability company, in a joint-stock company and in a simple joint- stock company.
The legislator also introduces new solutions to the Code, i.e., groups of companies, as well as other changes.
1. Groups of companies
By amending the Code of Commercial Companies, the legislator will introduce a new solution to this act, i.e. groups of companies. This amendment will introduce elements of the holding law into the Code.
Based on the amended regulations, groups of companies will be defined as “a parent company and a subsidiary company, which are capital companies, following the resolution on participation in a group of companies by a common strategy in order to implement a common interest (interest of the group of companies), justifying the exercising by parent company the coherent management over the subsidiary company”.
Due to the introduction of comprehensive solutions in the field of parent companies and subsidiaries, Art. 7 of the Commercial Companies Code, which constitutes the obligation to notify the Court of the establishment of a dependency relationship between the Companies, will be repealed
The essence of the changes described above will be the introduction of the of Section IV to the Code, in which the parent company has specific rights in relation to the subsidiary company. The most important rights include:
- The right to issue binding instructions to a subsidiary company – however, pursuant to Art. 214 of the Commercial Companies Code a subsidiary company may adopt a resolution to refuse to carry out a binding instruction if its execution will lead to the insolvency of the subsidiary company or a threat of insolvency.
- The right to permanent supervision over the subsidiary by the supervisory board of the parent company.
- The right to pass a resolution on compulsory buyout of partners or shareholders of a subsidiary company by the parent company. However, it is possible when parent company is representing 90% of the subsidiary’s company share capital.
The legislator also provided for provisions on the basis of which the relations between the parent company and the subsidiary company will be regulated, in particular:
- Access of the parent company to the books and documents of the subsidiary company. In a situation where a subsidiary company refuses to disclose books and documents, pursuant to art. 216 § 3 of the Code the parent company will be able to apply to the appropriate Registry Court with a request to oblige the subsidiary company to provide books and documents.
- Audit of the group of companies accounting and operations at the request of minority partners or minority shareholders (representing at least 10% of the share capital) of the subsidiary company.
An application in this matter will be submitted to the competent Registry Court, which will appoint an audit company that will audit the accounts and operations of the group.
- The liability of the parent company for damage caused to a subsidiary company if the damage was caused by the execution of a binding instruction of the parent company and was not remedied within the prescribed period.
- The parent company’s liability towards partners or shareholders of the subsidiary company.
In this case, the parent company will be liable for the damage consisting in the reduction of the value of the shares, if the reduction was a consequence of the subsidiary’s company execution of a binding instruction.
- Joining the group of companies will be made by adopting a resolution by a majority of three-fourths of votes by the shareholders’ meeting or the general meeting of the subsidiary company, together with indication of the parent company.
Importantly, participation in the group of companies will be voluntary, but participation in the group will be subject to disclosure in the National Court Register.
2. Changes concerning supervisory boards
Another change introduced to the Code of Commercial Companies will be the amendment to the provisions on the activities of the supervisory board in a limited liability company, joint- stock company, and simple joint-stock company. In principle this amendment is adding provisions containing the rules for the functioning of the supervisory board.
The most important competence to be granted to the supervisory board is the right to demand (from the management board, proxies, and employees of the company) any information, documents, reports or explanations regarding the company’s operations or its assets.
The above-mentioned documents will be made available to the supervisory board within two days from the date of submission of the request by the supervisory board.
The management board, proxy or a person employed in the company will not be able to refuse the supervisory board’s access to the necessary documents.
Additionally, at each of its meetings, a supervisory board member will be able to request the necessary documents, reports or explanations.
The above right will be implemented in the same way in relation to supervisory boards of limited liability companies, joint-stock companies, and simple joint-stock companies.
Another change will be the possibility of appointing a supervisory board committee and an advisor to the supervisory board.
The supervisory board will be able to establish a permanent or ad hoc committee consisting of members of the supervisory board to perform specific supervisory activities.
The committee of the supervisory board will be appointed in limited liability companies and in joint stock companies. The regulations do not provide for such a possibility in the case of a simple joint-stock company.
Additionally, under the new regulations, it will be possible for the supervisory board to appoint an adviser. However, the provision clearly states that such a possibility will have to be provided for in the partnership agreement or the articles of association.
The appointment of an adviser will be possible along with the adoption of a resolution by the supervisory board on the examination at the company’s expense of a specific case concerning the company’s operations or its assets by the selected adviser.
In the case of a simple joint-stock company and a joint-stock company, the supervisory board will be able to decide to make the results of the inspection carried out by the adviser available to the general meeting of shareholders, unless it causes damage to the company.
The adviser will be obliged to keep secret all non-public information that they learned about while investigating a specific case. This obligation will not be limited in time.
The last change in the functioning of the supervisory board in connection with the amendment to the Code of Commercial Companies will be the participation of the key statutory auditor in the meetings of the supervisory board.
The participation of the statutory auditor who has audited the company’s financial statements will be mandatory if the financial statements are subject to statutory audit. In such a situation, the supervisory board will be required to inform the statutory auditor one week in advance about the meeting of the supervisory board.
During the meeting of the supervisory board, the statutory auditor will present to the supervisory board a report on the conducted audit and answer questions from its members.
The above-described obligation for the statutory auditor to participate in scheduled meetings of the supervisory board will apply to a limited liability company, joint-stock company and simple joint-stock company.
3. Method of determining the term of office of members of the management board
The legislator introduced changes to art. 202 § 2 of the Commercial Companies Code and art. 369 of the Commercial Companies Code the purpose of which is to end doubts as to the method of calculating the term of office of a management board member in a limited liability company and a joint stock company.
Amendments to the two above-mentioned provisions consist of adding a second sentence to them, which reads “The term of office is calculated in full financial years, unless the partnership agreement/ articles of association provide otherwise”.
The above change is a response to the need to regulate the situation in which the partnership agreement (in a limited liability company) or the articles of association (in a joint-stock company) do not mention anything about the calculation of the term of office of a management board member. Therefore, under the amended regulations, the term of office of a management board member will end at the end of the financial year.
4. New requirements for the protocols of the management board resolutions
The amendment will also result in adding art. 2081 of the Commercial Companies Code and the change of art. 30058 § 5 and art. 376 of the Commercial Companies Code, which are the requirements to be met by minutes of management board resolutions in a limited liability company, joint-stock company and simple joint-stock company.
Pursuant to the above provisions, the minutes of management board resolutions should include:
- First names and surnames of the board members,
- The number of votes cast for individual resolutions.
The protocols should also include the dissenting opinions expressed by the members of the management board along with their possible justification.
The minutes should be signed at least by the member of the management board chairing the meeting or ordering the vote, unless the articles of association, statutes or regulations state otherwise.
5. Duty of loyalty to the company
Another change to the Code of Commercial Companies will be adding provisions on the obligation of loyalty for a member of the management board and the supervisory board towards the company.
Through the introduction of art. 2091 and art. 2141 of the Commercial Companies Code, the legislator will impose obligation to exercise diligence in the performance of functions and to be loyal to the company on the members of the management board and supervisory board in a limited liability company
This obligation will also include the prohibition to disclose the company’s secrets also after the expiry of the mandate of a member of the management board or supervisory board.
The newly added provisions of art. 3771 and art. 3871 of the Commercial Companies Code will impose similar obligations on members of the management board and supervisory board in a joint-stock company.
6. Sharing documents with partners and shareholders
The legislator will also amend the provisions on making documents available at the request of partners (in a limited liability company) and shareholders (in a joint-stock company and a simple joint-stock company).
By adding § 41 to the art. 231 of the Commercial Companies Code the legislator granted the possibility of making documents available to a shareholder upon request.
Documents the release of which may be requested by a shareholder will have to correspond to the content of the management board’s report on the company’s operations, the financial report, or the supervisory board report.
A shareholder will be able to submit his request from the day the ordinary shareholders’ meeting is convened.
The company authorities will have to issue the above-mentioned documents to the shareholder immediately, but not later than within two days from the date of submitting the request.
Similar rights will also be granted to the shareholders of a joint-stock company (art. 395 § 4) and a simple joint-stock company (art. 30082 § 4).
7. Business Judgement Rule
An important change will also be the modification of the rules of liability of members of the management board and supervisory board of capital companies by introducing “business judgment rule” to art. 483 § 3 of the Commercial Companies Code.
This amendment will introduce a rule under which a member of the management board, the supervisory board and the liquidator will not violate the obligation to exercise due diligence in the performance of their duties, if in a good faith they will act within the limits of justified economic risk based on information, analyzes and opinions that should be taken into account when making a decision.
In connection with the above, the person holding the above-mentioned functions will not be liable for any damage caused to the company, if they acted within the limits of reasonable risk and based their actions on the available analyzes and assessments.
8. Responsibility for breach of disclosure obligations
The last change made to the Code of Commercial Companies will be adding art. 5871 and art. 5872 , which constitute a penalty for breach of information obligations.
Art. 5871 of the Commercial Companies Code concerns breach of the information obligation in connection with the supervisory board’s request for access to information and documents allowing for the inspection of the company’s assets or operations.
Art. 5872 of the Commercial Companies Code concerns the breach of the information obligation in relation to the adviser of the supervisory board to the extent to which the management board should provide them with access to the requested documents and information.
The acts described above will be punishable by a fine of not less than 20,000 PLN and not more than 50,000 PLN or a penalty of restriction of liberty.
If the perpetrator acts unintentionally, they will be subject to a fine of not less than PLN 6,000 and not more than PLN 20,000.
Jan Mielczarek (e-mail: [email protected]) will answer questions relating to this revision.