Amendment to the duties of members of the management board of a Polish limited liability company

On 13 October 2022, an amendment to the provisions of the Polish Code of Commercial Companies (the “CCC“) will come into force covering a number of provisions, including new obligations for members of the management board of a limited liability company. The amendment also introduces provisions that deal with two new aspects:

• keeping a record of resolutions of the management board
• the duty of loyalty owed to the company by members of the management board

Record of resolutions

Unlike the regulations applicable to a joint-stock company, the regulations concerning a limited liability company did not regulate any record of resolutions adopted by the management board.

As a rule, resolutions of the management board of a limited liability company should be adopted in matters that go beyond the ordinary course of business, or if at least one of the members of the management board objects to an action that goes beyond the ordinary course of business. There is no defined catalogue of actions that go beyond a company’s ordinary course of business – this issue may be regulated by the company’s articles of association or the regulations of the management board.

The provisions of the CCC specify when resolutions may be adopted, what majority of votes is necessary to adopt resolutions, in what form the members of the management board may participate in the meeting and how they may adopt resolutions, as well as the issue of adopting resolutions through another member of the management board. However, so far the regulations have not referred to taking minutes of resolutions in any way whatsoever. Now, the provision of Article 2081 of the CCC introduces new regulations in this respect.

Under the new provision, management board resolutions must be recorded and the minutes should contain: the agenda of the meeting, the full names of the members of the management board present at the meeting and the number of votes cast with respect to individual resolutions. The minutes must also indicate any dissenting opinions raised by any members, together with a statement of reasons. Importantly, the minutes must be signed by at least the member of the management board chairing the meeting or ordering the vote, unless the articles of association or the management board regulations provide otherwise.

In short, after the amendment introducing Article 2081 of the CCC comes into force, the management board is required to keep a record of any resolutions it adopts.

Duty of loyalty

The second amendment also places the members of the management board of a limited liability company in a similar position to the provisions already in force with respect to members of the management board of a simple joint-stock company. The new Article 2091 of the CCC will bring into law what are already generally accepted principles, i.e. the duty of loyalty owed by members of the management board to the company, as well as the fiduciary duty to maintain confidentiality, i.e. not to disclose the company’s confidential information and trade secrets even after they are no longer serving on the board.

Importantly, this provision also introduces the business judgment rule – i.e. a rule of law that excludes the civil liability of members of the management board and protects their decisions from judicial scrutiny in most cases. According to the explanatory memorandum to the bill, the newly introduced provision is intended to allow the actions and decisions made by members of the management board of a limited liability company to be assessed from the perspective of a reasonable business risk, whereby such decisions and actions must be based on information, analyses and opinions that should be taken into account when making a diligent assessment of the circumstances. The provision aims to protect members of the management board who perform their duties in accordance with the duty of loyalty and make decisions on a day-to-day basis regarding the company’s actions, which may not always turn out to be accurate and may cause a loss to the company. Under the new regulation, the liability of members of the management board will be assessed based on the “best judgment” basis, considering the information available at the time and their loyal action, rather than being based on the consequences of their decisions.

By introducing this duty, the legislator has directly linked it to the exclusion of the liability of members of the management board. If the business judgement rule is applied to a decision/action made by a member of the management board of a limited liability company, that member will not be held liable for the negative consequences.