Who Can Be the Proxy of a Management Board Member?

Neither the Commercial Companies Code (CCC) nor the Civil Code imposes restrictions on granting a management board member a power of attorney to represent the company. It is true that some legal commentators argue that granting a power of attorney to one of the management board members may lead to a circumvention of the law on the joint representation applicable in the company. According to the case law of the Supreme Court, however, a power of attorney to represent the company may be granted to one of the management board members (or to the president of the management board).

In this article we discuss the following issues:

1. Rules of representation in a limited liability company (sp. z o.o.).
2. A power of attorney to represent the company for a management board member where joint representation applies.
3. Representation of the company when a contract is concluded with a management board member.
4. The commercial proxy (prokurent).

Rules of Representation in a Limited Liability Company

The manner in which a limited liability company is represented is governed by the Commercial Companies Code and the articles of association. Under Article 38 of the Civil Code, a legal person acts through its bodies in the manner provided for by law and by its statute (articles of association). With a sole-member management board, the management board member represents the company by default. Where the management board has more than one member, under Article 205 § 1 CCC the manner of representation is laid down in the articles of association. By default (if the articles of association do not regulate representation), statements on behalf of the company require the cooperation of two management board members or of one management board member together with a commercial proxy (prokurent).

Where the management board has a sole member, the company is always represented by that member, whatever the articles of association provide. To avoid doubts on the part of counterparties, however, it is worth including the following provisions in the articles of association:

• "where the management board has one member, the management board member is authorised to represent the company independently";
• "where the management board has more than one member, statements on behalf of the company require the cooperation of two management board members or of one management board member together with a commercial proxy" or "where the management board has more than one member, each management board member acting independently is authorised to make statements on behalf of the company" or "where the management board has more than one member, the president of the management board or two management board members acting jointly or one management board member acting jointly with a commercial proxy are authorised to make statements on behalf of the company".

Statutory provisions or the articles of association may also impose restrictions on the representation of the company. Certain acts may require a resolution of the shareholders' meeting or the management board, or the cooperation of a larger number of management board members.

See also: Organising General Meetings and Shareholders' Meetings

To keep business dealings efficient, where two persons jointly represent the company, the shareholders may decide to grant a power of attorney to represent the company to one of them, in order to speed up and simplify the circulation of documents and the conclusion of contracts.

A Power of Attorney to Represent the Company for a Management Board Member Where Joint Representation Applies

Neither the Commercial Companies Code nor the Civil Code imposes restrictions on granting a management board member a power of attorney to represent the company. It is true that some legal commentators argue that granting a power of attorney to one of the management board members may lead to a circumvention of the law on the joint representation applicable in the company. According to the case law of the Supreme Court, however, a power of attorney to represent the company may be granted to one of the management board members (or to the president of the management board). It should, however, take the form of a specific power of attorney, meaning that its scope is limited to the legal act specified in it, or of a generic power of attorney, meaning that it covers acts of a specified type. Granting a power of attorney has no effect on the rules under which the management board represents the company. To ensure proper representation of the company, it is worth carrying out a legal audit, which will identify any irregularities.

A management board member of a limited liability company, authorised by the articles of association to represent it jointly with another management board member, may be appointed as a proxy for individual acts. Resolution of the Supreme Court of 23 August 2006, III CZP 68/06, OSNC 2007, no. 6, item 82.

A management board member of a limited liability company, authorised under the articles of association to represent it jointly with another management board member, may be appointed as a proxy for acts of a specified type. Resolution of the Supreme Court of 24 April 2014, III CZP 17/14, OSNC 2015, no. 2, item 17.

A properly represented company may grant a power of attorney to perform a legal act to a person who holds the office of president of the management board. Judgment of the Supreme Court of 4 February 2010, IV CSK 416/09, LEX no. 577698.

By contrast, granting a management board member a general power of attorney is ruled out, as this would circumvent the provisions on joint representation of the company.

See also: Business Law (in Polish)

A management board member authorised to represent the company should present the power of attorney to the counterparty, to avoid doubts about the proper representation of the company (and therefore the validity of the contract). This person acts not as a "management board member" but as a "proxy of the company", and this should be reflected in the manner of representing the company stated in the contract.

A management board member is granted a power of attorney to represent the company by way of a resolution adopted by the management board.

Representation of the Company When a Contract Is Concluded With a Management Board Member

Under Article 201 § 1 CCC, the management board is the body whose rights and obligations include managing the company's affairs and representing it. Exceptions to the rule that the management board represents the company arise from Articles 210, 253 and 295 CCC.

As a rule, the supervisory board does not represent a limited liability company. Its duties include continuous supervision of the company's activities in all areas. Under Article 210 § 1 CCC, however, in a contract between the company and a management board member, and in a dispute with such a member, the company is represented by the supervisory board or by a proxy appointed by a resolution of the shareholders' meeting. Failure to comply with this rule renders the legal act invalid. Legal commentators emphasise that the provision applies both to contracts that may be connected with the office held and to those that are unconnected with performing the function of management board member and are concluded by that member as a natural person.

When a contract is concluded in a dispute with a management board member of a limited liability company, the company may be represented, on the basis of a resolution of the shareholders' meeting, by a proxy authorised generically or for a specific contract or a specific dispute (Article 210 § 1 CCC). Resolution of the Supreme Court of 30 January 2019, III CZP 71/18, OSNC 2019, no. 11, item 110.

See also: Legal Services for Companies

A proxy is appointed, for example, where the company has not established a supervisory board. The shareholders' meeting then adopts a resolution appointing the proxy. The appointment of a proxy may therefore cover only representation in contracts and disputes with a management board member. The established view in the case law is that the shareholders' meeting may appoint another shareholder as proxy.

A management board member of a limited liability company may be authorised by the shareholders' meeting to conclude an employment contract with another management board member (Article 210 § 1 CCC). Decision of the Supreme Court of 7 April 2010, II UZP 5/10, OSNP 2011, no. 19-20, item 263.

This rule does not apply to a single-shareholder limited liability company. A legal act between that shareholder and the company represented by that shareholder requires the form of a notarial deed.

The Commercial Proxy (Prokurent)

Under Article 109(1) § 1 of the Civil Code, a commercial power of attorney (prokura) is a power of attorney granted by an entrepreneur subject to the obligation of entry in the Central Register and Information on Economic Activity (CEIDG) or in the register of entrepreneurs of the National Court Register (KRS), which covers authority for court and out-of-court acts connected with running the enterprise.

To grant a prokura, the provisions of the Commercial Companies Code require the consent of all shareholders entitled to manage the company's affairs (for partnerships) or the consent of all management board members (for capital companies). Under Article 109(2) § 1 of the Civil Code, a prokura must be granted in writing, on pain of invalidity. These requirements are intended to safeguard the company's affairs. Because of the wide range of powers conferred on a commercial proxy, only a person trusted by the owners should be appointed. The scope of a prokura covers all acts connected with running the enterprise.

See also: Business Succession (in Polish)

We can distinguish two types of prokura: sole and joint (proper and improper). A sole commercial proxy is entitled to perform all acts within the scope of authority independently. A proper joint prokura involves two commercial proxies acting jointly, while an improper joint prokura means that the company is represented by a commercial proxy together with a member of a governing body or a shareholder. In this respect, companies often introduce an improper joint prokura (statements on behalf of the company require the cooperation of two management board members or of one management board member together with a commercial proxy).

Unlike a power of attorney, which, depending on the scope of authority, may be general, specific or generic, the scope of a commercial proxy's authority cannot be limited by the company. This is based on the principle of certainty of legal transactions. Every commercial proxy has the same scope of powers under statute, and the appointment of a commercial proxy must be filed with the KRS or CEIDG. Otherwise, the scope of the commercial proxy's authority would have to be checked for every act. Restrictions on a prokura are permitted, but they have effect only in the internal relationship between the entrepreneur and the commercial proxy. A legal act performed by a commercial proxy in excess of authority remains valid. A suitable law firm will support this whole process.