Termination of the mandate of a member of the management board of the limited liability company

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A limited liability company belongs to the category of capital commercial law companies. It is one of the most popular forms of business activity in Poland. One of its bodies is the management board, which consists of specifically selected persons - with which obligations are associated with the expiry of the mandate of a member of the management board of a limited liability company. and when can it be?

Member of the management board of a limited liability company

Pursuant to Art. 200 of the Commercial Companies Code, the management board conducts the company's affairs, represents the company outside, and consists of one or more members. Persons from among the partners or from outside their group may be appointed to it. A management board member is appointed and dismissed by a resolution of the shareholders, unless the articles of association provide otherwise. A resolution of the shareholders or the articles of association may specify the requirements to be met by candidates for the position of a management board member.

The management board is the body that performs the most duties on behalf of a given company. We can safely say that it is a body on which its proper functioning in legal and economic transactions depends.

In practice, where the members of a limited liability company come from is very diverse, but it rarely happens that the circle of these people does not include at least one partner. Much in this respect depends on the specific company, and in fact on the shareholders' idea of ​​how to run it. We should remember, however, that a resolution of shareholders or the articles of association may stipulate that a member of the management board is appointed by the supervisory board after conducting a qualification procedure. In such a case, the shareholders' resolution or the articles of association may also specify detailed rules and procedure for conducting the qualification procedure for the position of a management board member.

The judgment of the Supreme Court of September 24, 2020 (file reference number III PK 60/19)

A member of the management board of a capital company may be employed under an employment contract or perform his activities under civil law relationships (he may also perform his duties towards the company without any additional contract at all). The validity of the contract, if it has been concluded between the management board member and the company, and the assessment of whether it is an employment contract and not another contract, e.g. a civil law contract, depend in turn on considering the circumstances of a specific case in terms of not only proper representation of the company, but also the objectives pursued by the parties to the concluded contract, the unanimous intention of the parties as to all essential structural elements of the contract and maintaining the structural elements specific to the employment relationship, as specified in Art. 22 § 1 of the Labor Code, in particular the features of the broadly understood subordination of an employee in the process of performing work.

Mandate of a member of the management board of a limited liability company

Member of the management board of each limited liability company should be appointed for a specific period known as a term of office or a mandate. It is worthwhile for the date of performing this function to be precisely specified in the content of the articles of association of a given company, although, of course, there is no such obligation in this respect.

Failure to specify the duration of the mandate of a limited liability company member. however, it does not mean that a given person has been appointed to this position for an indefinite period. According to the content of Art. 202 of the Commercial Companies Code, unless the articles of association provide otherwise, the mandate of a management board member shall expire on the date of the shareholders' meeting approving the financial statements for the first full financial year of serving as a management board member. If a management board member is appointed for a period longer than one year, the mandate of a management board member shall expire on the date of the shareholders' meeting approving the financial statements for the last full financial year as a management board member, unless the articles of association provide otherwise.

If the articles of association provide that members of the management board are appointed for a joint term of office, the mandate of a management board member appointed before the end of a given term of office of the management board shall expire at the same time as the mandates of other management board members expire, unless the articles of association provide otherwise.

As you can see, the expiry of the mandate of a member of the management board of a limited liability company depends primarily on the term of office of a given management board. It turns out, however, that the said expiry may also take place in other situations.

Termination of the mandate of a member of the management board of a limited liability company

In addition to the expiry of the term of office of the management board of the limited liability company the mandate of its members also expires as a result of:

  • death,

  • resignation,

  • loss of legal capacity (e.g. as a result of incapacitation),

  • legally valid sentencing of a member of the management board for one of the offenses specified in art. 18 § 2 of the Commercial Companies Code,

  • dismissal from the composition of the management board.

The provisions on termination of the order by the person accepting the order shall apply accordingly to the submission of a resignation by a member of the management board. If, as a result of the resignation of a management board member, no mandate in the management board would be filled, the member of the management board resigns to the shareholders and convenes the shareholders' meeting, unless the articles of association provide otherwise. The invitation to the shareholders' meeting also contains a declaration of resignation of a management board member. It becomes effective on the day following the day on which the shareholders' meeting was convened.

Judgment of the SA in Warsaw of April 15, 2019 (file reference number V ACa 485/18)

Resignation from the position on the management board, pursuant to Art. 202 § 4 of the Commercial Companies Code, causes the mandate to expire without the necessity to adopt any resolution on dismissal, because it is a unilateral legal act, effective upon reaching the company and producing effects without its adoption. It results in the loss of the status of a member of the management board and does not require his dismissal by the competent body of the company.

The dismissal of a management board member is a unilateral act of the company, effective as soon as the statement made by the body (person) authorized to act (cannot be other management board members) reaches the dismissed management board member.

Termination of the mandate of a management board member and his liability

Management Board of a limited liability company conducts the company's affairs, which in practice means that he signs a number of different contracts and incurs many obligations that must be performed sooner or later. However, what if the contract is signed by members of the management board whose mandates have expired, and the obligation has not been performed, and the creditor demands its fulfillment? Are the new board members responsible for the unrealized contract, even though they never signed it?

The answer to the above issue can be found in the judgment of the Supreme Court of 17 January 2017 (file no. IV CSK 143/16), according to which a person who at the time of submitting a declaration of will on behalf of a limited liability company was no longer - due to the expiry of mandate - a member of its management board, is responsible under Art. 39 of the Civil Code in connection with Art. 14 of the Act on the National Court Register towards a counterparty acting in good faith, in confidence to an entry in the National Court Register indicating this person as a member of the company's management board. In other words, if the company's creditor was convinced that he was signing a contract with authorized members of the company's management board, and these persons were listed in the National Court Register as still holding their mandate, they are liable to such a contractor even if they no longer hold any term of office in the company's management board.

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Example 1.

The president of the limited liability company, who is also a member of its management board, signed a loan agreement with the bank on behalf of the company in 2019. In January 2020, his mandate expired (although, as a result of an oversight, it was not disclosed in the National Court Register). From June 2020, the company does not pay loan installments. In connection with the above, the bank, having gone through court proceedings, instituted enforcement proceedings against the company with the help of a bailiff. Due to the fact that she did not have any assets at the time of the enforcement actions, the bailiff directed his actions against members of the management board, in particular against the former president of the company. In such a case, enforcement of the property of a person who is no longer the president of the company, although he held this position on the date of taking out a bank loan, is possible and lawful - the creditor is protected by the statutory presumption that the entries in the National Court Register are true.

Summary

Expiry of the mandate of a member of the management board of a limited liability company it can occur as a result of many different events. As a rule, this mandate expires with the end of the term of office of a given management board member, which should be clearly defined in the articles of association. If the contract does not address this issue, the mandate shall expire on the date of the shareholders' meeting approving the financial statements for the first full financial year of serving as a member of the management board. Regardless of this, the mandate of a member of the management board of a limited liability company it may also expire in the event of his death, resignation, loss of legal capacity, dismissal by the company or final conviction for one of the offenses specified in art. 18 § 2 of the Commercial Companies Code. The expiry of the mandate, however, does not release the former member of the management board from liability for obligations incurred during his term of office.