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Legal Alert: Activities Of Authorities In Limited Liability Company During Epidemic


26.03.2020

Legal Alert: Activities Of Authorities In Limited Liability Company During Epidemic

Activities of management board and supervisory board

The Polish Code of Commercial Companies (“CCC”) does not provide for regulations about holding management board meetings by way of using means of direct distance communication (conference calls, video conferences, instant messengers like Skype, WhatsApp or Signal etc.) or using written form. To this end, such issues may be settled only in the articles of association or in the management board by-laws.

Where none of those documents specifies such opportunities, a problem arises whether and how to check the possibility of holding management board meetings remotely. Adopting resolutions at a distance without appropriate regulations being in place may give rise to the risk of disputes.

A solution to this problem may be an appropriate authority’s unanimous resolution on introducing to the management board by-laws provisions about adopting management board resolutions outside the meeting or even about holding meetings remotely.

Where a supervisory board was established in the company, a written vote or a vote with the usage of direct communication means are admissible only provided that this is envisaged in the articles of association.

Activities of shareholders’ meeting

An underlying principle is that shareholders of a limited liability company act within meetings. The articles of association may admit participation in a shareholders’ meeting with the usage of means of electronic communication, which comprise in particular:

  • real-time broadcast of deliberations of the shareholders’ meeting;
  • two-way real-time communication enabling the shareholders to speak during the shareholders’ meeting while staying in a place different from the place of holding the shareholders’ meeting;
  • exercise of the voting right in person or via an attorney prior to or during the shareholders’ meeting.

However, if the company did not insert appropriate provisions in the articles of association, they will have to be amended, which due to the epidemic situation may turn out impossible (a meeting before a notary would have to be held and the amendment would have to be registered with the Polish Court Register).

An exception to the principle of shareholders acting at a meeting is the possibility to adopt resolutions under article 227 § 2 of the CCC without a shareholders’ meeting being held, provided that all the shareholders consent in writing to the decision to be taken or to voting in writing.

Adopting a resolution outside a meeting is excluded in two cases: with respect to resolutions that must be statutorily adopted following the convention of a shareholders’ meeting; and (ii) with respect to resolutions that must be adopted in a secret ballot.

As a result, the following resolutions must be adopted by the shareholders’ meeting:

  • on further existence of the company in a situation where the balance sheet drawn up by the management board shows a loss exceeding the sum of supplementary and reserve capitals plus half the share capital;
  • on approving the liquidation report;
  • on the company’s merger, division or transformation;
  • on appointing members of the company’s authorities or liquidators, or on requests to remove them or to bring them to account, as well as in personal cases (secret ballot).

An annual shareholders’ meeting should be held within 6 months from the financial year end (i.e. most frequently by 30 June of the next year). It is of key importance to clarify thereat the following matters:

  • examining and approving the management board report on the company's operations and the financial statements for the preceding financial year,
  • adopting a resolution on the distribution of profit or absorption of loss, where those matters were not excluded from the competence of the shareholders’ meeting in accordance with article 191 § 2 of the CCC;
  • acknowledging the fulfilment of duties by members of the company’s authorities.

What to do if the shareholders are afraid to meet in a broader group due to the epidemic situation? In this case, the following resolutions can be adopted:

  • on approving the financial statements, and
  • on distributing the profit, also in written form.

Nevertheless, such resolution adoption mode cannot be used for resolutions on acknowledging the fulfilment of duties by members of the company’s authorities. If shareholders decide to adopt part of the resolutions in written form, a shareholders’ meeting can be held at a later date (in extreme cases after the deadline) or an acknowledgement of duties resolution can be adopted at the next annual shareholders’ meeting.

Also excluded is the possibility to adopt resolutions in written form on extending the management board members’ terms of office, where the members’ terms of office expired following the approval of the financial statements for the last full financial year of their fulfilling their management board functions.

Consequently, for the company to function correctly, an annual shareholders’ meeting may have to be held (even after its deadline). This is because actions taken by a management board member whose mandate has expired may be found invalid (in the case of unilateral actions) or may give rise to the need to be confirmed by the company (in the case of contracts).

Obviously, the aforesaid principles do not apply to single-member companies, in which the sole shareholder can adopt resolutions without the said limitations.

1. Legislative work

Currently legislative work is underway to amend the CCC. The planned amendments are to eliminate the aforesaid limitations imposed on the authorities with respect to using means of direct distance communication or written form and taking decisions by those means.

The amendments should in particular make the functioning of shareholders’ meetings more flexible. Remarkably, using means of direct distance communication cannot violate the basic principles of holding such meetings (e.g. the right to secrecy in voting). Therefore, irrespective of the changes in the law, companies will have to deal with the organisational matters such as the method of participating in the meetings or the exercise of the voting right. Those problems may be overcome e.g. by way of the by-laws of holding meetings in electronic form. This regulation should, however, be based on the principles set out in the CCC, and the by-laws will rather be a document specifying technical solutions and principles of participating in the meetings. In this case, co-operation with law firms and IT services may have to be necessary.

If you need current support in taking corporate actions, please do not hesitate to contact us.

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