Management Board in Polish limited liability company – everything you need to know

5. Can a foreigner be a member of the management board in Poland?

Yes, a foreigner can be a member of the management board of a limited liability company in Poland, and they do not need to have a PESEL number (Polish personal identification number). However, management board members are required to provide an address for delivery within the EU. If they do not have such an address, it is necessary to appoint an authorized representative for delivery.

It is important to note that holding the position of a management board member in a Polish limited liability company by a foreigner does not automatically grant the right to stay in Poland. Separate arrangements need to be made for that. Citizens of EU member states, the Swiss Confederation, EFTA member states, and countries that are parties to the agreement on the European Economic Area are exempt from the requirement to obtain such a permit.

6. When does the appointment and dismissal of a new management board member become effective?

Both the appointment and dismissal of a management board member take effect at the moment when the relevant resolution of the general meeting of shareholders is adopted or at the time specified in the resolution text (e.g., appointment within a specified period). The entry of changes in the register of entrepreneurs of the National Court Register has a declaratory nature, merely confirming the fact of the appointment or dismissal of a management board member. The appointed members of the management board can perform their functions even before the entry of changes in the National Court Register.

It is also worth noting that updating data in the National Court Register is mandatory, and the application in this regard should be submitted within 7 days of the change. Depending on the ownership structure of the company or group of companies, it may also be necessary to disclose or update the data of a management board member as the ultimate beneficial owner in the Central Register of Beneficial Owners within 14 business days of the appointment or dismissal, not from the day of registration of changes in the National Court Register.

7. When does the term of office of a management board member in Polish limited liability company expire?

The term of office of a management board member of a limited liability company expires due to death, resignation, or removal from the management board. It also expires when the period for which the management board member was appointed elapses. The term expires on the day of the shareholders’ meeting approving the financial statement. Generally, this is the financial statement for the first full financial year of holding the position. If the period of appointment of a management board member is longer than one year, it is the financial statement for the last full financial year of holding the position. It is essential to note that the legislator leaves room for different regulations on this matter in the company’s articles of association.

In this regard, it is important to emphasize that when members of the management board are appointed for a joint term, their mandates generally expire at the same time, even if one of them was appointed later. However, different regulations can be introduced in the company’s articles of association.

Regardless of when the term of office of a management board member expires, they can be removed from office at any time by authorized persons or bodies, as well as resign themselves.

8. How do members of the management board of Polish limited liability company resign?

In principle, a member of the management board of a limited liability company can be removed from office by a resolution of the shareholders, and the company’s articles of association may regulate the procedure for removing members of the management board in any way. Removal does not simultaneously terminate the legal relationships and claims that the member of the management board may have from another capacity in which they are associated with the company, such as an employment contract. The resolution to remove a member of the management board can be adopted at any time and for any reason, provided that the company’s articles of association do not impose limitations in this regard. If a member of the management board has an additional agreement with the company, such as an employment contract or a service contract, and they definitively part ways with the company, it is necessary to terminate these agreements, regardless of the removal of the member from their management role.

9. Can a member of the management board of Polish limited liability company receive remuneration?

According to current legal regulations, a member of the management board may receive remuneration for performing their duties. The amount of remuneration, as well as other benefits, can be determined by a resolution of the shareholders or by any other method specified in the company’s articles of association. Additionally, members of the management board may be remunerated based on an employment contract or a civil law contract (such as a mandate contract, managerial contract, etc.).

The Commercial Companies Code does not contain a provision mandating the remuneration of a member of the management board. However, considering the applicable tax regulations, non-equivalent provision of services to the company by a member of the management board may have tax consequences for the company. In specific cases, the company may incur income from a non-gratuitous provision of services, especially when the member of the management board does not receive remuneration for any other function performed in the company or group of companies, or is not a shareholder. This means that a member of the management board of a company not receiving remuneration for their management role but being compensated in the context of simultaneous roles as a shareholder of the company or a member of the management board of the parent company generally does not generate income from a non-gratuitous provision of services.

It should be emphasized that each situation should be considered individually, and the occurrence of income from a non-gratuitous provision of services will depend strictly on the specific factual circumstances.

10. On what basis can a member of the management board of Polish limited liability company receive remuneration?

When choosing the type of legal relationship that will connect the limited liability company and the member of the management board, it is advisable to consider the company’s objectives, potential legal and tax consequences for both parties, and the relationship being established. Remuneration can be paid to a member of the management board based on a resolution of the shareholders appointing them to the management board. In addition to remuneration from the appointment, a member of the management board may receive remuneration based on civil law contracts, including a mandate contract, a managerial contract, or a business-to-business (B2B) contract. It is also possible to establish an employment relationship with a member of the management board by entering into an employment contract regulated by the Labor Code (pl. Kodeks Pracy).

Among the mentioned types of legal relationships, remuneration based on a resolution of the shareholders is the least regulated, providing greater flexibility in shaping the legal relationship, but it does not offer the same legal protection as a detailed employment contract. The choice between remuneration from the appointment, an employment contract, and civil law contracts depends primarily on the overall relationship and expectations of the parties and should be tailored individually, taking into account elements such as the level of detail in regulations and the accompanying level of flexibility, conditions to become a party to the contract, such as appropriate education or entrepreneur status, taxation and social security contributions, distribution of responsibility for fulfilling legal and tax obligations, and consequences for non-compliance, as well as the legal regulations to which the particular legal relationship is subject to.

11. What is the scope of the powers of a member of the management board of Polish limited liability company?

By law, a member of the management board is entitled to manage the internal affairs of the company and represent it externally in all legal and extralegal matters, and any limitations in this regard are not effective against third parties. In internal relations between the company and a member of the management board, the scope of the powers of a member of the management board can be regulated in a more detailed manner.

As a general rule, all matters not reserved by law for other company bodies fall within the competence of the management board. In case of doubt about which company body is competent to perform a specific task or exercise certain powers, and if there are no regulations in this regard, it is assumed that it falls within the competence of the management board. Regardless of this principle, the Commercial Companies Code in some cases unequivocally indicates duties and powers that belong exclusively to the competence of the management board, such as the competence to:

• Convene a shareholders’ meeting;
• Bring a court action to annul a shareholders’ resolution;
• Bring a court action against the company to invalidate a shareholders’ resolution conflicting with the law.

12. What are the duties of a member of the management board of Polish limited liability company?

The primary duty of a member of the management board of a limited liability company is to manage its affairs. In practice, this means that members of the management board are responsible for all current activities of the company, for which other bodies are not accountable. Among the corporate duties of members of the management board, we can mention:

• The duty to fulfill annual reporting obligations related to submitting financial statements and resolutions required by law to the Financial Repository of Documents,
• The duty to maintain a share register and a protocols register,
• The duty to submit a current list of shareholders to the commercial court each time there is a change in this regard,
• The duty to provide explanations requested by the auditor,
• The duty of the management board, at the request of the supervisory board, to submit reports and explanations.

13. How do members of the management board represent Polish limited liability company?

In the case of a one-person management board, a member of the management board represents the company independently. However, in the case of a multi-person management board, the method of representation should be specified in the company’s articles of association. If the company’s articles of association does not specify the method of representation, making statements on behalf of the company requires the cooperation of two members of the management board or one member of the management board with a proxy. If statements are made to the company by a 3-rd party, it is sufficient to address them to one person – a member of the management board or a commercial proxy.

14. How are resolutions of the management board of Polish limited liability company adopted?

Resolutions of the management board of a limited liability company can be adopted:

1. at a management board meeting, but also
2. in writing,
3. using means of direct communication at a distance, or
4. in writing through another member of the management board,

unless the company’s articles of association provides otherwise regarding the methods of adopting resolutions.

Resolutions adopted at a board meeting are valid if all board members have been properly notified of the meeting. Board resolutions are generally passed by an absolute majority of votes. When making resolutions, it is essential to adhere to the obligation of documenting resolutions, as stipulated in Article 208¹ of the Commercial Companies Code. Additionally, caution must be exercised because some resolutions require compliance with additional conditions specified in the Commercial Companies Code.

15. Is it possible to make decisions of the board of Polish limited liability company remotely?

The Commercial Companies Code provides for the possibility of making board resolutions using means of direct communication at a distance, conditional on the absence of obstacles arising from the company’s articles of association.

16. Who in Polish limited liability company can appoint or dismiss a commercial proxy?

In the absence of other arrangements specified in the company’s articles of association, the commercial proxy is generally appointed by the company’s board through a resolution signed by all board members and duly recorded. The commercial proxy begins to perform their duties on the day the decision is made or on the date specified in the resolution. Subsequently, it is necessary to register the commercial proxy within 7 days by submitting an electronic application on the National Court Register’s Portal to disclose the change in the register of entrepreneurs. The entry is declarative, meaning that the commercial proxy can perform their function even before being registered.

In the absence of other provisions in the company’s articles of association, one of the board members can generally dismiss the commercial proxy with a signed statement, just as in the case of appointment. Like the appointment, the dismissal of the commercial proxy is effective as of the date specified in the statement of dismissal. Registering changes in the National Court Register is only declaratory.

If the commercial proxy also serves in the company based on an agreement with the company, including an employment contract, a separate termination will be required for that agreement. The removal from the function, in the case of an employment contract, does not equate to termination of the employment contract. Similarly, if the proxy performs their duties based on other agreements of a civil law nature.

17. How can board members of Polish limited liability company appoint a commercial proxy?

Commercial proxy is a type of authorization that can be granted by an entrepreneur registered in the register, including a limited liability company, conducting business activities. Board members may not always have the opportunity to personally carry out all legal actions, especially when they are permanently outside the company’s headquarters. In such situations, a commercial proxy supports the board in its business activities by representing it. The commercial proxy can be a natural person with full legal capacity. The appointment of a commercial proxy, as an action exerting a significant influence on the company’s operation, requires the consent of all board members, while each board member can independently dismiss the proxy later.

Such a resolution can be passed in the manner provided for the adoption of management board resolutions.

18. What are the exceptions to the Principle of Representation in Polish limited liability company?

Members of the board, acting on behalf of the company, are obligated to take care of its interests. However, situations arise where the company’s interests conflict with those of a board member. In such cases, the legislator provides a solution by allowing the representation of the company by the supervisory board or a proxy appointed by a resolution of the shareholders’ meeting, ensuring the protection of the company’s interests.

According to Article 210 § 1 of the Commercial Companies Code , in agreements between the company and a board member or in disputes with them, the company is represented by the supervisory board or a proxy appointed by a resolution of the shareholders’ meeting. Violating this provision renders the legal act invalid, affecting contracts such as employment agreements or contracts between a board member and the represented company. The signature of another authorized board member does not alter this situation, as specific statutory procedures must still be followed.

Moreover, in a unique situation where the sole shareholder is also the sole board member, any transaction between them and the company must be in the form of a notarial deed, except for actions performed using a teleinformatics system template.

Moreover, under Article 15 § 1 of the Commercial Companies Code , the conclusion by a capital company of a credit agreement, loan agreement, guarantee, or any similar agreement with a member of the management board, supervisory board, audit committee, proxy, liquidator, or for the benefit of any of these individuals, requires the consent of the shareholders’ meeting or the general assembly, unless the law provides otherwise. According to Article 15 § 2 of the Commercial Companies Code, the conclusion of such an agreement by a subsidiary company with a member of the management board (proxy or liquidator) of the parent company also requires the consent of the shareholders’ meeting or the general assembly of the parent company.

A legal act performed without the required resolution is invalid. The consent may be given before or after the statement is made by the company, but not later than within two months from the date of the statement by the company. Confirmation given after the statement is made has retroactive effect from the moment of the legal act.

19. Can a board member of a Polish limited liability company engage in competitive activities against the company?

In accordance with Article 211 § 1 of the Commercial Companies Code, a board member of a limited liability company can engage in competitive activities only if the company’s authorized organ grants permission.

This prohibition extends not only to engaging in competitive activities but also to participation in a competitive civil, personal, or capital company, or any competitive legal entity (as a board member), even holding at least 10% of shares or the right to appoint at least one board member in such a company.

20. Board member’s liability: When and for what does a board member bear responsibility?

Due to the fact that a member of the management board has an obligation to act in the best interests of the company and to exercise due diligence while undertaking daily tasks. They are held responsible for any damage incurred by the company if:

1. a) there is a causal relationship between the action or omission of the member of the management board and the resulting damage,
2. b) the action of the member of the management board was contrary to the law or the company’s articles of association,
3. c) the action of the member of the management board was culpable.

The liability prescribed by the legislator for causing damage may entail not only civil legal consequences but also criminal legal consequences. The Penal Code, in Article 296, stipulates that causing significant financial damage to a limited liability company (pl. spółka z ograniczoną odpowiedzialnością), or even the direct creation of a threat of such damage, subject to certain conditions specified in this provision, is punishable by imprisonment of up to 10 years.

According to Article 299 § 1 of the Commercial Companies Code , members of the management board of a limited liability company are responsible for the company’s obligations when enforcement against the company proves to be ineffective. Members of the management board are jointly liable for unpaid obligations with their entire personal assets. It has been established in case law and doctrine that a member of the management board is not liable under this provision for the company’s obligations that did not exist during their term of office. Therefore, they will not be held responsible for the company’s debts incurred after their removal from the position of the management board member.

According to Article 293 § 1 of the Commercial Companies Code, members of the management board of a limited liability company are liable to the company for damage caused by actions or omissions that contravene the law or the provisions of the company’s articles of association unless they are not at fault. As indicated in Article 293 § 3, a member of the management board does not breach the duty of due diligence arising from the professional nature of their activities if they act loyally towards the company within the limits of justified economic risk, including based on information, analyses, and opinions that should be taken into account when making a diligent assessment in the given circumstances.

It should also be noted that when resigning from the position, a member of the management board remains responsible for the company’s obligations as long as they continue to function within the company’s management. Therefore, the actual performance of their duties should be taken into account. The scope of liability includes all company obligations existing during the time when the member of the management board held the position, for which the company has not made payment.

According to Article 116 § 2 of the Tax Ordinance, members of the management board are liable for public law obligations, including taxes and social security contributions, arising during their term of office.

Furthermore, members of the management board may also bear consequences under criminal law for their actions and omissions. According to Article 586 of the Commercial Companies Code, a member of the management board who fails to file a bankruptcy petition for the company despite the grounds for it can be subject to a fine, restriction of liberty, or imprisonment for up to one year. As indicated in Article 18(2) of the Commercial Companies Code, committing certain crimes under the Penal Code or the Commercial Companies Code may result in a prohibition from serving as a member of the management board. Additionally, the court may impose a fine, restriction of liberty, or imprisonment. Criminal liability may arise from violations of various laws, including:

• criminal provisions of the Commercial Companies Code,
• violations related to labor rights,
• tax and financial crimes, violations of financial and accounting regulations,
• crimes against economic turnover
• and other offenses such as fraud, document-related crimes, false statements, intellectual property violations, among others.

21. Can a member of the management board be held liable for the tax arrears of Polish limited liability company?

A limited liability company, as a general rule, is an independent legal entity with separate assets from those of its shareholders or members of its governing bodies, who, in principle, are not personally liable for the company’s obligations. However, there are situations in which members of the management board may be held responsible for the company’s obligations due to their roles. One such situation arises when a creditor’s claims cannot be satisfied through the execution of the company’s assets, provided that the execution has proven to be ineffective, unless the member of the management board timely files the appropriate application for bankruptcy, initiates restructuring proceedings, etc. It is important to note that the member of the management board’s diligent conduct, including ongoing monitoring of the company’s financial status and obligations to identify the conditions for bankruptcy and, when they occur, submitting the relevant application for bankruptcy, initiating restructuring proceedings, or approving a settlement, can protect the member of the management board from liability for the company’s obligations.

22. Is a member of the management board liable for the content of the Financial Report of Polish limited liability company and for not submitting it on time?

A member of the management board of a limited liability company may be held liable for the tax arrears of the company. This liability arises from the provisions of the Tax Ordinance, which state that if a limited liability company has tax arrears and the execution from its assets proves to be partially or completely ineffective, the member of the management board is personally liable with their entire assets if:

1. they fail to demonstrate that a bankruptcy petition was filed on time or restructuring proceedings were initiated,
2. they fail to prove that the failure to file for bankruptcy was not their fault, and

iii. they do not identify the company’s assets from which the execution could substantially satisfy the tax arrears.

However, the member of the management board is only responsible for tax arrears related to obligations whose payment deadline expired during their term.

23. Is a member of the management board liable for the content of the Financial Report of Polish limited liability company and for not submitting it on time?

According to Article 4a of the Accounting Act, the preparation of the financial report is the responsibility of the manager of the entity, who, in the case of a limited liability company, is a member of the management board (if this body is a single-person board) or the members of the management board in the case of a multi-person board, and the supervisory body, if established. Therefore, members of the management board are liable for damages resulting from their actions or omissions if they constitute a breach of the obligation to ensure the compliance of the financial report with the law, and this liability is joint and several. Failure to prepare the financial report, preparing it in violation of the statutory provisions, or including unreliable data in it is subject to a fine or imprisonment for up to 2 years, or both penalties combined, according to Article 77 of the Accounting Act. In the case of failure to submit the financial report on time, the registry court may initiate compulsory proceedings against the company and call on the company to submit financial documents.

If the documents are not submitted by the company within 7 days of the summons, the court may then impose a financial penalty, which can be repeated, and its total amount cannot exceed one million PLN. The court may also initiate proceedings to dissolve the company without conducting financial proceedings if, despite the summons, the financial report has not been submitted for the next two years. In principle, the responsibility for managing the company’s affairs rests with the members of the management board. Failure to ensure the timely submission of financial documents and the resulting consequences may therefore incur internal liability for the members of the management board with respect to the company and negatively impact the company’s reputation.

24. Is a member of the management board of Polish limited liability company obliged to have an Electronic Signature?

Polish legislation does not explicitly establish the obligation for a member of the management board to have an electronic signature or a trusted government profile. However, obtaining one may be essential for fulfilling obligations stipulated by applicable regulations. For instance, according to the Accounting Act, a financial report should be prepared in electronic form and signed with a qualified electronic signature, a trusted signature, or a personal signature. Based on Article 52, the report should be signed by the management board, and in the case of a multi-person board, by all its members or at least one member after receiving statements from the others that the financial report meets the requirements specified in the law. From these provisions, it follows that to meet all the requirements, at least one member of the management board should possess one of the aforementioned signatures.

The situation looks similar in the case of certain tax declarations. Additionally, according to the Anti-Money Laundering Act, limited liability companies are obligated to report information about their ultimate beneficiaries and update it. The information must be submitted to the Central Register of Beneficial Owners only electronically, and the reporting party is a member or members of the management board, depending on the principles of representation. Therefore, possessing one of the specified forms of electronic signature by at least one Board Member for independent representation and by at least two Board Members for joint representation is essential to fulfill the aforementioned legal obligations.

One of the elements of the ongoing process of digitizing document circulation in Poland is the implementation of the Act of November 18, 2020, on electronic deliveries. The e-Delivery Act requires companies registered in the National Court Register before October 1^st, 2024, to establish an e-Delivery box by January 1^st, 2025. Fulfilling this obligation involves appointing an administrator for the e-Delivery box. The administrator can be any person, but the most intuitive choice is to designate one of the members of the company’s management board. Individuals serving as administrators of the e-Delivery box must have a qualified electronic signature or a trusted profile.

Regardless of the requirements set by the law, having the ability to electronically sign documents is a very practical and recommended solution. It should also be noted that to obtain both a trusted and personal signature, it is necessary to have a PESEL number. A qualified electronic signature can be obtained based on the PESEL number or, alternatively, for board members without a PESEL number, based on an internationally recognized identification document such as a valid passport.

In conclusion, understanding the intricacies of a management board member’s obligations in Polish limited liability company is essential for sound corporate governance.