Directors of a Poland LLC 2022
The board of directors is a group that involves several directors, who are accountable for the profit & loss of the firm. The board also has the power to control all corporate powers.
A corporation also has officers, who are appointed by the board and get their powers from it. The board of directors is generally responsible for major business and policy decision-making. The officers are responsible to carry out the policies and make the day-to-day decisions.
So, without any further ado, let get dive into the discussion about powers, duties & liability of directors of a Poland LLC, it is helpful to provide some clarification.
What is a director?
An employee or a member of the management board can be a director in a Poland business. The management board reports to the administrative director, the HR director, and the sales director.
Therefore, a “director” who isn’t a member of the management board has no real (or implied) power or authority to bind the company (unless authorized by the Management Board).
Key Responsibilities of Directors
- The company’s shareholders elect the board of directors. It also includes corporate positions holders at high levels.
- A public company must have a business operation document (BOD) by law. Private entities and non-profit organizations are free to opt out.
- BOD is committed to protecting the rights and interests and taking care of all assets that are invested in the business.
- The board is the highest governing authority of an organization. It participates in board meetings and makes strategic corporate decisions.
Summary of Corporate Governance
After the terminology is clear, the next step is to get a better understanding of the corporate governance system in Poland. In short, the management board is the mandatory corporate body for LLCs, except for the shareholder’s meeting.
It does not necessarily mean that a Poland management board is equivalent to an American or English board. Common law systems typically have one board of directors. These directors are then divided among executives and other directors.
But under Poland law, the directors (again members of the management boards) are always executive directors. An LLC can have a supervisory board or a supervisory body, but only in limited instances. An LLC can have additional directors.
It doesn’t matter if there is a supervising board (or committee) in a company, there is always a practicable split of competencies among the directors and shareholders. They have supervisory competencies and can review company documents and request information.
Limitations to directors' authority
While the management board is presumed to have the authority to conduct company business and represent the company in court, it is limited by certain limitations.
The first is a set of statutory limitations that require shareholders to consent to certain activities such as the acquisition, disposal, or encumbrance, of company assets. The articles of the association may contain limitations, which are often enforced.
The third group covers both obligations and limitations imposed by shareholders’ resolutions. The shareholders may demand that the management board does not do certain things and that certain actions are taken by the directors.
This means that shareholders can have (or might have) real influence on almost all matters of the company, even deciding on the payment of dividends. The directors’ recommendation is only a guideline for shareholders and they are free to make their own decisions.
Accountable To Run a Firm & to Represent the Business
However, it may be possible to determine the actual powers of directors. First, the management board is responsible for running the company and managing its operations. Shareholders are unable to do this directly.
This is why all of the members of management boards are executive directors. It is the directors that represent the company towards third parties (signing contracts or other statements, and receiving statements from other parties). Shareholders can’t do this.
As we have already mentioned, shareholders can oppose decisions made by directors or refuse to agree to them. Shareholders can even overrule directors’ decisions and demand that they do something.
The directors’ action is valid and effective unless the shareholder’s consent to a given material. If the articles of association, require shareholders’ consent before entering into an agreement of any kind, an agreement that is entered into without such consent can still be valid for the company.
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How can you represent the company?
The directors’ rights to represent and bind the company, regardless of the provisions of the articles or shareholder’s resolutions, cannot be excluded against third parties. However, directors may not always be bound by the company. The articles of association do not provide for any other exceptions.
To bind the company, at least two directors must act together a director & a commercial proxy. Articles can vary this rule to provide either individual empowerment or both. The chairman of the management board can act alone, but other directors must act in pairs.
A key point to keep in mind is that Poland law doesn’t allow any deemed or imputed power for a person who holds himself out as a director.
The commercial register, also known as KRS, reflects both directors’ names and how they should act (individually and in particular configurations). Third parties may not claim they did not know about the joint representation of two or more directors in a given firm.
Duties of Directors
Director’s powers are one thing. What they must do is another. They have the power to conduct company affairs, but they also have obligations to ensure that affairs are done properly and in the company’s interest.
The directors are responsible for timely and proper preparation of all statutory filings, the annual financial statement, preparation of the annual report about the company’s operations, holding shareholder meetings, maintaining the share book, and so forth.
Liability for the company and third-parties
Directors’ powers, duties, and liabilities are connected to their liability to the company and third parties. If a director causes damage to the business, then he may be held liable.
This applies regardless of whether the act or omission was unlawful or in violation of the articles. Importantly, shareholders can sue directors liable for the company if they fail to sue them within a prescribed time. Another point concerning internal liability is the so-called corporate liability of a director.
It means that if a director fails to comply with a statute, articles of association, or shareholders’ instructions, it could lead to his dismissal. A vital comment is that directors are not protected under the law.
The shareholders may approve a formal resolution to this effect at any time. External liability (to the third party) is subjected to severe limitations. While Poland law does not contain an equivalent to corporate veil doctrine, director practice is similar.
In short, directors could be held personally liable for company debts if enforcement against the company proves to be ineffective. These exclusions are based on the timely filing of a bankruptcy petition for the company, unless the director’s negligence or if the company’s creditors were not damaged by the delay.
Criminal & Various Liability
In addition to the previous comments about corporate and civil liabilities, the director’s actions or failures to act could be subject to criminal, tax, or administrative liability. The most severe category can lead to probation, ineligibility, or even jail time.
Conflict of interests for Director
A corporation might enter into transactions in which a director has a direct, or indirect, interest. This is called a “conflict of interest transaction”. A conflict of interest transaction is, for example, when a director sells property he has to the corporation.
The corporation might want to annul such a transaction due to the possibility that the director’s financial interest could have affected his judgment in a way that is detrimental to the corporation. Several states have provisions that deal with conflicts of interest transactions.
A conflict of interest transaction cannot be declared invalid by a corporation because a director held an interest. This is subject to certain conditions, including the transaction being fair to shareholders or the board of directors, the material facts of the transaction, and the director’s interests being disclosed to them, as well as approval or ratification by the board.
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All directors may be subject to the liability mentioned above. These apply regardless of whether the director was involved in the operations of the company or was simply a “nominee”, appointed by the shareholders to oversee the interests of the Poland subsidiary.
His fellow directors could be held responsible if he did something that he should have done or prevented.
If you’re still having questions regarding the powers, duties & liability of directors of a Poland LLC, or any other question, we are ODINT Consultancy. We’re we are here to assist you at each step of your way.
Directors are responsible for managing their companies. They have to be honest and work for the success of their company and its shareholders.
- Designing business strategies and recommending implementation methods.
- Communicating with board members and executives of companies.
- Conducting manager performance evaluations
- Preparing business plans and budgets.
- Managers should have all the resources they need.
A director may be held responsible for an offense against the company if they participated in or encouraged illegal activities or caused it by neglecting their duties.
- You have the power to make phone calls about money that isn’t paid for shares.
- You can call meetings on a suo-moto basis.
- Issue shares, convertible debentures, and any other instrument to the Company.
- You can borrow money and invest in the Company.
- Approve Financial Statements & Board Report.
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