In Poland, only joint-stock companies can be listed. The relevant regulations of the CCC provide for a mandatory two-tier board structure for joint-stock companies that consists of a management board and a supervisory board.i Board structure and practicesComposition, appointment and dismissalManagement board
The management board of a company must have at least one member (with no applicable maximum number of members unless otherwise specified in the articles of association). Only individuals can be members. In particular, another company may not be appointed to the management board.
If a fixed or a minimum number of management board members is provided in the articles of association and that number of members is not appointed, even temporarily, then the ability of the management board to validly represent the company may be compromised. To avoid any such issues, most companies have articles of association specifying that the management board consists of one or more members.
The competence to appoint, remove or suspend a management board member is vested in the supervisory board, unless the articles of association of the relevant company provide otherwise (e.g., by stipulating that the management board members are appointed by way of a shareholders' resolution or by conferring rights on a certain shareholder to make nominations). Management board members may always be removed or suspended by the shareholders at a general meeting.
Following the amendment of the CCC, which entered into force on 1 January 2017, the articles of association or a resolution of a general meeting may stipulate certain criteria that should be met by a management board candidate, or may provide a detailed qualification procedure.
There is the possibility to temporarily appoint one member of the supervisory board to the management board. Such an appointment (which is an exception to the general division of functions between company bodies and the non-compatibility rule described below) is only allowed for up to three months and is only used in exceptional circumstances (e.g., after the resignation of a management board member and before the appointment of a new candidate).
The Best Practice Code provides that management board members should be of high quality and experienced, and the overall composition of the board should ensure diversity as regards matters such as gender, age, education and professional background.
Generally, no minimum term applies to the appointment of management board members, although a single term of office cannot exceed five years. Reappointment for a subsequent term cannot be made earlier than one year before the end of the current term of office. If the articles of association do not provide any specific term of office, the mandate of a management board member automatically expires, at the latest, on the date of the general meeting approving the financial statements for the final full financial year of service of the relevant management board member. Similarly, if a term of office is specified in the articles of association, the mandate of a management board member expires upon approval of the financial statements for the final full financial year of that term. In 2016, the Supreme Court ruled that, for these purposes, the final full financial year is the final financial year that commenced during the term of office. The ruling brought an end to debate in the legal doctrine with regard to that aspect of the interpretation of the regulation. This is an important development, because miscalculation of the expiry of mandates of management board members could have significant consequences. In particular, a management board member without a valid mandate cannot validly represent the company, and as such, the effectiveness of any acts undertaken by a management board member after the expiry of the mandate could potentially be brought into question, sometimes years later. Following the amendment of the Civil Code adopted in 2018, from 1 March 2019 onwards it will be possible for a company to confirm legal acts undertaken by the member or members of its management board without a valid mandate (similar to acts of a falsus procurator). This brings an end to a discussion regarding the controversies regarding whether such a possibility exists with respect to acts undertaken by a company's organs.
The articles of association may provide for a joint term of office of the management board members. In such cases, the mandates of all members generally expire at the same time, even if a particular management board member was appointed during the term of office.
A management board member may generally be removed without reason at the discretion of the general meeting or other nominating body. However, the articles of association may limit this right to circumstances in which there are valid reasons for removal.Supervisory board
The supervisory board of a listed company must consist of at least five members, and there is no maximum unless otherwise specified in the articles of association. Because of the division of functions between the management board and the supervisory board, it is not possible for a management board member to be a supervisory board member at the same time. The same restrictions apply to a commercial proxy, a liquidator, a manager of a branch office of the company and certain other persons employed by the company.
Members of the supervisory board are generally appointed and dismissed by way of resolutions at a general meeting. Irrespective of the appointment rules specified in the articles of association, the regulations of the CCC provide a special appointment procedure designed to protect the interests of minority shareholders. Shareholders representing at least one-fifth of the share capital may request that the election of the supervisory board at a general meeting take place by voting in separate groups. Shareholders may create groups by division of the total number of shares represented at the general meeting by the number of supervisory board members to be appointed. Each group may then elect one supervisory board member.
The recommendations of the Best Practice Code regarding the composition of the management board and diversity are equally applicable to the supervisory board. Additionally, at least two members have to fulfil the independence criteria described in the Commission Recommendation on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board. Neither an employee of the company, a subsidiary or an affiliated company, nor a person holding at least 5 per cent of the shares in the company, can be regarded as independent for these purposes. The new Act on auditors and auditors' firms that entered into force 2017 introduced further criteria for part of the supervisory board members in listed companies. Under this Act, an audit committee appointed by the supervisory board from its own members is obligatory in such companies. The audit committee members (there must be at least three of them), being supervisory board members at the same time, apart from fulfilment of the independence criteria must have knowledge and skills in the scope of the industry in which the company is operating, whereby at least one of them must have knowledge and skills in the scope of accounting or examination of financial statements.
The rules regarding the term of office and expiry of the mandate of a supervisory board member are the same as for the management board members as described above.Legal responsibilities and representationManagement board
The competence to represent a company in relation to third parties generally lies with the company's management board. Specifically, management board members are entitled to represent the company in relation to third parties in all judicial and extrajudicial matters. The representation rules specified in the articles of association may provide for either joint or individual representation. The rules on joint representation may provide that the company can be represented by a management board member acting jointly with a commercial proxy. The notion of commercial proxy in Poland is similar to that of Prokura in Germany.
As a general rule, each management board member is responsible for the day-to day management of the company.
The competence of the management board to manage the company's business may, to a certain extent, be limited. In particular, it may be subject to a list of reserved matters for which the consent of the supervisory board or the shareholders by way of resolution at a general meeting is required. In such situations, the supervisory board role is strengthened or the shareholders in general meeting are more involved in crucial decisions concerning the management of the company. However, exceptionally detailed or exhaustive catalogues of reserved matters for the supervisory board may not be permissible because, in practice, the need for the approval of the supervisory board may be tantamount to it giving binding instructions to the management board, which is prohibited.
In the course of performing their duties, the management board members are obliged to act with due care necessitated by the professional nature of their activity. In 2012, the Court of Appeal in Poznan emphasised that a management board decision can be made based on analyses prepared by the company's employees or opinions of external persons who have the required special knowledge. However, simply entrusting other persons with an issue is not on its own sufficient to fulfil the obligations of due care of a management board member. In particular, the responsibility for decision-making cannot be shifted to a subordinate.
The management board members have fiduciary duties towards the company and are obliged to act in the interests of the company. Following a resolution of the Supreme Court in 2009, it is clear that the interests of the company are not independent and abstract from the interests of the shareholders, but the interests of the shareholders should be taken as a whole.Supervisory board
The supervisory board exercises ongoing supervision of all the company's activities. For that purpose, the supervisory board members may inspect all the company's documentation and request information from the management board and the company's employees.
The specific responsibilities of the supervisory board include, in particular, evaluating annual financial statements, annual management board reports and motions from management concerning decisions on the company's profits or losses. The supervisory board provides the shareholders with an annual written report on the results of the evaluation. The basic scope of supervisory board responsibilities may be extended and include, among other things, reserved matters for which management is obliged to get supervisory board approval.
The powers of the supervisory board also include suspending (but only for significant reasons) an individual or all management board members from their duties and temporarily appointing supervisory board members to the management board (for a period no longer than three months) to perform the duties of management board members who were dismissed, who resigned or who are incapable of performing their duties for other reasons. The supervisory board is not entitled to issue binding instructions to a management board member and the supervisory board members cannot represent the company in relation to third parties, except in relation to agreements or disputes with the management board members.Supervisory board and management boardDelegation of board responsibilities
The supervisory board members generally act jointly. Indeed, the regulations of the CCC explicitly apply a collectivity principle to the activities of the supervisory board. In accordance with this principle, a supervisory board member cannot act individually without the prior authorisation of the entire supervisory board. However, the supervisory board may delegate an individual supervisory board member to undertake certain specific supervision activities.
As a general rule, and unlike the supervisory board members, each management board member is responsible for the day-to-day management of the company. The management board is entitled to issue its own by-laws regulating its internal operation, unless the authority to issue the by-laws is granted under the articles of association to the supervisory board or to the shareholders in a general meeting.
The by-laws may provide for the delegation of certain areas of the company's operations to individual management board members. However, the delegation of functions within the management board does not relieve the other management board members of their responsibility for those functions. Management board members are obliged to control each other and prevent a negative outcome for the company (horizontal control). According to the Best Practice Code, such an internal division of responsibilities should be clear and unambiguous and published on companies' websites.Roles of the chair
There is the possibility to appoint one of the management board members as the president of the management board. However, unless provided otherwise in any management board by-laws or the articles of association, no particular duties or powers apply to the president. As such, this function is not necessarily the same as or comparable to the position of a CEO or president of a US corporation.
In the case of a supervisory board, there is often a chair and a deputy chair. Unless explicitly granted additional powers (e.g., a decisive vote if there is no majority on a supervisory board decision), the main power of the chair is basically to open general meetings. Usually, the chair has administrative functions with respect to the supervisory board, such as preparing agendas for and chairing its meetings.Remuneration
The shareholders should determine the general remuneration policy of the company including, among other things, caps and remuneration systems, as well as any rights of the management board members to participate in the company's profits. However, the specific remuneration of the management board members is usually determined by the supervisory board.
According to the Best Practice Code, the level of remuneration of management and supervisory board members and key managers of the company should be sufficient for the acquisition, retention and motivation of persons with the qualities and range of competences generally required by the company, as well as being adequate with regard to the specific tasks and any additional functions discharged by the relevant individual.