Companies & corporate law

Grounds for exempting members of the management board of a subsidiary from liability in the draft amendment to the Code of Commercial Companies

Previously in our news we mentioned the draft act on amending the Commercial Companies Code and some other acts prepared by the Minister of State Assets:

https://www.dudkowiak.com/blog/corporate-law-group-of-companies-in-the-light-of-the-proposed-amendment-to-the-commercial-companies-code.html

https://www.dudkowiak.com/blog/corporate-law-management-board-of-a-limited-liability-company-in-the-light-of-the-proposed-amendment-to-the-commercial-companies-code.html

In this text, however, we describe the requirements that, according to the author of the draft act must be met by members of the subsidiary’s bodies in order to benefit from the exemption from liability for the performance or refusal to comply with the parent company’s binding instructions.

Group of companies

The amendment introduces a new institution for a group of companies to operate in line with a common economic strategy (the so-called group of companies’ interest). As part of this action, the parent company may issue binding instructions to the subsidiary to deal with the latter’s affairs justified by the specific interest of the group of companies, even if such action may expose the subsidiary to damage. Binding instructions should be in writing, documentary or electronically.

Grounds for exemption from liability

According to corporate law in Poland, in order to avoid civil and even criminal liability in connection with the execution or refusal to execute such binding instructions of the parent company, members of the management board, audit committee or supervisory board of the subsidiary should ensure that the following requirements are met:

  1. The articles of association or the statute of a subsidiary should contain provisions stating that the subsidiary is guided by a common economic strategy (interest of the group of companies) and such changes must be registered in the register of entrepreneurs of the National Court Register,
  2. The participation in a group of companies should also be disclosed in the register of entrepreneurs of the National Court Register,
  3. Being guided by the interests of a group of companies may not infringe the legitimate interests of creditors or minority shareholders of a subsidiary,
  4. The execution of the parent company’s instruction requires a resolution of the subsidiary’s management board or the board of directors to be adopted in this respect, whereby such a resolution should define both the interest of the group and the expected benefits, as well as the time and manner of remedying the damage (the period of remedying cannot exceed 2 years from the event causing damage). The resolution should be in written, documentary or electronic form,
  5. A resolution of the management board or board of directors to refuse to carry out a binding instruction requires justification.

Scope of the exemption

It should also be remembered that the execution of a binding instructions meeting the above requirements will allow members of the subsidiary’s body to avoid liability only in the following scope:

  • civil liability for damage caused by an act / omission contrary to the law or the provisions of the articles of association (Art. 293 of the Commercial Companies Code),
  • criminal liability for abuse of rights or failure to fulfill the obligation imposed on the perpetrator (Art. 296 of the Penal Code).
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