overview
Resolutions passed by the management and supervisory boards of a Polish spółka z ograniczoną odpowiedzialnością (sp. z o.o.) can have a profound impact on the legal positions of board members, the company itself, and its shareholders. Unlike shareholder resolutions, Polish company law (KSH) does not contain a specific provision for challenging such board resolutions. The procedural basis is therefore provided by Article 189 of the of Civil Procedure (KPC): an action for a declaratory judgment as to the existence or non-existence of a right or legal relationship, provided there is a legitimate legal interest .
Key points:
a) No special provision in the KSH Article 189 KPC is decisive
b) Types of action : Declaratory judgment of the invalidity (non-existence) of the decision or declaratory judgment of the (non-)existence of the legal relationship that the decision is intended to trigger,
c) Types of defects :
=> Nullity (e.g. violation of law, circumvention of the law, violation of public policy – Art. 58 KC in conjunction with Art. 2 KSH),
=> Non-existent decisions (serious procedural violations, lack of majority/quorum, sham decisions),
d) Articles of Association / Rules of Procedure : There is disagreement in legal literature as to whether a mere violation triggers invalidity or "only" liability for damages/liability of the officers.
e) Legitimacy : Active legitimacy is held by anyone with a legal interest (especially members of governing bodies); passive legitimacy is always held by the company.
f) No substantive time limit expires , but a late claim may be classified as an abuse of rights (Art. 5 KC) and the legal interest may lapse.
g) Court fee : generally 5,000 PLN per contested decision (Art. 29 Nos. 4 and 5 KSCU by analogy),
h) Arbitration : possible if the decision concerns property rights (Art. 1157 KPC), arbitration clause can be included articles of association
i) A judgment has declaratory effect ex tunc ; a separate declaratory judgment has binding effect according to Art. 365 KPC .
Challenging decisions of the management board and the supervisory board
Resolutions of the supervisory board and the management board may concern matters that are significant for the rights and obligations of the board members of the sp. z o.o., the company itself, and its shareholders. If a resolution of the supervisory board or the management board is flawed, persons with a legitimate interest have the right to challenge the resolution in court.
Nature and content of the complaint
Legal basis of the lawsuit
Unlike the detailed regulations governing the challenge of shareholder resolutions of a sp. z o.o. (limited liability company), the provisions of the Polish Commercial Code (KSH) do not contain any specific regulations for challenging resolutions of the supervisory board or management. There is also no basis for applying the regulations on challenging shareholder resolutions analogously in this area. The legal basis for an action to challenge a resolution of the supervisory board or management of a sp. z o.o. is Article 189 of the Polish Commercial Code (KPC), according to which the plaintiff may request a judicial declaration of the existence or non-existence of a legal relationship or right if they have a legitimate interest in doing so (see Decision of the Supreme Court of September 18, 2013, III CZP 13/13 ).
Type of formulation of the complaint
The action can be formulated both as an action for a declaration of the nullity (declaration of non-existence) of the resolution of the supervisory board or the management, and as an action for a declaration of the existence (non-existence) of a legal relationship or right that is supposed to be a consequence of the resolution.
Example of an application:
"Na podstawie art. 189 KPC wnoszę o stwierdzenie nieważności uchwały nr 1 rady nadzorczej spółki spółki X.”
"Na podstawie art. 189 KPC wnoszę o ustalenie, że Y nie został skutecznie powołany do pełnienia funkcji członka zarządu spółki 08/01/2021 r.”
Defects in the decision that justify its challenge
Nullity of the decision
A resolution of the supervisory board or the management of a limited liability company (sp. z o.o.) can be challenged, in particular, if the resolution is absolutely void. According to Article 58 § 1 of the Cantonal Code (KC) in conjunction with Article 2 of the Cantonal Code of Civil Procedure (KSH), a resolution is void if it violates the law or aims to circumvent the law. Additionally, the resolution is void if it violates the principles of social coexistence (Article 58 § 2 KC in conjunction with Article 2 KSH).
The basis for the invalidity of a resolution of the supervisory board or the management of a limited liability company (sp. z o.o.) due to a violation of law can lie not only in the infringement of substantive legal provisions (e.g., a resolution of the supervisory board on the appointment of a member of the management if the articles of association do not grant the supervisory board the authority to appoint members of the supervisory board; a resolution of the supervisory board on the appointment to the management of a person who does not meet the requirements specified in Art. 18 § 1 KSH; a resolution of the management on the payment of an advance on the expected dividend, passed even though the approved annual accounts for the previous financial year show no profit), but also in the infringement of procedural rules that determine the manner of decision-making (e.g., a resolution of the management that was passed even though not all members of the management were notified of the management meeting; a resolution of the supervisory board that was passed by written procedure even though the articles of association exclude the possibility of decision-making by written procedure). However, while a violation of substantive legal provisions always results in the invalidity of the resolution, a violation of procedural legal provisions does not lead to the invalidity of the resolution if it could not have influenced the decision-making process and the content of the resolution (e.g., a member of the management was not formally invited to the management meeting, but was present and voted in favor of the resolution).
Contradiction to the articles of association or the rules of procedure
Legal doctrine is divided on whether a challenge to a management or supervisory board resolution is permissible if it does not violate statutory provisions but contradicts the articles of association (e.g., a supervisory board resolution appointing a person to the management board who does not meet the requirements stipulated in the articles of association; failure to comply with specific requirements for convening meetings stipulated in the articles of association). According to the first view, resolutions that contradict the articles of association should be considered void (the violation of the articles of association is treated as a violation of Articles 35 and 38 of the Belgian Code of Civil Procedure or the principles of social coexistence). According to the opposing view, the violation of the articles of association does not render the management or supervisory board resolution void, but may only result in liability for damages or organizational mismanagement on the part of the board members. Similarly, the impact of a violation of the management or supervisory board's rules of procedure on the validity of the resolution is disputed.
Non-existent decisions
In addition to completely void resolutions of the management and supervisory boards, a distinction must be made between resolutions that do not exist. Resolutions are legally non-existent if their adoption involved such serious violations that they cannot be considered valid resolutions at all, and the action taken merely creates the appearance of a resolution. Examples of non-existent resolutions include those passed by individuals who are not members of the governing bodies, those recorded in the minutes even though no vote was taken, those passed in violation of the quorum requirement, or those that did not receive the required majority. In the case of a non-existent resolution, the action should be formulated as an action for a declaratory judgment that the resolution does not exist. The Supreme Court (SN) allowed such actions in its judgments of March 14, 2012 ( II CSK 252/11 ) and February 18, 2010 ( II CSK 449/09 ).
In practice, doubts can arise as to whether a particular violation will be considered by the court to render a resolution void or non-existent. In such situations, it is advisable to formulate the action as a conditional action (an action for a declaration of nullity, or alternatively, for a declaration of non-existence of the resolution – or vice versa, depending on which action is considered more promising) to avoid dismissal of the action in the event of a different judicial assessment of the consequences of the resolution defects. The distinction between void and non-existent resolutions of the management or supervisory board is less significant than in the case of shareholder resolutions of a limited liability company (sp. z o.o.). Regardless of the chosen classification of the resolution, the legal basis for the action, the challenge procedure, and the effect of a successful claim will be identical.
Active and passive legitimacy
Active standing
Anyone with a legitimate interest as defined in Article 189 of the Polish Civil Code (KPC) may bring an action to declare a resolution of the management or supervisory board of a limited liability company (sp. z o.o.) null and void or invalid. Due to the function they perform, it can be assumed that members of these bodies always have a legitimate interest in challenging a resolution of the management or supervisory board (a member of the management can also challenge a resolution of the supervisory board and vice versa). However, the action cannot be brought by the supervisory board or the management as a whole, since these bodies lack legal capacity to be a party to legal proceedings. A shareholder will only have a legitimate interest in challenging a resolution if the resolution affects their rights and obligations (e.g., a management resolution to refuse consent to the sale of shares; a management resolution to pay an advance dividend; a management resolution to reduce the share capital, adopted under the procedure of Article 199 § 5 of the Polish Civil Code).
Passive legitimacy
An action seeking a declaration of nullity or invalidity of a resolution of the supervisory board or management of a limited liability company (sp. z o.o.) must be brought against the company itself. The body that passed the resolution cannot be named as the defendant, as neither the management nor the supervisory board has legal capacity to be a party to legal proceedings. The company should be represented in the proceedings according to general principles, i.e., by its management. The question of company representation differs only if the action is brought by one or more members of the management. In such a case, the company should be represented, pursuant to Article 210 § 1 of the Dutch Commercial Code (KSH), by the supervisory board or an authorized representative appointed by resolution of the shareholders' meeting.
Nature of the judgment that grants the claim
The invalidity of a resolution of the supervisory board or the management of a limited liability company (sp. z o.o.) is characterized by the fact that the resolution is ineffective from the outset, a fact which anyone can invoke at any time without requiring a court judgment establishing this invalidity – the resolution is void by operation of law. In particular, one can also invoke the invalidity of a resolution of the supervisory board or the management in other proceedings, even if no judgment has been issued establishing the invalidity of the resolution.
A judgment declaring a decision void is declaratory and has retroactive (from the date of its adoption). The foregoing applies in full to a non-existent decision – the decision does not exist by operation of law since its adoption, and the judgment declaring the non-existence of the decision is declaratory and has retroactive (from the date of its adoption).
However, challenging the decision by means of a separate action has the advantage that only a judgment rendered in proceedings concerning a claim directly related to the decision has binding effect on other courts pursuant to Article 365 of the Code of Civil Procedure. The binding effect of a final decision on other courts relates only to the operative part of that final decision.
Appeal procedure
a) Lack of a time limit for bringing an action. The possibility of bringing an action to declare a resolution of the management or supervisory board of the sp. z o.o. void or non-existing pursuant to Article 189 of the Polish Code of Civil Procedure (CCP) is not subject to a limitation period. However, it is required that the resolution be challenged as soon as possible after its adoption. Bringing an action long after the resolution has been passed may be considered an abuse of rights within the meaning of Article 5 CCP. Furthermore, the passage of time may affect the assessment of whether there is a legitimate interest in challenging the resolution (the challenger has no legitimate interest if the resolution has already had irreversible effects).
b) Formal requirements for the statement of claim. The statement of claim seeking a declaration of the nullity or non-existence of a resolution of the management or supervisory board of the sp. z o.o. should comply with all formal requirements for a statement of claim pursuant to Article 187 § 1 of the Code of Civil Procedure, as well as the formal requirements for pleadings pursuant to Articles 126 et seq. of the Code of Civil Procedure. A copy of the statement of claim, along with copies of the attachments, must be provided to the defendant (Article 128 § 1 of the Code of Civil Procedure).
c) Commercial proceedings. Disputes concerning the declaration of the invalidity or non-existence of a resolution of the management or supervisory board should be treated as disputes arising from the corporate relationship, governed by the rules on commercial proceedings (Articles 4581 et seq. of the PCP). It is irrelevant whether the plaintiff is an entrepreneur.
d) Securing the claim. An action seeking a declaration of the nullity or non-existence of a resolution of the management or supervisory board of the sp. z o.o. can be secured according to the principles applicable to non-pecuniary claims. A typical protective measure for such an action is the suspension of the enforcement of the contested resolution until the proceedings are concluded with final legal effect. Filing an application to secure the claim will be particularly advisable in practice in cases where the resolution concerns changes in the company's bodies, is intended to serve as the basis for actions by the management, or is to result in an entry in the commercial register.
e) Competent Court. The Commercial Court with jurisdiction over the company's registered office has exclusive local jurisdiction for filing an action seeking a declaration of nullity or invalidity of a resolution of the management or supervisory board of the sp. z o.o. (Art. 40 KPC). The aforementioned matters fall under the jurisdiction of the Regional Courts (Sądy Okręgowe – Art. 17 No. 42 KPC).
f) Court fees. Pursuant to Article 29, No. 5 of the Act of 28 July 2005 on Court Fees in Civil Matters (hereinafter: KSCU), the fee for an action seeking a declaration of the existence or non-existence of a resolution of a company body is PLN 5,000, which applies directly to resolutions of the management and supervisory boards of a sp. z o.o. However, the provisions of the KSCU do not expressly specify the amount of the fee for an action seeking a declaration of nullity of a resolution of the management or supervisory board of a sp. z o.o. Therefore, Article 29, No. 4 of the KSCU applies analogously, which provides for a fee of PLN 5,000 for an action seeking a declaration of nullity of a shareholders' resolution of a sp. z o.o. The court fee applies to each of the challenged resolutions, even if several resolutions are challenged in one action. Challenging a large number of resolutions in a single lawsuit, even if they were passed in the same meeting of the management or supervisory board, requires the payment of a separate fee for each of the challenged resolutions.
(g) Arbitration. Disputes concerning the declaration of nullity or invalidity of a resolution of the supervisory board or management of the sp. z o.o. may be submitted to an arbitral tribunal, provided the challenged resolution is of a pecuniary nature (Art. 1157 KPC). Whether a particular resolution is to be classified as a pecuniary or non-pecuniary resolution depends on the content of the specific resolution (this view is well established in case law with regard to shareholder resolutions; see, e.g., Decision of the Supreme Court of February 8, 2008, I CZ 145/07 , which also applies to resolutions of other corporate bodies). The arbitration agreement regarding disputes concerning the declaration of nullity or invalidity of a resolution of the management or supervisory board of the sp. z o.o. may be included in the articles of association. In such a case, it binds the company, its shareholders, as well as the company's bodies and their members (Art. 1163 § 1 KPC).
Checklist (short version)
=> Form and content of the complaint (Articles 126, 187 § 1 KPC) were complied with,
=> Fee of 5,000 PLN per decision paid,
=> Arbitration clause in the articles of association reviewed,
=> Legal interest substantiated,
=> Defects (invalidity / non-existence) specifically explained,
=> Evidence (documents, witnesses) attached,
=> Alternative action and application for protection considered.
Should you have any questions regarding the challenge of decisions made by the management and supervisory boards of a Polish company, you can contact us by email at kontakt@kancelaria-pozniak.pl or by phone at +48 665 246 969 .