Poland Supreme Court Decision Regarding Representation of a Limited Liability Company

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On April 24, 2014 the Supreme Court issued a decision resolving an unsettled issue with respect to the representation of a limited liability company: whether the grant of a power of attorney by the management board of a limited liability company organized under the laws of Poland to a management board member (allowed by the company’s articles of association to represent the company jointly with another management board member) authorizing the board member to take specific categories (types) of actions, is permissible. Until now, the ability of a management board of a limited liability company to appoint one management board member as the authorized representative of the company has been subject to dispute in those circumstances in which the articles of association of the company require joint representation.

The Supreme Court addressed this issue as early as 2006 holding that a limited liability company could appoint a management board member of a company as an authorized representative to take specific (single) legal action (pursuant to a special power of attorney). The result of the 2006 holding did not result in definitive guidance with respect to this issue.

As a result, the most recent Supreme Court decision issued in response to the legal question posed by the Regional Court in Warsaw takes on greater importance in resolving this legal issue by definitively holding that a management board member of a limited liability company can in addition to its function as a board member, be appointed as an authorised representative empowered to take specific categories (types) of actions (and not only specific legal action), even if joint representation is required by the articles of association of the company. A power of attorney should be granted with respect to a company that requires joint representation by at least two management board members.

Therefore, in this case, the Supreme Court approved the actions of a management board member of a limited liability company acting, in addition to its management function, in the capacity as an authorized representative of the company, by holding that based on the power of attorney it is entitled both to carry out specific legal action, as well as specific categories (types) of actions.

This case provides practical guidance for the operation of a limited liability company by alleviating concerns that legal actions taken by the company represented by a management board member acting as an attorney may be deemed invalid. Companies are able to grant powers of attorney to management board members to act during periods of time and in situations in which joint action of the management board members is impossible, or hindered for any reason. A management board member, as an authorized representative, undoubtedly provides a better guarantee of performance of a specific action than an authorized representative from outside the company. As a result from the company’s perspective, the granting of a power of attorney to a management board member bears a more limited risk than the granting of a power of attorney to a third party.

Undoubtedly, the Polish Supreme Court’s interpretation of the regulations ending a long dispute in the legal doctrine is favorable from the perspective of legal transactions.

 

Topics:  EU, Limited Liability Companies, Managers, Power of Attorney, Third-Party Risk

Published In: Business Organization Updates, Civil Procedure Updates, General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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