How to resign from the management board and be sure it’s effective?
Effective resignation by a member of the management board of a company is not an easy matter. The First President of the Supreme Court of Poland recently applied for a resolution on the matter by a seven-judge panel of the Supreme Court.
One of the reasons for termination of the appointment of a member of the management board of a company is resignation (Commercial Companies Code Art. 202 §4 and 369 §5). The Commercial Companies Code (Art. 202 §5 and 369 §6) provides that the regulations on notice of termination of a contract of mandate by the person accepting the mandate (i.e. Civil Code Art. 746 and following) shall apply as relevant to submission of resignation. These rules provide that a person accepting a mandate may terminate it at any time. But as there are no specific regulations on the method of submitting the termination notice as such, the general provisions on the method of submitting a declaration of will (Civil Code Art. 61 §1) apply. Under those rules, a declaration of will (i.e. termination of the mandate, or, in this case, resignation by a member of the management board of a company) is deemed submitted to another person when it has been made in such a way that the other person could review its content. Moreover, because of the unilateral nature of a declaration on resignation, it does not require acceptance by the addressee to be effective. But a fundamental question is whom should the declaration on resignation by a member of the management board be made to, since the person resigning holds an office in a legal person (limited-liability company or joint-stock company) which formally is the addressee of the declaration?
This is not an easy question to answer, as demonstrated by the discrepancy in the views expressed in the case law and the legal literature. In light of this discrepancy, creating legal uncertainty and differing treatment by different courts of actions taken by persons submitting resignations as members of management boards, on 24 September 2015 the First President of the Supreme Court of Poland applied for adoption of a resolution by a seven-judge panel of the court on the following legal question (Case III CZP 89/15): “In submission by a member of the management board of a declaration of will on resignation from this office, unless otherwise provided by the articles of association (or statute), is the company represented by one member of the management board or a commercial proxy (Commercial Companies Code Art. 205 §2 and 373 §2), the supervisory board or proxy appointed by resolution of the shareholders’ meeting or general meeting of shareholders (Commercial Companies Code Art. 210 §1 379 §1), the body authorised to appoint members of the management board, or—in the absence of a supervisory board—the shareholders’ meeting (or general meeting of shareholders)?”
Whom to file the declaration with?
This issue is particularly important considering that improper submission of a resignation from office means that the resignation is ineffective. Submitting the resignation to the wrong addressee, or more broadly erroneous determination of who the proper addressee is, may in practice make the management board member into a “prisoner” of the company, preventing him from exercising his right to resign from office.
But first an overview of the three main positions on this issue in the case law and the commentaries, which are also highlighted in the First President’s application for a resolution by a seven-judge panel of the Supreme Court.
Another member of the management board, or a commercial proxy?
The first view is that declaration of will by the resigning management board member should be submitted to another member of the management board or a commercial proxy of the company.
Under Commercial Companies Code Art. 205 §2 and 373 §2, any member of the management board (regardless of the rules of representation adopted in the company), or any commercial proxy (regardless of the type of proxy issued to him), is authorised to represent the company passively.
An obvious drawback of this solution is revealed when the resignation is made by the sole member of the management board, or the last of a multi-member board, and no commercial proxy has been appointed.
Or the supervisory board or proxy?
The second view is that the declaration by a resigning management board member should be submitted to the supervisory board, or a proxy appointed by the shareholders’ meeting of a limited-liability company or general meeting of a joint-stock company.
This is a natural allusion to Commercial Companies Code Art. 210 §1 and 379 §1, referring to the rules for representation of the company “in a contract or dispute between the company and a member of the management board.”
But neither of these provisions suggests that it should apply (even respectively) to receipt of a unilateral declaration of will by a resigning member of the management board. And if these provisions were accepted as applying to this issue, it could as a practical matter prevent the management board member from submitting his resignation. This could happen when the company has no supervisory board or the shareholders have not appointed a proxy (or refuse to appoint a proxy, not being under any obligation to do so).
Or maybe the body authorised to appoint the management board?
Under the third view, the resigning management board member should submit his resignation to the body authorised to appoint members of the management board—known as the “mirror rule.”
Similarly to the second view, applying this construction could generate a number of problems. The basic one is that a member of the management board has no instruments at his disposal to force the members of another of the company’s bodies (the supervisory board, or the shareholders’ meeting or general assembly of shareholders, as the case may be) to gather in order to accept his resignation. It should also be pointed out that none of the bodies of the company other than the management board is vested by law with the authority to represent the company, whether actively or passively.
Finally, this solution could not be applied in a situation where the right to appoint a given member of the management board is vested pursuant to the articles of association or statute with an entity other than a body of the company—for example a specific shareholder.
And those aren’t all the possibilities
In addition to the positions outlined above, which are far from offering an ideal solution, there are other positions that can be encountered in the literature, for example submitting a resignation to one of the shareholders of a limited-liability company or simply mailing it to the company’s address. Like the others, they offer some features of a solution to the issue, but they could be criticised as actions that are not sanctioned in the code.
Given this state of affairs, it appears that issuance of a resolution by a seven-judge panel of the Supreme Court could have a beneficial influence on commercial practice. Hopefully the ruling by the Supreme Court will be as comprehensive as possible, because as explained above, none of the alternatives mentioned in the First President’s application could be universally applied in every possible situation.
Whatever a ruling by the Supreme Court may promise, it could still be hoped that this issue were directly addressed in the code. Such a provision should also refer to supervisory board members, who are not mentioned in the First President’s application but find themselves in a similar situation to management board members.
Maciej Szewczyk, Corporate and M&A Practice, Wardyński & Partners
