Important changes in joint commercial proxies
An amendment to the Polish Civil Code has created new types of commercial proxies but also raised doubts about the legitimacy of joint commercial proxies granted before the new legislation came into force.
The Act of 16 December 2016 Amending Certain Acts to Improve the Legal Environment for Business came into force on 1 January 2017, triggering major changes regarding commercial proxies (prokura).
Old legal framework (through 31 December 2016)
Under the old legal framework, in force through 31 December 2016, there was a single type of joint commercial proxy (prokura łączna). If the articles of association or statute of a company did not stipulate otherwise, apart from a joint commercial proxy’s power to act together with another joint commercial proxy (one or more, as the case may be), such proxy could also act together with any management board member (known as mixed joint representation—reprezentacja łączna mieszana). A company’s articles of association or statute could establish other rules of representation instead (e.g. any management board member individually, two management board members acting together, etc).
New legal framework (from 1 January 2017)
Following entry into force of the amending act, there are now three different types of joint commercial proxy functioning in Poland:
- One that authorises a joint commercial proxy to act solely together with another joint commercial proxy or proxies (the existing joint commercial proxy referred to in Art. 1094 §1 of the Civil Code)
- One that authorises a joint commercial proxy to act either together with another joint commercial proxy or proxies, or with a management board member (or a partner authorised to represent a partnership) (the first type of commercial proxy referred to in the new Art. 1094 §11 of the Civil Code)
- One that authorises a joint commercial proxy to act solely with a management board member (or a partner authorised to represent a partnership) (the second type of commercial proxy referred to in the new Art. 1094 §11 of the Civil Code).
Apart from the joint commercial proxies discussed here, the remaining types of commercial proxy (i.e. an individual proxy (prokura samoistna) and a branch proxy (prokura oddziałowa)) still remain in force and are not affected by the amending act.
According to the explanatory memorandum to the act, the amendments involving commercial proxies were primarily made to solve the problem known as the “joint improper commercial proxy,” which involved granting a proxy to a person with an indication that the person can act only together with a member of the management board. In a resolution of seven judges adopted on 30 January 2015 (Case III CZP 34/14), the Supreme Court of Poland held that entry of such a proxy in the National Court Register is inadmissible because it is not recognised in the law (as discussed in our article “One resolution, many doubts”). Clearly, in this regard, the amendment satisfies the demands of the legal literature and the accepted commercial practice.
However, as the amending act does not include transitional provisions, from 1 January 2017 it could be unclear whether persons appointed as a “joint commercial proxy” prior to that date are still empowered to represent the company in the form of mixed joint representation (where one of the joint commercial proxies acts together with a management board member).
For these reasons, until the commentators and the courts find a reliable approach in this area, it seems reasonable to exercise extreme caution whenever a counterparty to any legal act (such as signing a contract) is represented in the form of mixed joint representation, i.e. when one of the joint commercial proxies acts together with a management board member. In such case it is crucial to first identify when the commercial proxy was granted to the person. (If the proxy was granted prior to 1 January 2017, no transaction should be made in this manner. If this occurred on or after 1 January 2017, it should first be determined which of the three types of commercial proxy discussed above applies to the person.)
Meanwhile, in the case of companies that granted joint commercial proxies before 1 January 2017 and are making legal acts in the form of mixed joint representation, it is recommended that they take actions to adapt the types of joint proxies they have granted (including their description in the commercial register) to suit the current legal regulations. This will ensure that the commercial proxies can still perform their duties, while avoiding any doubts about the effectiveness of their actions.
Maciej Szewczyk, Izabela Zielińska-Barłożek, M&A and Corporate practice, Wardyński & Partners