The amended provisions of the Commercial Companies Code (CCC) regarding additional control powers of supervisory bodies are now beginning to generate risks and problems, not only for company boards, but also for individuals who cooperate with those entities where supervisory boards have been established. “Employees and contractors cooperating on the basis of B2B contracts with companies where supervisory boards are in place are often unaware that failure to provide explanations or documents required by this body in a timely manner can result in a severe fine or restriction of freedom. This also raises a number of risks related to the protection of confidentiality or personal data, which those employed or providing services to companies will face in the near future,” says Cezary Miąskiewicz, Partner in charge of the transactional practice at Lawsome.
In October 2022, the Law of February 9, 2022 on Amendments to the Commercial Companies Code and Certain Other Laws (Journal of Laws 2022, item 807), the so-called “holding law,” came into force. As part of the amendment, supervisory boards were equipped with new tools to control the activities of companies. Although the regulations have been in force for several months, alarming signals are beginning to come from the market regarding the many doubts that have arisen regarding their application in practice.
“The changes introduced in the Companies Act, as presented in the explanatory memorandum to the bill, resulted from the lack of effective mechanisms for the supervisory board to obtain information and documents, from entities obliged to present them. However, it seems that in the course of the amendment a very wide circle of persons has been established, which, combined with the expansion of the permissible scope of the request, and the criminal liability associated with failure to provide information in a timely manner, exposes employees and associates of companies to risks that most of them are probably unaware of,” Cezary Miaskiewicz stresses.
According to the amended Article 219 par. 4 of the Code of Commercial Companies, “the supervisory board may (…) demand that the management board, proxies and persons employed by the company under an employment contract or performing certain activities for the company on a regular basis on the basis of a contract for work, a contract of mandate or another contract of a similar nature, prepare or submit any information, documents, reports or explanations concerning the company, in particular its activities or assets.” This obligation should be fulfilled immediately, no later than within two weeks, unless a longer period is set. Similar provisions also apply to joint-stock companies (Article 382 par. 4 of the Companies Act).
“Every employee, but also a person employed by a company on the basis of a so-called B2B contract, is obliged to provide the supervisory board with the requested information or documents. While in joint-stock companies, or larger entities with extensive reporting compliance, the new rules should not pose a problem, for those working with smaller companies, the situation is no longer so comfortable. For example, in start-ups, which usually take the form of limited liability companies, it is standard practice to create a supervisory board whose members are appointed by investors on the basis of personal powers, and such an appointment, as a rule, is effective upon filing an appropriate declaration. Entry in the National Court Register occurs with a delay and is in the vast majority of cases declaratory, i.e. merely confirmatory. An employee or contractor of the company, therefore, cannot be entirely sure whether the person who requests information from him or her is actually a member of the supervisory board entitled to make such a request, and most often does not have the tools to verify this on his or her own, i.e. he or she does not know the provisions of the company’s articles of association and may not have knowledge of the investors. This creates room for manipulation and generates risks related to the disclosure of confidential information or company secrets, especially when conflicts arise between shareholders or bodies in companies,” adds Damian Bednarczyk, Associate in Lawsome’s Transaction Department.
As the specialists point out, in addition to the problems of verifying the persons directing the request, a number of doubts also arise under the amended regulations as to how persons obliged to provide information to the supervisory board are to behave when they believe they are not authorized to respond, or do not understand the content of the request.
“Today we do not know how a person who is supposed to provide information should behave, in the face of the rigors of professional secrecy, confidential information and data protection regulations. It is also often unclear with whom such a person can communicate within the organization, in terms of the board’s request. Doubts may also arise from the content of the request, as the supervisory board may also ask for additional studies. The question then arises as to how to treat such a request, and whether the company will compensate an associate who, in addition to the agreed order, has completed additional studies at the request of the board, devoting his time. It seems appropriate that, pending interpretation or clarification of the regulations, companies should supplement their bylaws, compliance policies and applicable model contracts,” concludes Cezary Miaskiewicz.
Sanctions for failure to comply with the board’s request are regulated by Article 5871 par. 1 OF THE CCC. It stipulates that failure to provide information, documents, reports or explanations on time, or to provide them inconsistently with the facts, or to conceal them, is punishable by criminal liability, including a fine of between PLN 20,000 and PLN 50,000. A person who has failed to comply with the board’s request, to the extent specified by the law, may also be subject to a penalty of restriction of liberty – so the potential consequences are very severe. In Poland, there are currently almost 8,400 active joint stock companies that are obliged to have a supervisory board, and more than 448,000 limited liability companies, some of which have established this body, so the problem could affect a significant part of the market.
