Source: http://www.codozasady.pl/en/catch-for-newly-appointed-management-board-members/
Timestamp: 2019-01-19 07:22:39
Document Index: 731538114

Matched Legal Cases: ['Art. 19', 'Art. 69', 'Art. 79', 'Art. 22', 'art. 20', 'Art. 69', 'Art. 79', 'Art. 20', 'Art. 79']

Catch for newly appointed management board members? | In Principle
Amendments enacted in mid-March 2018 to the National Court Register Act have already caused some confusion and a lot of trouble for companies whose management boards solely comprise foreigners. In order to file the company’s annual financial documents with the registry court (the financial statements, management board report, and resolutions approving them and distributing profit or covering losses) at least one person has to be on the management board who has an individual civil identification number (PESEL) or qualified electronic signature, or is registered as a user of the e-government ePUAP system (an article about this can be found here).
At the height of the season in which ordinary shareholders meetings and assemblies are held, a large part of the law in question, applicable even when there are persons who hold a PESEL number on the management board, should also be borne in mind.
Under Art. 19e(2) of the National Court Register Act, a filing made with the National Court Register should be furnished with a qualified electronic signature or signature confirmed in the e-government ePUAP system by a least one natural person whose PESEL number is entered in the National Court Register and who is entered as a management board member in that register, or a receiver, liquidator, or partner of a partnership who is authorised to represent it, as applicable.
Therefore, under the act, not only do documents have to be filed by a member of the management board, that person also has to have a PESEL number, and that person’s details, including information that they are a management board member, etc. and their PESEL number, also have to be entered in the National Court Register. At times, meeting all of these requirements and filing documents within the statutory time limit can be difficult, and sometimes not possible at all.
Under Art. 69(1) of the Accounting Act, the manager of a unit (in practice this is usually a company’s management board) has an obligation to file with a registry court the annual financial statements, audit findings (if the financial statements were audited), the report on business activity, and resolutions approving the annual financial statements and distributing profit and covering losses within 15 days of the day on which the annual financial statements are approved. If however the statements have not been approved, this should be done by no later than 15 days from expiry of the time limit for holding the ordinary shareholders meeting or assembly, i.e. six months from the end of the financial year in question.
According to Art. 79(4) of the Accounting Act, a person who violates the law by not complying with this obligation faces a fine or penalty of restricted freedom.
When the entire management board is replaced at an ordinary meeting…
Frequently, apart from confirming proper performance of duties by the current members of the management board, the ordinary meeting is held to appoint the management board for a further term or appoint new members.
The latter can cause serious problems for a newly appointed management board under the provisions in question.
While unless the resolution itself states otherwise the new members have full corporate rights as of the moment a resolution is adopted, their details still have to be entered in the business register of the National Court Register. The management board is required to file the relevant application within seven days of the appointment taking effect (Art. 22 of the National Court Register Act), while a registry court has an obligation to review the application within seven days of receipt (art. 20a(1) of the National Court Register Act). Therefore, theoretically, there is no reason why the newly appointed members of the management board cannot be entered into the National Court Register within this 15-day time limit for filing the financial documents, thereby fulfilling the obligation within the time limit stated by law.
Theory is one thing and practice another
In practice, National Court Register entry proceedings last on average between two and six weeks, and sometimes can take longer.
There is a paradox, therefore, that although a newly appointed management board member has full corporate rights deriving from their function as of the moment they are appointed, they do not have the power to file financial documents with the court effectively. There are even cases in which nobody in the company has that power (when the entire management board are replaced at the ordinary meeting). Meanwhile, management board members formally face criminal liability for failing to file the documents on time.
Gap in legal provisions
This scenario was not anticipated by legislators. In practice in such a case, a pathological situation may arise. On one hand, due to not filing the required documents with a court within the time limit specified by law, management board members act in violation of Art. 69(1) of the Accounting Act, and are subject to criminal liability under Art. 79(4) of that act. On the other hand, this violation is beyond their control, assuming that the application for entry of their details in the National Court Register is filed within the legal time limit. This clearly means that management board members can argue that they are not responsible for the violation of law. At the same time, they cannot prove this fact until proceedings for committing an offence are conducted against them.
As the provisions in question only recently came into effect, there is no established practice of law enforcement agencies and courts. It is not clear therefore what approach will be adopted in cases of this kind.
This makes it even more important for newly appointed management board members to take the appropriate measures in good time so that if criminal proceedings are instigated against them they can demonstrate that they are essentially not responsible for a delay in making court filings.
The measures taken need to be suited to the circumstances on a case-by-case basis. For example, these can be demonstration that the management board members applied to have their details entered in the National Court Register promptly upon being appointed. They can also consider taking other action to fulfil legal obligations as much as possible. For example, although formally it is not legally effective because financial documents have to be filed electronically, for the sake of prudence, management board members can file them with a registry court on paper, explaining the reasons for late filing in the legally required form. While doing this they can file a request with a registry court saying that the application for the change in the management board to be entered in the National Court Register needs to be reviewed urgently due to the approaching deadline for filing the financial statements.
Legislators need to intervene to resolve this gap in legal provisions. At the moment, where changes are made to the management at the ordinary shareholders meeting or assembly, if a court does not manage to enter the new management board members within the time limit specified in Art. 20a(1) of the National Court Register Act, the new management board might not be able to file the documents with the court in the legally required form. In such a case it can be argued that a manager of a unit (usually a management board, and specifically the members of the management board) qualifies for a misdemeanour under Art. 79(4) of the Accounting Act. Despite this, that person should not bear criminal liability for this act. It is difficult to hold that person responsible for objective inability to file documents due to that person being entered too late in the National Court Register by a court, making it impossible to fill in the electronic form. This lack of culpability should result in refusal to commence preparatory proceedings or in the case being closed if the proceedings are already underway. This is because a person who is not at fault at the time of an offence does not commit an offence. This fact should be established in the course of the proceedings. Meanwhile, this means further work on the part of law enforcement agencies, and for representatives of companies the potential unpleasantness which would be avoided if the ill-functioning laws were rectified.
Jakub Znamierowski, Business Crime practice, Wardyński & Partners