The Management Board of a capital company, as the body authorized to manage its affairs and represent it, often in the realities of business transactions performs legal actions without the required consent of another body of the company, such as the Shareholders’ Meeting or the Supervisory Board, despite the obligation to obtain such consent, arising either directly from the law, or from the company’s articles of association.
In such situations, our clients often ask questions: Does this action result in the invalidity of the legal act performed, and is it possible to obtain a subsequent consent?
The answer to the above-mentioned questions depends on the source of the obligation to obtain the consent of the body in question, since, according to Article 17 of the Code of Commercial Companies (CCC), different legal consequences occur in the absence of consent, required by law, and different in the absence of consent arising solely from the company’s articles of association.
If the source of the obligation to obtain the consent of the body to perform an act is the law, then according to the wording of Article 17 § 1 of the CCC an act performed without the required consent is absolutely invalid, and thus does not have the intended legal effects.
However, it should be noted that Article 17 § 2 of the CCC allows for the possibility of convalidating such an action in the form of obtaining a subsequent consent, otherwise known as corporate consent. However, it should be granted no later than within 2 months of the date the company performs the legal action in question – then the legal action has effect as of the moment of its performance (the consequential consent expressed within the statutory period thus has retroactive effect).
It is also necessary to mention the case of an action with a value of at least twice the amount of the share capital of a limited liability company, which, as a rule – if not otherwise specified in the articles of association – under Article 230 of the CCC requires the consent of the Meeting of Shareholders. At the same time, however, the regulation of the aforementioned provision stipulates that the provision of Article 17 § 1 of the CCC does not apply here, which means that there is no sanction for the invalidity of such an action taken without the required consent of the Meeting of Shareholders. As a result, the counterparties of the above-mentioned companies do not bear the negative consequences of the failure of the Meeting of Shareholders to adopt a resolution on consenting to an action exceeding twice the share capital of the limited liability company, which is a significant strengthening of the security and certainty of trading. On the other hand, the execution of such a legal action by the Management Board, without the consent of the Meeting of Shareholders, may result in liability for damages, or organizational liability of the members of the Management Board, under the principles indicated in the following paragraph.
On the other hand, when the source of the obligation to obtain the consent of the corporate body for a legal action is solely the articles of association of the company (and not a statutory provision), the action performed without the required consent is admittedly valid and effective, but the members of the company’s management board may be liable for violation of the company’s articles of association (Article 17 § 3 CCC). According to the decision of the Supreme Court of April 17, 2015 (ref. I CSK 289/14), in such a situation, the company may bring an action against the members of the Management Board acting without the required consent under the company’s articles of association. In the event of damage, individual members of the bodies are liable under Articles 293, 300125 and 483 of the CCC, which provide for the liability of a member of the Management Board for damage caused by an act or omission contrary to the law or the provisions of the company’s articles of association (except when he is not at fault). However, if the damage on the part of the company has not occurred, the possible consequences for members of the Management Board may concern their organizational liability, among other things, in the form of dismissal of the person concerned from the Management Board.
If you have any questions about the topics covered in this article, please contact our Legal Office.