In our practice we often encounter a situation when foreign entrepreneurs conduct business activity in Poland in the form of a limited liability company.

Due to the barriers on the Polish market, in particular the language barrier, as well as numerous duties related to the activity in the home country, entrepreneurs are looking for a "manager" for their activity.

Foreign entrepreneurs want to be a member of the management board of the created Companies, in order to ensure that they are able to influence their business on an ongoing basis. Then they often appoint a proxy, who becomes the "manager" of the Company.

At the same time, a distinction should be made between the sphere of activity of a proxy as a representative of the Company, i.e. "outside", and the internal sphere, i.e. relations between the Company and the proxy.

As far as the proxy's activity as a representative of the Company is concerned, I would like to point out the following.

In principle, by virtue of the power of proxy granted, the commercial proxy may represent the Company before all entities, e.g. contractors, offices, employees in activities related to running the enterprise. Therefore, it is worth bearing in mind that all agreements concluded by a commercial proxy in the performance of business activity will be binding for the Company, regardless of whether - in the opinion of a foreign contractor - they are beneficial for the Company or not. Therefore, the Company will have to meet the obligations assumed by the commercial proxy.

In accordance with the provisions of law, the proxy must hold a special power of attorney to perform such activities as:

• transfer of the business,
• the performance of a legal act on the basis of which the enterprise is give away for temporary use,
• dispose of and encumber real estate (provision of Article 109³ of the Civil Code).

As far as, for example, the proxy of a limited liability company is concerned, in some situations a resolution of the shareholders will also be necessary for its important and effective operation.

According to the provision of Article 228 of the Polish  Commercial Companies Code (k.s.h.), a resolution of shareholders is required, among other things:

• for sale and lease of the enterprise or its organized part and establishment of a limited property right on them;
• for acquisition and disposal of real estate, perpetual usufruct or share in real estate, unless the articles of association provide otherwise.

On the other hand, the provision of art. 15 § 1 of the Polish Commercial Companies Code indicates that the conclusion by a capital company of a credit, loan, surety or other similar agreement with a proxy or on his behalf requires the consent of the general meeting of shareholders, unless the Act provides otherwise.

The proxy may also be organized in such a way as to make it impossible for the proxy to act independently by establishing a joint proxy, but only with another proxy (Article 109⁴ § 1 of the Civil Code). The proxy can be set also since 2016 to perform activities jointly with a member of the management board or a partner authorized to represent the partnership.

Information on whether the proxy may act jointly or independently is available in the register of entrepreneurs (provision of Article 109⁸ § 2 of the Civil Code).

If the company has a branch, the power of attorney may be limited to matters entered in the register of the branch.

As far as the relations between the proxy and the Company are concerned, I would like to point out the following.

At the same time, the Company should have an agreement with the proxy, in which the rules of cooperation (employment contract, managerial contract, contract of mandate) will be regulated. Some entrepreneurs stipulate in these agreements that the proxy may not conclude transactions exceeding a certain value. It is worth pointing out, however, that such reservations are not effective against three persons, but only in the internal relationship between the Company and the proxy. According to the provision of art. 109¹ § 2 of the Civil Code, a commercial proxy may not be limited with effect in relation to third parties, unless a specific provision provides otherwise. Thus, only the provisions of law may decide that the proxy will not have the right of unrestricted representation.

The Proxy shall not be liable towards third parties for the Company's obligations. The Company is responsible for its obligations. In certain cases, members of the Management Board are liable. The fact that a proxy has been appointed does not release the Management Board from its duties related to the Company's operations. Therefore, the Management Board should supervise the proxy on an ongoing basis. In particular, the Management Board should take care that the proxy's actions are compliant with the law and are undertaken in the interest of the Company. The Management Board should monitor the financial situation of the Company on an ongoing basis.

If the proxy acts to the detriment of the Company, it may be necessary to immediately dismiss the proxy, terminate the agreement between the parties and pursue claims for damages against the proxy before the Court.

Ewa Kosowska-Czapla

Attorney-at-law

In our practice we often encounter a situation when foreign entrepreneurs conduct business activity in Poland in the form of a limited liability company.

Due to the barriers on the Polish market, in particular the language barrier, as well as numerous duties related to the activity in the home country, entrepreneurs are looking for a "manager" for their activity.

Foreign entrepreneurs want to be a member of the management board of the created Companies, in order to ensure that they are able to influence their business on an ongoing basis. Then they often appoint a proxy, who becomes the "manager" of the Company.

At the same time, a distinction should be made between the sphere of activity of a proxy as a representative of the Company, i.e. "outside", and the internal sphere, i.e. relations between the Company and the proxy.

As far as the proxy's activity as a representative of the Company is concerned, I would like to point out the following.

In principle, by virtue of the power of proxy granted, the commercial proxy may represent the Company before all entities, e.g. contractors, offices, employees in activities related to running the enterprise. Therefore, it is worth bearing in mind that all agreements concluded by a commercial proxy in the performance of business activity will be binding for the Company, regardless of whether - in the opinion of a foreign contractor - they are beneficial for the Company or not. Therefore, the Company will have to meet the obligations assumed by the commercial proxy.

In accordance with the provisions of law, the proxy must hold a special power of attorney to perform such activities as:

• transfer of the business,
• the performance of a legal act on the basis of which the enterprise is give away for temporary use,
• dispose of and encumber real estate (provision of Article 109³ of the Civil Code).

As far as, for example, the proxy of a limited liability company is concerned, in some situations a resolution of the shareholders will also be necessary for its important and effective operation.

According to the provision of Article 228 of the Polish  Commercial Companies Code (k.s.h.), a resolution of shareholders is required, among other things:

• for sale and lease of the enterprise or its organized part and establishment of a limited property right on them;
• for acquisition and disposal of real estate, perpetual usufruct or share in real estate, unless the articles of association provide otherwise.

On the other hand, the provision of art. 15 § 1 of the Polish Commercial Companies Code indicates that the conclusion by a capital company of a credit, loan, surety or other similar agreement with a proxy or on his behalf requires the consent of the general meeting of shareholders, unless the Act provides otherwise.

The proxy may also be organized in such a way as to make it impossible for the proxy to act independently by establishing a joint proxy, but only with another proxy (Article 109⁴ § 1 of the Civil Code). The proxy can be set also since 2016 to perform activities jointly with a member of the management board or a partner authorized to represent the partnership.

Information on whether the proxy may act jointly or independently is available in the register of entrepreneurs (provision of Article 109⁸ § 2 of the Civil Code).

If the company has a branch, the power of attorney may be limited to matters entered in the register of the branch.

As far as the relations between the proxy and the Company are concerned, I would like to point out the following.

At the same time, the Company should have an agreement with the proxy, in which the rules of cooperation (employment contract, managerial contract, contract of mandate) will be regulated. Some entrepreneurs stipulate in these agreements that the proxy may not conclude transactions exceeding a certain value. It is worth pointing out, however, that such reservations are not effective against three persons, but only in the internal relationship between the Company and the proxy. According to the provision of art. 109¹ § 2 of the Civil Code, a commercial proxy may not be limited with effect in relation to third parties, unless a specific provision provides otherwise. Thus, only the provisions of law may decide that the proxy will not have the right of unrestricted representation.

The Proxy shall not be liable towards third parties for the Company's obligations. The Company is responsible for its obligations. In certain cases, members of the Management Board are liable. The fact that a proxy has been appointed does not release the Management Board from its duties related to the Company's operations. Therefore, the Management Board should supervise the proxy on an ongoing basis. In particular, the Management Board should take care that the proxy's actions are compliant with the law and are undertaken in the interest of the Company. The Management Board should monitor the financial situation of the Company on an ongoing basis.

If the proxy acts to the detriment of the Company, it may be necessary to immediately dismiss the proxy, terminate the agreement between the parties and pursue claims for damages against the proxy before the Court.

Ewa Kosowska-Czapla

Attorney-at-law