Resignation and dismissal from serving as a member of the management board of a capital company

From this article, you will learn:

• The difference between resignation and dismissal from serving as a management board member.
• How to effectively submit a declaration of resignation or dismiss a management board member?
• What changes to the National Court Register are necessary in the event of termination of the relationship between a management board member and the company?

A mandate, i.e. the competence to perform the duties of a member of the company's management board, may expire as a result of a number of different events or actions. The Polish Commercial Companies Code provides for the termination of a management board member's relationship with the company due to the expiry of a given term of office, death, resignation from the held position or dismissal from the management board.

In the course of business, entrepreneurs often incorrectly assume that resignation and dismissal from a function are the same concepts. Unfortunately, this is not the case – these are completely different ways of ending the relationship with the company. How do these concepts differ and what does the process of removing a management board member from public registers look like in practice in each of these two cases?

What is resignation from the position of a management board member?

Resignation from the position of a management board member is a unilateral declaration of will made by the current management board member, in which they express their lack of willingness or ability to continue performing the mandate. 

A member of the management board may submit a declaration of resignation at any time. However, if it is submitted without a valid reason, the company may (in extreme cases) be entitled to file a claim against the resigning person for damages incurred as a result of such an unexpected decision. 

It should be noted that after submitting a resignation, there is no need to subsequently dismiss such a member of the management board by a separate act issued by any body. The mandate expires by effectively submitting a declaration of will.

Does resigning from the position require a special form?

The regulations do not require a specific form to submit a resignation – it can be submitted in any way (even orally), but for evidentiary purposes it is advisable to submit it in writing. 

According to the regulations, a declaration of will may be considered submitted when it reaches the recipient of the resignation in a way that enables them to become familiar with its content. It is from this point that the resignation is effective. 

As a side note, it should be noted that it is also possible to revoke a resignation submitted by a member of the management board. A declaration of will in this respect would have to reach the addressee together with the resignation or earlier.

Resignation procedure: how can a management board member submit it?

The issue of resignation was resolved in the resolution of the Supreme Court of 31 March 2016 (III CZP 89/15), in which the Court stated that a declaration of a management board member resigning from a function should be submitted to the company in accordance with statutory provisions. 

This means that a declaration of resignation must be submitted to any of the authorised agents or other members of the management board.

There is no obstacle to stipulating in the submitted declaration of will to resign that the effect of the resignation will take place at a later date, precisely indicated therein (e.g. after 7 days from the date of submitting the resignation). An exception to the above rule is a situation in which the sole partner or shareholder of the company is also the sole member of the management board. In this case, the legal act requires the form of a notarial deed – i.e. the same form is required to resign from membership in the management board.

Resignation of the sole management board member: who should it be reported to and how?

The Commercial Companies Code provides for a special procedure in the event of resignation submitted by the sole member of the management board. In such a situation, in the case of a limited liability company, the management board member submits their resignation to the partners, and in the case of a joint-stock company – to the supervisory board or shareholders (simultaneously convening a meeting of partners or shareholders – unless the company's articles of association provide otherwise). 

The invitation to the meeting must include a declaration of resignation. Importantly, such resignation is effective only on the day following the day for which the meeting was convened – until then, a member of the management board is obliged to perform activities related to their function.

What is a dismissal?

Dismissal from the management board should be understood as a unilateral legal act in which an act of will is expressed to deprive a given person of the status of a management board member. 

This act is expressed by the company's body, which is authorised to dismiss members of the management board. The dismissal of a given management board member does not have to be motivated by any specific reason, and it is not necessary to justify such a decision to the management board member – unless the company's articles of association contain specific provisions in this respect.

How to dismiss a management board member?

It all depends on who has the competence to conduct such a dismissal. In most cases, this will be the shareholders' meeting or the supervisory board. The act of dismissal prepared by such bodies should take the form of a resolution. However, the right to dismiss a management board member may be granted to other persons – e.g. individual partners. In such a case, the dismissal will take the form of a declaration of will of the entitled person.

The effectiveness of the act of dismissal does not depend in any way on the will of the person being dismissed. There is nothing to prevent the dismissal act from stipulating that the mandate will expire at a later date, precisely specified in the document (e.g. 7 days from the date of delivery of the resignation).

However, there is a dispute in the doctrine regarding whether the dismissal is effective at the moment the resolution is adopted or at the moment the management board member is informed about this fact. The first view seems to prevail, but this does not, of course, exempt from the obligation to inform the management board member about the decision to dismiss them.

What obligations must the company fulfill after a resignation or dismissal of a management board member?

1. First of all, after receiving a resignation or making a decision to dismiss a given person from holding the position, the company's management board should appropriately update the information in the register of entrepreneurs of the National Court Register. The application for entry should be submitted no later than 7 days from the date of the event justifying the entry. However, it should be remembered that both the resignation and the dismissal are declaratory in nature, which means that they are effective from the moment the dismissal is passed or the resignation is submitted. Therefore, these decisions do not require entry in the register of entrepreneurs of the National Court Register to be valid.
2. If the resignation or dismissal affects the determined beneficial owner of the company, it is also necessary to make an appropriate update in the Central Register of Beneficial Owners. The application to change data should be submitted within 14 business days from the date of the event.
3. A former member of the management board has the right to participate in the meeting approving the financial statements and the report on activities for the financial year in which they held their position. To exercise these rights, they should submit a written request to the management board in this regard, no later than one week before the shareholders' meeting. The Commercial Companies Code provides for the possibility of adopting a resolution to release a former member of the management board from such an obligation – with a caveat that the right of a member of the management board to participate in the meeting regarding granting the discharge cannot be limited.
   4.    If a member of the management board was bound by any contract with the company (including, but not limited to, an employment contract, a service contract, a contract of mandate or a managerial contract), it should be remembered that such a contract, as a rule, does not expire upon resignation or dismissal from the management board. It is necessary to terminate it or sign an agreement terminating it in this respect. A suggested solution would be to include appropriate provisions for such a case in the contract concluded between the company and a member of the management board.

It is worth analysing the effects of the resignation or dismissal of a management board member with the help of an expert

The fundamental difference between resignation and dismissal comes down to the fact that resignation is a declaration of will of a management board member about the desire to end the relationship with the company, and dismissal is a declaration of the willingness to end the relationship with a management board member, regardless of their will. 

Each of these cases requires the preparation of different documents. Additionally, the content and conditions of making a decision may depend on the provisions of the company's articles of association and other documents (e.g. additional agreements concluded with a member of the management board), which each time requires detailed knowledge of the facts of the case. It should also be noted that both the resignation and dismissal of a management board member require specific updating activities in the National Court Register and possibly the Central Register of Beneficial Owners. Therefore, before making final decisions, it is always worth consulting the matter with experts in the field of legal services for companies.

If you need support in preparing documentation regarding the resignation or dismissal of a management board member, coordinating the process of updating data in appropriate registers or need any additional information in this regard, please contact us. Our experienced team of experts will be happy to provide you with all the necessary information, as well as guide you through the entire process and help you fulfill all management obligations imposed by Polish regulations.