The amendments to the Commercial Company Code which came into effect in October 2022 have significant implications for the liability of managers working in corporate groups.

For the first time, the legislator introduced into the Code a “group interest” within a holding of companies, which is not always the same as the interests of the individual companies that comprise it.

In addition, the so-called “business judgement rule” was explicitly regulated to protect carefully acting managers from the consequences of their business decisions. 

The powers of supervisory boards have also been strengthened, expanding their authority to investigate the company's assets and clarify potential irregularities. This may be important in the context of conducting internal investigation procedures at companies.

Group of companies and binding orders vs. managers' liability
 

The amendment introduced into Polish law the concept of a so-called “group of companies” (a parent company and subsidiaries with a common interest). In order for a corporate group to be recognized as a group of companies, it is necessary to adopt the relevant resolutions and make an entry in the company register. It is not enough for there to be only factual links between companies or for the parent company to exercise strategic leadership in the group. 

Within a group of companies, it is possible for the management board, commercial proxy or attorney of the parent company to issue binding instructions to subsidiaries. In a situation where binding instructions are carried out, members of the subsidiary's management or supervisory board are not liable for the damage caused by carrying out the instruction. Also, the bodies of the parent company will not be liable for the damage, as long as they acted in the interest of the group of companies.
Managers will also not be criminally liable for the crime of mismanagement/abuse of trust, as long as they followed binding instructions.

This is a significant change in the context of protecting managers who carried out the instructions of the owner (the parent company) and took actions that were beneficial to the group, but could be considered detrimental to a specific subsidiary. It has been recognized that managers of subsidiaries, in the case of implementation of the group's long-term strategy, e.g. its restructuring, change of profile/place of operations, have very limited freedom in decision-making, regarding the management of the subsidiary's assets, and must implement owners’ decisions. As a result of the amendment, their actions will be protected by law, and they will not face criminal liability for potential mismanagement. 

Business judgement rule 
 

Members of the corporate bodies of all limited liability companies (regardless of their participation in a group of companies) will receive protection from the introduction of the business judgement rule into the Code (until now, the so-called “business judgement rule” has been recognized by the courts in case law). 
Managers do not violate the duty to exercise due diligence in the performance of their duties (as a member of the management board, supervisory board, audit committee, liquidator), as long as they act loyally towards the company and act within the limits of reasonable economic risk, including on the basis of authoritative information, professional analysis and opinion, which should be taken into account under the circumstances in making a careful assessment. This means that reckless actions unsupported by risk analysis will still be sanctioned. At the same time, members of the corporate bodies get additional protection and certainty that their actions will be evaluated at the time of making the decision, and not taking into account the situation after the event, when it occurs that a certain action turned out to be unfavourable for the company.

Internal investigations in a new way?
 

The amendment to the CCC has also strengthened the position of supervisory boards and expanded their powers. Supervisory boards are to be kept informed of the company's situation (e.g. transactions and other events or circumstances that materially affect or may affect the company's assets, including its profitability or liquidity, or the direction of the company's business). Within groups of companies, supervisory boards are also to oversee the subsidiary's pursuit of the group of companies' interests. It has also been confirmed that the supervisory board may appoint committees (to oversee a specific area of activity) and supervisory boards have been given the power to appoint a supervisory board advisor at the company's expense.

The catalogue of persons obliged to submit to supervisory boards explanations, reports and documents concerning the company, in particular, its activities or assets, has been expanded (the obligation applies to the management board, commercial proxies, employees and collaborators). In addition, a 14-day deadline has been introduced (unless a longer period is specified in the request) for providing this information. The regulation on the obligation to provide explanations to the supervisory board was already in force to a limited extent prior to the amendment, but due to the lack of specification of a deadline for its implementation, supervisory boards in practice often did not receive the requested information at all or received it with a delay that precluded adequate supervisory actions. Currently, failure to submit the data by the deadline may result in criminal liability - as the CCC provides for a new type of crime (punishable by a fine of not less than PLN 20,000 and not more than PLN 50,000 or a restriction of freedom).

The above may be important in light of the conduct of internal investigation procedures. Supervisory boards, due to the responsibilities assigned to them and their new powers, can take the initiative in initiating and conducting internal investigations - until now it was usually the domain of the management board to make decisions in this regard. Supervisory boards, in the course of their investigations, may use the services of an advisor appointed by them, whose activities will be financed by the company. After the amendment, it is expected that supervisory bodies will be more active in exercising day-to-day control over the company's activities and in clarifying any suspected irregularities.