Both commercial proxy (prokurent) and management board member (członek zarządu) in a Limited Liability Company (spółka z ograniczoną odpowiedzialnością) are individuals who represent a company. At the same time, they bear a certain level of responsibility, the scope of which can vary depending on their roles.
Members of the Management Board an LLC – who are they?
A management board member of an LLC serves one of the most important functions in the company. The Commercial Companies Code regulates a range of rights and duties for the management board, with the most crucial ones being the management of the company’s affairs and its representation.
An LLC must have at least one board member.
Commercial proxies – who are they?
Power of attorney for a commercial proxy, according to the Polish Civil Code, is a type of power of attorney granted by an entrepreneur subject to the obligation of registration with the Central Register and Information of Economic Activity (CEIDG) or the National Court Register (KRS). It encompasses activities related to running a business, whether they are legal or not legal, such as entering into contracts with business partners. A commercial proxy is, therefore, the company’s representative for activities related to conducting business operations. More about commercial proxies can be found in our blog article (Click here).
Appointing a proxy is not mandatory – the board oof a company may appoint a commercial proxy, but it is not obligatory to do so. A company may also have multiple commercial proxies simultaneously.
Responsibility of a commercial proxy and a Member of the Management Board in an LLC – basic information
The main difference between a commercial proxy and a management board member of a limited liability company lies in the scope of responsibility. In essence, both represent the company, but their liabilities differ based on their roles. However, in certain situations, a management board member or a commercial proxy may be held accountable for such obligations.
The responsibilities of a commercial proxy and management board member is primarily regulated by two provisions: Article 299 of the Commercial Companies Code (KSH) (for “ordinary” obligations, i. e., civil-law obligations, mostly arising from contracts and invoices) and Article 116 of the Tax Ordinance (for tax obligations).
Depending on the responsibility, a commercial proxy and a management board member will be held accountable differently.
It is essential to note that responsibility under either of these provisions only arises when the company lacks assets to cover a specific obligation. In all cases, the company’s assets should be pursued first.
Responsibility of a Member of the Management Board
- Management board member is held responsible for the company’s obligations under Article 299 of the Commercial Companies Code when it is not possible to enforce them from the company’s assets. In such cases, management board members are jointly liable (meaning the entire amount can be demanded from each management board member, and payment by one releases the others) for the company’s outstanding obligations.
- Member of the Management Board is held responsible for the company’s tax arrears under Article 116 of the Tax Ordinance when it is not possible to enforce them from the company’s assets.
Responsibility of a commercial proxy
- Commercial proxy is not held responsible for the company’s obligations due to the lack of any legal basis (Article 299 of the Commercial Companies Code does not list commercial proxy as a responsible person, unlike a management board member).
- Commercial proxy is held responsible for the company’s tax arrears under Article 116 § 3 of the Tax Ordinance, but only when acting as the representative of an LLC in an organization that does not have a management board. In practice, it is rather rare situation.
General responsibility of a procuration holder and a board member based on fault.
Regardless of responsibility under Article 299 of the Commercial Companies Code and Article 116 of the Tax Ordinance, both a management board member of an LLC and a commercial proxy are liable based on general provisions regarding compensation for their actions or omissions towards the company (based on fault).
For example, their actions (e.g. delayed signing of a contract, untimely completion of a task) cause harm to the company’s assets or contribute to its occurrence, they may be held liable under Article 415 of the Civil Code.
Summary
The scope of responsibility for a board member in an LLC is much broader that the responsibility of a procuration in a business.
Unlike a board member, a procuration holder is not held responsible for the company’s obligations, and for its tax arrears, only in a specific case defined in Article 116 § 3 of the Tax Ordinance.
Agnieszka Bodzek
paralegal