The 2022 amendment to the Polish Commercial Companies Code
In 2022, the Polish Commercial Companies Code was amended in relation to the rules governing the liability of management board members towards the company. The amendment introduced, among other changes, paragraph 3 to Article 293 (and correspondingly Article 483 § 3 for joint-stock companies). This provision states that: “A member of the management board, supervisory board, audit committee or a liquidator does not breach the duty of diligence resulting from the professional nature of their activities if, acting loyally towards the company, they act within the limits of reasonable business risk, including on the basis of information, analyses and opinions which should be taken into account under the given circumstances when making a careful assessment.”
The aim of the regulation was to limit the liability of company officers for decisions that, while ultimately unsuccessful, were made in good faith, based on available data and within the bounds of reasonable business risk. The legislator emphasized that the evaluation of actions should be made from the perspective of the moment the decision was taken, not in light of its subsequent consequences.
The American concept of the business judgment rule
Under U.S. law, the business judgment rule is a legal presumption that a company officer acted in good faith, in the best interest of the company, free of conflicts of interest, and based on information that could reasonably be obtained under the circumstances. This means that the opposing party bears the burden of proving misconduct to rebut the presumption of due care, unless the transaction occurred under a conflict of interest. Thus, it creates a kind of protective shield for managers against allegations of improper business decision-making.
The rule is based on the belief that directors possess the expertise and experience necessary to manage the company, and that courts should not assess the wisdom of business decisions with the benefit of hindsight. In the U.S. legal system, particularly in the state of Delaware, the business judgment rule is one of the cornerstones of corporate law.
What is the concept of “business judgment” in Polish law?
First, it should be noted that even after the amendment, the relationship remains unclear between Article 209¹ § 1 (or Article 377¹ § 1), which introduces (or rather reaffirms) the duty of diligence in performing management board duties, and Article 293 § 3, which replaced the former Article 293 § 2.
Second, a major shortcoming of the amendment is the retention of the presumption of fault for company officers. A management board member will still have to “defend” themselves in proceedings under Article 293 by proving that their business decisions were made diligently. In contrast, under the business judgment rule, such as in the U.S. system, there is a presumption that a director acted diligently, in good faith, and in the best interest of the company. These presumptions create a genuine “safe harbor” for company officers, allowing them to make decisions without fear that judges will later review their business choices with hindsight bias.
Third, Article 293 § 3’s reference to a director acting “on the basis of information, analyses, and opinions that should be taken into account in the circumstances when making a careful assessment” is more appropriate for evaluating a management board member’s conduct in running the company than for assessing a supervisory board member, whose role focuses primarily on oversight.
Fourth, the wording of the provision misleadingly implies that a management board member must have “documentation” in the form of legal or business opinions to avoid liability, even in urgent management situations (e.g., unexpected operational failures). Unfortunately, the amendment may result in managers artificially seeking opinions merely to justify the correctness of their decisions. Paradoxically, the actual beneficiaries of this amendment may turn out to be law firms and financial advisors. Observations from U.S. case law, particularly in Delaware, indicate that what truly matters is the proper design of a company’s decision-making and control processes, not the number of opinions obtained. For instance, in Marchand v. Barnhill, the court held that the absence of oversight and control procedures could lead to directors’ liability, even when the underlying business decision was rational.
Conclusions
The introduction of the “business judgment” principle into the Polish Commercial Companies Code was an attempt to incorporate elements of the Anglo-American approach into Polish law. This reform represents a step toward increasing legal certainty for company officers. However, it still does not provide as broad a level of protection as the American business judgment rule. It is therefore worth monitoring the evolution of Polish commercial court case law, which will determine how broadly the business judgment principle will be applied and how closely it may eventually align with the American standard.