A proxy’s liability in a limited liability company

Establishing business proxies is a common practice. It allows entrepreneurs to save time as well as relieve the company management of excess responsibilities. It is assumed that in a limited liability company a proxy is equated with a member of the board of directors. However, it is worth considering if proxy is responsible for his actions or negligence. Pawel Dyrduł, lawyer from law office KG Legal Kiełtyka Gładkowski Sp.p with its registered office in Krakow, discusses the issues of proxy’s liability in Ltd.

A proxy

Proxy is a special kind of power of attorney. It can be granted only to an entrepreneur who is subject to compulsory entry in the register of entrepreneurs. The grant of a proxy should be made in writing under pain of nullity and registered in the register of entrepreneurs. The method of establishing a proxy may be regulated by the company’s statute. If this is not then the general rules will be apply. Proxy may only be a natural person with full legal capacity. This means that the principal cannot appoint a legal person as a proxy. As a general rule, proxy shall include the authority for the procurator to carry out judicial and extrajudicial actions that are linked to the conduct of the business. It therefore grants the proxy the right and duty to represent and act on behalf of the company in most situations.

A proxy’s liability in a limited liability company – Commercial Companies Code

In the Commercial Companies Code, in particular in art. 299, it is possible to find a provision that if the enforcement against the company proves to be ineffective then the members of the management board are jointly and severally liable for its obligations. However, the provision does not say anything about the liability of proxies in this regard, which competence is equated with a board member. It has been a discussion between the doctrines if it is possible to extend the interpretation of this provision. This would also cover the responsibility of the proxy. He would be responsible for the company’s obligations jointly and severally with the management board members. Similar considerations on this provision were also made by the Supreme Court. In his rulings he emphasized that art. 299 will also apply to liquidators of the company. This position Supreme Court found its reflection in the addition art. 2991 by the legislature, which formulates the principle of liability of liquidators analogous to the principle of liability of board members. The liability of the proxy for the obligations of the company liabilities is still not explicitly regulated in the Commercial Companies Code.

A proxy’s liability – other provisions

Provisions on proxy’s liability in a limited liability company can be found in the Insolvency Act – art.21. It refers the situation of filing bankruptcy of the debtor – in this case the company. If the debtor is a legal person (eg Ltd company), the obligation to file a bankruptcy petition within the court (within 30 days of the date on which the bankruptcy was filed) rests with anyone under the law, company agreement or statute who has the right to pursue and to represent the debtor, either alone or together with other persons. These grounds for dealing with debtors do not directly mention the establishment of a proxy. However, the contract for the establishment of a proxy is derived from both the law, the statute and the company’s agreement. Hence it is necessary to conclude that a proxy, when failing to comply with the obligation to file a bankruptcy declaration, will be liable for damage caused by non-submission of the application. Proxy’s liability in this regard may be excluded only if he or she is not responsible for the late submission of the application, or if he or she demonstrates that a restructuring proceeding has been opened within 30 days of the bankruptcy proceeding or the system is approved in the approval procedure.

Abstract: Business law, Comapany law, limited liability company, proxy

The article was prepared by KG LEGAL KIEŁTYKA GŁADKOWSKI based in Cracow, Poland, specialising in cross border cases, with its focus on new technologies, IT and life science. It discuesses the proxy’s liability in the limited liability company.

Paweł Dyrduł, lawyer (specializing in banking law, financial law) from KG LEGAL KIEŁTYKA GŁADKOWSKI – PARTNERSHIP office in Cracow, specializing in cross border issues and servicing life science and IT companies, discusses the issue of a proxy’s liability in a limited liability company.