Proxy – the essence and the basic regulations

Understanding the proxy as a special kind of power of attorney and the common practice of establishing it should not create problems. However, as the practice shows, entrepreneurs (especially foreigners) encounter problems with establishing a proxy. Paweł Dyrduł, lawyer from law firm KG Legal Kiełtyka Gładkowski Sp.p, based in Krakow, discusses the essence and basic regulations related of the proxy.

The essence of the proxy

One of the principles adopted in Polish civil law is the principle that any legal act can be done through a representative. Exceptions in this respect may be provided by a law or legal action specifics. As a rule, the legal action performed by the representative on behalf of the representative produced effects directly on the latter.

Analyzing the provisions of the Civil Code, we will find a separate chapter dedicated to the proxy (Articles 109¹ – 109⁹). Polish law treats the proxy as a special type of power of attorney granted by an entrepreneur subject to compulsory registration in the register of entrepreneurs. The represented person (the principal) enters into an agreement with a procurator under which he authorizes him to engage in court and extrajudicial activities connected with running the business. This means that a proxy is a commercial power of attorney on the basis of which the procurator represents the company in most situations.

Types of proxy

The Polish Civil Code distinguishes three types of proxies:

• Joint proxy
• Spearate proxy
• Branch proxy

A joint proxy means that several proxy holders have been established. A legal action will only be successful if all prosecutors act jointly. However, the principal, who decides to grant a joint proxy, may decide what actions are required for the cooperation of proxies, and for which they are not. The joint proxy is intended to reduce the temptation of abuse by the procurator so that it acts as a preventive measure.

The joint proxy is often confused with a pooled representation. However, it is important to realize that these are two completely different things. The joint proxy is the imposition of the obligation on the proxy to cooperate, and the combined representation – the cooperation of the board member with the procurator.

Separate proxy otherwise is called one-person, spontaneous. It is granted only to one person and thus gives him the right to take effective legal action for the principal.

The branch proxy has also been identified in the Civil Code. This is a restriction of the above types of proxies. This means that the principal restricts the procurator’s authority to represent the company only in matters that are registered in the register of a branch of an enterprise. A procurator established on the basis of such a proxy cannot perform activities that go beyond the branch of an enterprise, such as those relating to the whole enterprise or other branches.

The principal

Only an entrepreneur who is subject to compulsory entry in the register of entrepreneurs may submit a proxy. This means that the natural person cannot established the proxy. The right to establish a proxy is vested in both partnerships and joint-stock companies.

How to establish a proxy

The enterpreneur is obliged to make that legal action in writing under pain of being declared null and void. In addition, he is obliged to register in the business registry the fact of establishing a proxy. The application should be accompanied by information on the type of proxy. If principal have established a joint proxy, he should also indicate how to perform it. During registering  a proxy principal must enclose the signature form of the procurator.

The way to establish proxy by enterpreneurs is different. This is mainly dependent on the legal form of conducting business activity. Typically, the provisions on how to set up a proxy are governed by the articles of association or by statutes. If there are no provisions on this establish a proxy then the provisions of the Commercial Companies Code will be apply.

The procurator

Procurator may only be a natural person who has full legal capacity. This means that the person has to be an adult and cannot be at least partially incapacitated. The statement that a proxy can only be a natural person implies that enterpreneur cannot appoint a legal person as a procurator.

The procurator’s activities

The Polish law briefly indicates what procurator’s actions are authorized to do. As a general rule, the procurator is empowered to perform judicial and extrajudicial actions related to the conduct of the business, and the scope of such authorization cannot be limited to the effect of third parties. Within the scope of his representation competencies, the procurator is de facto equal to a partner in partnerships and a member of a board in ltd’s and joint-stock comapnies. It is understood that the procurator is empowered to make and receive declarations of will, to enter into contracts, to file suits etc.

The legislator in the Civil Code limits the scope of the procurator. To dispose of a business, to perform the legal action under which it is handed over for temporary use, and to sell and charge the property is required a mandate for a particular activity.

Expiration of the proxy

Entrepreneurs have the right to terminate the proxy at any time. In addition, the Civil Code lists situations in which the proxy is terminated by law. They are:

• The enterpreneur was delete from the register
• Bankruptcy of the entrepreneur or opening of liquidation
• Transformation of the entrepreneur
• Death of procurator

It is worth noting that the death of an entrepreneur or the loss of his legal capacity does not result in the expiration of the proxy.

The expiration of the proxy must also be reported in the register of entrepreneurs.

Abstract: Business law, enterprise, 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 characteristics of the proxy in Poland.

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 essence of proxy in Poland