The amendment to the Commercial Companies Code (hereinafter: CCC), which took effect on October 13, 2022, generated considerable interest, as it introduced a lot of novelties. Attention was mainly focused on the provisions concerning the rules for the formation and operation of groups of companies. It is also worthwhile to lean on the changes concerning supervisory boards, for these provisions can be regarded as a minimum of good practice as to how supervisory bodies function in companies. This short article will point out the most important changes concerning supervisory boards in joint-stock companies.
The right to information
In connection with the expansion of the supervisory boards’ right to information, additional obligations have been imposed on the board of directors. Pursuant to Article 3801 of the Commercial Companies Code, the management board is obliged – without further request – to provide the supervisory board with information about, among other things, the resolutions of the management board and their subject matter, the situation of the company (including with regard to its assets), as well as important circumstances in the conduct of the company’s affairs. Particularly in the areas of operations, investment and personnel, or progress in the implementation of the set directions for the development of the company’s business. The provision also indicates the deadlines within which this information should be provided.
However, it is worth pointing out that the Articles of Association may exclude or limit the above-mentioned duties, so this right may not be respected to the extent that the legislator intended.
The right to use the services of an expert
An interesting change is the establishment of the institution of an advisor to the supervisory board, who may examine a specific matter concerning the company or its assets, or prepare a specific analysis or opinion. Moreover, if an advisor is selected, the board is also required to provide him with access to documents and provide him with the requested information. However, the regulations also provide in this case for the possibility of excluding or limiting this right of the board. It is to be hoped, however, that this right will not be curtailed too often, for it should be considered one of the most important rights granted to supervisory boards, which can improve the quality of the work of supervisory bodies tremendously.
Obligation to prepare an additional report
Supervisory boards have been required to prepare an annual report for the past fiscal year, which is to include, among other things, an assessment of the company’s situation. It is to take into account the adequacy and effectiveness of the company’s systems of internal control, risk management, ensuring compliance with standards or applicable practices and internal audit, or the assessment of the fulfillment of the management board’s disclosure obligations mentioned above.
It is important to note that with the introduction of this obligation, the supervisory boards have been extended, in addition to the above-mentioned authority, the right to information, for in order to prepare the aforementioned report, this body may examine all the company’s documents, as well as review the company’s assets. It can also demand explanations, and it will be able to direct these demands to any person continuously working for or with the company.
Obligation to obtain supervisory board approval
Transactions with a parent company, subsidiary or affiliated company, the value of which, when aggregated with the value of transactions concluded with the same company during the fiscal year, exceeds 10% of the company’s total assets within the meaning of the accounting regulations – determined on the basis of the company’s last approved financial statements – have been put under the supervision of the supervisory authority. An obligation to obtain the approval of the supervisory board has also been introduced. Importantly, however, this obligation does not apply to companies whose at least one share is admitted to trading on a regulated market in accordance with the regulations on trading in financial instruments, and companies belonging to groups of companies.
Duty of due diligence, loyalty and confidentiality
The amendment imposed an obligation on members of supervisory boards to exercise, in the performance of their tasks, diligence resulting from the professional nature of their activities and to maintain loyalty to the company. In addition, a member of the body may not disclose company secrets – with this obligation continuing even after the expiration of the mandate.
Supervisory board meetings
Several changes have also been made to supervisory board meetings:
- These meetings are to be convened by invitations, indicating the date, time and place of the meeting and the proposed agenda, as well as the use of means of direct remote communication during the meeting.
- It was also indicated that meetings should be convened as needed, but at least once in each quarter of the fiscal year.
- In doing so, there is a regulation analogous to that applicable to the general meeting, whereby the supervisory board may adopt resolutions without formal convening or adopt resolutions not on the agenda.
Another novelty is the obligation to keep minutes of supervisory board meetings. It is worth noting that until now, meetings were, as a rule, minuted – with the minutes of the general meeting being modeled – but there was no explicit obligation to do so. In addition to introducing this obligation, the amendment also indicates the basic and mandatory elements of such minutes: the agenda, the names of board members present and the number of votes cast for each resolution. The signature of at least the supervisory board member chairing the meeting is also required.
Participation of the auditor in the supervisory board meeting
If the company’s financial statements are subject to statutory audit, the supervisory board is required (at least one week in advance) to notify the key auditor who audited the company’s financial statements of the date of the meeting. The subject of such a meeting will be, among other things, the evaluation of the board’s report on the company’s operations and financial statements for the past fiscal year. The company is to ensure that the key auditor or other representative of the auditing firm attends the board meeting to present the audit report and answer questions from board members.
Summary
As you can see – the amendment not only grants additional rights to supervisory boards, but also imposes new obligations on them.
I believe that the nature of the new regulations may extremely affect the very existence of supervisory bodies, as they clarify the rules of supervisory boards. Defining these rules may not only organize the way they operate, but in some cases even clarify the very reason for the functioning of these bodies.