The issue of indefinite term appointments for management board members of limited liability
companies has for years presented interpretative challenges to judges and legal scholars alike. Also
the Supreme Court has failed until now to develop a uniform and clear ruling practice in this respect.
That is why the judgment of the Supreme Court issued on 4 March 2015 in case IV CSK 340/14,
which clearly resolved this problematic issue, is to be welcomed.
Article 202.1 of the Code of Commercial Companies Act of 15 September 2000 (hereinafter the “CCC”)
indicates the point in time when the mandate of a member of the management board of a limited liability company expires. In the opinion of some judges and legal scholars, the shareholders may set aside the rule that this mandate expires as of the date of the general meeting which has approved the financial report for the first full financial years during the term of office of the member of the management board only in the articles of association. As the Supreme Court pointed out in its resolution of 21 July 2010 issued in case III CZP 23/10, “this means that unless the articles of association provide otherwise, the mandate of a member of the management board expires on the date contemplated in Article 202 §1 of the CCC also if such appointment was made for an indefinite term pursuant to a resolution of the shareholders”.
However, in line with the view of Supreme Court justices expressed in their judgment of 12 October 2011 issued in case II CSK 29/11, “(…) where a board member has been appointed for an indefinite period, the provisions of §4, rather than those of §1-2, of Article 202 of the CCC are applicable, which means that a management board member appointed for an indefinite term will hold that position until such time when the conditions laid
down therein for his/her mandate to expire are fulfilled, and in particular until he/she is dismissed by a shareholders’ resolution”.
These two, apparently dissimilar opinions of the Supreme Court regarding the issue in question could undoubtedly hinder the correct interpretation of the option to appoint members of the management board of limited liability companies for an indefinite term. After the Court’s judgment issued on 4 March 2014, the said issue should no longer give rise any doubts in interpretation. According to the panel of justices sitting on case IV CSK 340/14, both standpoints taken to date by the judiciary are not mutually exclusive, considering that the key
points are the factual circumstances and the dichotomous division based on whether or not the shareholders’ intent to appoint a member of the management board for an indefinite term has been clearly expressed in the articles of association.
The justices clarified that the judgment issued in case II CSK 29/11 dealt with a situation where a management board member was appointed in the articles of association, while the resolution issued in case III CZP 23/10 referred to a situation where the articles of association did not include a provision on the appointment of a board member for an indefinite term. Furthermore, the justices confirmed that nothing prevents the matter of expiry of the mandate of a management board member from being regulated in the articles of association in a manner different from that provided under §1 of Article 202 of the CCC. To incorporate a provision on the appointment of a
management board member in the articles of association for an indefinite term is tantamount to excluding the applicability of the contrary rule contemplated in the cited provision. Consequently, the board member’s mandate will expire only if in any of the circumstances described in Article 202 §4 of the CCC materialize.
The ruling issued in case IV CSK 340/14 has also resolved the issue of the presumed length of the term of office of members of the management board of limited liability companies. In line with the panel sitting on that case, “(…) in the absence of an express provision in the articles of association of the limited liability company to the effect that members of the management board are appointed for an indefinite term, and without it being indicated that they are appointed for the term of office specified therein (for example, three years), the provision of Article 202 §1 of the CCC establishes a presumption that the term of office of a management board member is one year. This means that the company managers must each year put themselves up for election by shareholders”.