The heart of the issue

If a management board member of a company submits his or her resignation from that function, this is a unilateral act in law composed of a declaration of intent by that management board member directed towards the company and aimed at dissolving the corporate legal tie between that member and the company. Resignation is effective from the moment the company learns of it in such a manner that it has been able to acquaint itself with its content. There is therefore no doubt that the addressee of that declaration of intent is the company itself. However, the problem lies in pointing out who represents the company when a management board member submits such a declaration, given the absence of a different contractual provision. The Commercial Companies Code does not decide this issue unequivocally, and courts and representatives of legal doctrine propose various solutions to it.

Solutions proposed

Three different standpoints currently dominate the discussion on this issue, providing for the possibility of the company being represented by: (1) one management board member or authorised commercial signatory, (2) the supervisory board or a proxy appointed by a resolution of the shareholders meeting or general meeting or (3) the body authorised to appoint management board members.

The first conception assumes that the resignation from holding a function on a company’s management board should be submitted to another management board member or an authorised commercial signatory, in accordance with the rule under Article 205 par. 2 and Article 373 par. 2 of the Commercial Companies Code (declarations submitted to the company and delivery of letters to the company can be made with respect to one management board member or an authorised commercial signatory). A problem only appears in a situation where the sole management board member submits a resignation. There is then no possibility of directing one’s declaration to the management board of a company of which one is the sole member, and if no authorised commercial signatory has been appointed in the company there is in principle no entity that could passively represent the company in such a situation. This opinion therefore needs to be supplemented by other solutions, depending on a given factual state.

The second opinion assumes that a declaration on resignation should be submitted to the supervisory board or a proxy appointed in a limited liability company by a shareholders meeting resolution (Article 210 par. 1 of the Commercial Companies Code), and in a joint stock company by a resolution of the general meeting (Article 379 par. 1 of the Commercial Companies Code). Particular rules of representing the company in the case of agreements and disputes between the company and the management board members would therefore apply. This standpoint is criticised above all on account of the fact that the resignation of a management board member from the function held constitutes a unilateral declaration of intent, while the regulations of Article 210 and Article 379 of the Commercial Companies Code refer to disputes and agreements, and therefore to multilateral acts. Besides, certain difficulties would arise in the case of a limited liability company in which no supervisory board has been established at all. In that event the effectiveness of the management board member’s resignation would in principle depend on the good will of the meeting of shareholders, which would have to appoint a proxy by means of an appropriate resolution in order to receive the resignation from the management board member.

The final standpoint is based on the assumption that a declaration on resigning from the function of management board member of a company should be submitted to that body of the company which is authorised to appoint management board members. Thus, unless an agreement or statute states otherwise, the meeting of shareholders would have that power in a limited liability company, and the supervisory board in a joint stock company. However, one should note that the effectiveness of a resignation in a limited liability company would in that situation depend on the statement of intent reaching the company, i.e. the meeting of shareholders, and not its individual members. A notification, even of all shareholders, is not identical to notifying the meeting of shareholders as a body. Besides, this opinion basically assumes that a company’s resolving or supervisory body has the right to represent it with respect to accepting a statement of intent concerning resignation from a function on the management board, although no provision of the Code grants it such powers.

Effects of the sevenfold resolution

It can be seen that the issue of the rules of representing a company when a management board member resigns from the function held is not a clear one, and the existing theories are divergent and not deprived of defects.

The security of legal relations requires this issue to be resolved so that there would be no doubts as to whether and when a management board member’s resignation from a function held becomes effective, and therefore what the real composition of the body representing the company is. Neither is a situation permissible where a management board member has no possibility whatsoever or faces basic difficulties in submitting a resignation from a function held, given a lack or uncertainty regarding the entity entitled to represent the company. For these reasons, the Supreme Court’s adoption of a resolution with the Court being composed of seven judges will have a positive effect on the functioning of companies in practice, and giving such a resolution legal force on the basis of Article 61 par. 6 of the Act on the Supreme Court would significantly heighten the certainty and security of legal relations.