Legal meaning of granting a vote of acceptance to members of the company’s governing bodies

What is the impact of granting a vote of acceptance to members of the company’s governing bodies for discharge of their duties on their liability towards the company and the company’s ability to pursue claims?

Ever since the beginning of a legal concept of granting a vote of acceptance for discharge of duties by board members, the question of its legal significance in terms of liability of members of the company’s governing bodies for damage caused to the company has been debatable.

It is still unclear whether granting a vote of acceptance to a given body member should be equated with the material and legal release of a given body member from civil liability towards the company or the resignation (of a legal and procedural nature) of the company from pursuing claims in this respect, or should it be perceived only as an intra-company act that does not cause external effects in the form of depriving the company of the possibility to seek damages from its officers or as an act that results only in shifting the burden of proof as to the fault of a board member in action for damages. This issue has not been analysed by the Supreme Court so far and still causes controversy, therefore the following analysis is one of many but, in the author’s opinion, the most accurate way of solving the problem discussed in legal literature.

What does the vote of acceptance mean for board members?

The Commercial Companies Code does not contain a definition of the concept of granting a vote of acceptance for discharge of duties by board members. In the light of the view expressed in judicial decisions, it represents an “approval (acceptance) by the general meeting of shareholders of the manner of performing the function and the related actions taken by members of the management board, supervisory board or audit committee in the previous financial year as compliant with the provisions of law, the company’s articles of association, good practice and the interests of the company and its shareholders”. This is how the shareholders express their approval or disapproval of the work of members of a given body.

It does not follow from the above that granting the vote of acceptance directly relates to liability for damages towards the company. There seems to be no justification for the position that the will of the shareholders deciding on the granting of acceptance is not to pursue civil claims from members of the governing bodies, as the discharge concerns only the correctness of their duties, and not the assessment of whether the conditions for their possible civil liability are met.

As it follows from the cited definition of discharge, the correctness of exercising a mandate in the company is verified by the owner’s authority by checking the compliance of its officers with the generally applicable law, internal corporate law, good practices and the interests of the company and the shareholders. However, the aforementioned evaluation criteria do not coincide with the premises of liability for damages, which in each case include the existence of damage and a causal link. Thus, it should be stated that when granting a vote of acceptance, members of the shareholders’ meeting do not analyse all circumstances on which the effectiveness of the claim for damages depends and do not establish the premises for such liability.

Resolution vs. declaration

It should also be noted that the vote of acceptance is always granted in the form of a resolution of the company’s general meeting of shareholders. The doctrine unanimously assumes that the consequence of adopting by the shareholders a resolution on granting a vote of acceptance to a member of the company’s management board constitutes, with few exceptions, an obligation for the management board to implement this resolution. Therefore, it is justified to believe that in order to have the effect of expressing the will by the company and to perform a legal action by it within the meaning of the provisions of the Civil Code, it is usually necessary, in addition to adopting a relevant resolution by the shareholders, to submit an additional declaration of will as regards this resolution by the company’s executive body, i.e. the management board, or by a duly authorized attorney.

In view of the above, a resolution of the owner’s authority of a company generally produces only internal, intra-company effects, not exceeding the company’s structure, and therefore does not correspond to the thesis presented in the literature, according to which granting a vote of acceptance exempts a body member from liability for damages towards the company. Therefore, it seems that the fact of granting a vote of acceptance should not be perceived as an exemption from liability for possible damage caused by a member of the company’s management board as a result of his performance as a member of the management board, whether in material and legal terms or in procedural terms, because this type of legal act would require another declaration of will by the company with external effect and an additional declaration by its executive body.

In the light of the above remarks, it should be stated that granting the vote of acceptance to a member of governing body by the shareholders’ meeting does not preclude the company from claiming compensation for damages caused to the company by his actions. The resolution of the shareholders’ meeting granting a vote of acceptance to a management board member does not have direct effect in relation to the company’s external relations, including the civil liability of its officers for the damage caused to the company’s property, but it is only an expression of the shareholders’ approval of the manner in which the function is performed by persons being members of the company’s bodies.

Learn more: Striking a limited liability company off the register without discharging its obligations

Vote of acceptance as evidence

But even adopting the above viewpoint does not mean that the legal concept of granting a vote of acceptance for discharge of duties is irrelevant to the liability for damages of members of corporate bodies. There is no doubt that the fact of granting the vote of acceptance may be used as evidence in the action for damages, which, after hearing all the evidence, my constitute the basis for exempting the defendant member of the company’s body from liability.

Considering that granting a vote of acceptance to a member of the body confirms a proper performance of his function, it would be difficult to assume that, in the opinion of shareholders the actions of that person were unlawful, and even less culpable.

Therefore, there are grounds to recognize the admissibility of a defendant company official’s claim in the action for damages that the evidence of his lack of guilt or unlawfulness is the positive assessment he obtained from the shareholders as to his activity, in the form of discharge granted to him. In such a case, the claim of obtaining the vote of acceptance could be considered a circumstance which would not result in the release from liability, but it would shift the burden of proof to the company and would indicate that the actions of a board member were not unlawful (cf. Art. 293 § 1 of the Commercial Companies Code and Art. 483 § 1) – which, however, resulted in damage to the company’s assets.

In order to obtain a judgment awarding damages from a management board member who had previously obtained a vote of acceptance, the company would have to prove that a given board member is guilty of the event causing the damage, and that his actions, despite receiving the vote of acceptance, were against the law. The justification for such a change in the assessment of the conduct of a member of the company’s management board could be, in particular, the disclosure of new circumstances that were not known to the company (or shareholders) at the time of granting the vote of acceptance.

Taking into account the above considerations, it is necessary to accept the position according to which granting a vote of acceptance to a member of the management board by the shareholders of the company does not exempt that member from liability for damages towards the company. It only shifts the burden of proof in the hearing of evidence, causing that the company, when submitting a claim for damages, should prove the circumstances underlying the liability of a given management board member.

Author:

Paweł Góra
Legal Adviser
TGC Corporate Lawyers

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