Amendments to the Commercial Companies Code – changes concerning Supervisory Boards

Establishment of standing and ad hoc committees of the Supervisory Board – Article 2191 of the Commercial Companies Code

As part of the amendments being introduced to the Commercial Companies Code, the Supervisory Board will be able to establish committees by way of a resolution to perform specific supervisory functions. It is emphasised that this is not an independent body, but operates within the framework of the Supervisory Board. A committee may be standing or ad hoc.

Appointment of an adviser to the Supervisory Board – Article 2192 of the Commercial Companies Code

If the articles of association so provide, the Supervisory Board may pass a resolution to have a specific matter concerning the company’s operations or financial position examined by a selected adviser at the company’s expense. The Supervisory Board has full discretion regarding the appointment of an adviser. The Supervisory Board has the right to represent the company in agreements with the adviser.

Duty of disclosure by the management board of a public limited company, Article 3801 of the Commercial Companies Code

The duty to provide information covers the following: resolutions of the Management Board and their subject matter, the company’s situation, progress in implementing the designated directions for the development of the company’s activities, together with any deviations from these directions, stating the reasons therefor, transactions and other events or circumstances which significantly affect or may affect the company’s financial position (profitability, liquidity), changes to information previously provided to the Supervisory Board, if such changes significantly affect or may affect the company’s situation.

The Management Board’s obligation to provide information to the Supervisory Board covers information held by the Management Board concerning the joint-stock company itself, as well as its subsidiaries and affiliated companies.

In theory, this regulation is intended to activate the Supervisory Board and provide real opportunities to ensure better control over the Management Board, but in practice this leads to an absurd situation in which the Management Board is required to provide information to and urge the Supervisory Board to exercise control. This also carries the risk that the Supervisory Board will be inundated with unnecessary information and, in the flood of data, will fail to identify the key issues concerning the company’s operations. On the one hand, the Management Board may use this provision as a tool to hinder the detection of irregularities. On the other hand, out of an excess of caution, it will send an excessive amount of documentation to protect itself against potential liability for failing to comply with the imposed obligation. It is pointed out that this solution is fundamentally at odds with the previously adopted model of the supervisory body’s functioning. It is possible to exclude or limit the duty to provide information in the company’s articles of association.