Business judgement rule in limited liability companies

Generally speaking, the business judgement rule originates from the US legal system. Its introduction into Polish commercial law will finally dispel doubts regarding how the liability of members of corporate bodies is perceived in relation to the decisions they have taken (though not exclusively, as liquidators are also covered by the regulation).

As part of the amendment, the criteria for assessing whether a member of a governing body has exercised the due diligence required by the professional nature of their activities will be standardised, as the criteria will be identical across all capital companies. The standards arising from the duty to exercise due diligence required by the professional nature of the activities can be grouped as follows:

• Loyal conduct towards the company and
• Acting within the bounds of reasonable business risk

If, in a given situation, a member of a governing body is guided by the above standards when making a decision, they will be free from liability.

A key element is the point in time that is assessed in the light of the above standards – the moment the decision is made, rather than the subsequent occurrence of its negative consequences for the company. This mainly concerns the conduct of a member of a governing body within the established decision-making process; it relates primarily to the availability of information and analyses which, at the time, justified the belief that the decision would be beneficial to the company.

The provisions governing the business judgement rule contain a closed list of entities to which they apply. However, attention should be paid to those who are not covered by these provisions, namely the company’s authorised signatories and proxies. Consequently, the provisions concerning the business judgement rule apply to:

1. the liability of members of the management board and liquidators of merging companies towards the shareholders of those companies – Article 512 of the Commercial Companies Code
2. the liability of members of the management board, supervisory board or audit committee, and liquidators of a merging capital company towards the shareholders of that company – Article 526 of the Commercial Companies Code
3. the liability of members of the management board, supervisory board or audit committee, and liquidators of companies participating in a division towards the shareholders of those companies – Article 548 of the Commercial Companies Code