Relationship to third parties and representation of a limited joint-stock partnership, part 1

The relationship to third parties and the representation of a limited joint-stock partnership are regulated in the Code of Commercial Companies. These regulations define the rules of liability of general partners and shareholders. As a rule, general partners are the legal representatives of the company, hence they have the right to represent the company, take actions on its behalf and are responsible for them. On the other hand, shareholders are passive partners, contributing capital to the company, but not having any influence on its functioning, and not liable for the company's obligations. Shareholders may, however, act under the authorization of the general partners on behalf of the company and then the principle of their irresponsibility ceases to apply.

No liability of the shareholder towards third parties for the obligations of the company

Pursuant to the provision of Art. 135 of the Commercial Companies Code, a shareholder in a limited joint-stock partnership, as well as a partner in a limited liability company or, as a shareholder in a joint-stock company, is not responsible for the company's obligations. A shareholder bears only the risk of losing the assets contributed to the company to cover contributions and take up shares in the share capital.

However, attention should be paid to situations in which a shareholder in a limited joint-stock partnership may be liable to third parties:

1. When the name of a shareholder is included in the name of a limited joint-stock partnership - the shareholder is liable as a general partner, i.e. jointly and severally with other partners and subsidiary with the company

2. When he acted on behalf of the company after its formation, and before its entry in the register - he is jointly and severally liable with other persons acting on behalf of the company

3. When he performs legal acts as an attorney or proxy, without disclosing his power of attorney, authorization or exceeding the limits of the power of attorney or acting without authorization - then he is responsible primarily and without limitation for the consequences of these actions

4. For the company's obligations incurred before the merger date - the shareholder is subsidiary to creditors, jointly and severally with the acquiring company or the newly formed company for a period of three years from the date of merger

Moreover, the shareholder's situation may also change if, with the consent of all general partners, the shareholder changes its status and becomes a general partner. In such a situation, he will also be responsible for the obligations of the company existing at the time of entering the change in the register.

Relationship to third parties and representation of a limited joint-stock partnership

The right to represent a limited joint-stock partnership is vested in general partners who have not been deprived of the right of representation by virtue of an amendment to the statute or a court decision, and includes all court and out-of-court activities. This right is statutorily granted only to general partners, while shareholders in a limited joint-stock partnership have the status of passive partners. The general partners may, however, contractually grant the right to represent shareholders by appointing them as proxies or proxies of the company.

The manner of representing a limited joint-stock partnership is specified in its articles of association. Therefore, partners may establish independent or joint representation in it. In the first case, the general partner is entitled to act on behalf of the partnership on his own, while in the second case, at least two partners must act to perform a valid legal act, thus having legal effect outside. Joint representation is often used when the shareholder is the company's proxy or proxy.

Primary deprivation of the general partner's right to represent the company

Depriving a general partner of the right to represent a limited joint-stock partnership may be compulsory or voluntary, as well as primary or consequential.

A general partner does not always have to be interested in managing the affairs of a limited joint-stock partnership, therefore the articles of association may exclude him from representing the partnership. Such a provision in the original articles of association does not in principle deprive a partner of the right of representation, as its mere signing by the excluded partner means consenting to such content of the articles of association. Thus, it is a voluntary form of the general partner's resignation from the right to represent the company. It is also possible for the general partner to later resign from the right of representation, which may occur by submitting an appropriate declaration of will to other general partners. Importantly, it is not necessary to change the company's status in this case.

Important! A general partner who is the sole partner of a limited joint-stock partnership with such status may not waive the right to represent the partnership

It should be emphasized that a change of status is not required only in the event of a general partner's voluntary resignation. Any other deprivation of this right entails the need to amend the statute.

Depriving a general partner of the right to represent the company under a court decision

Each of the general partners may demand that the court be deprived of the right of representation of another general partner. The existence of important reasons is a prerequisite for the deprivation of the right to representation by the court.

It is permissible to include a catalog of such reasons in the company's articles of association, however, the following situations are most often considered as such reasons:

• acting to the detriment of the company,

• starting a competitive activity,

• avoiding participation in joint representation,

• performing the action which resulted in the liability for damages.

It is the court that decides whether a given plaintiff is classified as a valid reason, so even the formulation of a catalog of important reasons in the statute is not binding on the court.

The right to representation by the court may be deprived of the right to representation only pursuant to Art. 137 of the Commercial Companies Code:

Pursuant to Art. 137 of the Code of Commercial Companies § 1. The company is represented by general partners who have not been deprived of the right to represent the company under the statute or a valid court decision. § 2. Subsequent deprivation of the general partner's right to represent the partnership constitutes an amendment to the articles of association and requires the consent of all other general partners. § 3. The general partner may be deprived of the right to represent the partnership against his objection only for important reasons, pursuant to a final court decision. § 4. The objection referred to in § 3 should be reported in the minutes of the general meeting or in writing with a signature certified by a notary no later than one month from the date of adopting the resolution by the general meeting. § 5. Depriving a general partner of the right to represent the partnership, against the objection referred to in § 3 and § 4, shall release that partner from personal liability for the partnership's obligations arising from the moment of making the relevant entry in the register.

It follows from the cited provision that an action for deprivation of the right to representation is not possible if the following conditions are not met:

• the statute was amended to which other general partners agreed,

• an objection was raised by the general partner,

• the objection was submitted to the minutes of the general meeting and was in the form of a notarial deed or in writing with a notarized signature (if it was submitted outside the general meeting, it should be reported within one month from the date of adopting the resolution by the general meeting),

• the court decides deprivation of the right for important reasons.

Important! A general partner deprived of the right to be represented by the court cannot be appointed as an attorney or proxy of the company, as this would be an action aimed at circumventing the law.

Subsequent deprivation of the right to represent the partnership by the general partner by amending the articles of association with his consent

In this case, the deprivation of the right takes place pursuant to an amendment to the company's articles of association, adopted with the appropriate number of votes and with the consent of the general partner to which the exclusion relates. This situation should be distinguished from the general partner's voluntary resignation from the right of representation by submitting an appropriate declaration of will. In this situation, the general partner does not object to the resolution adopted by the other partners, pursuant to which he is to be deprived of the right to represent the company by amending the articles of association. No objection of the general partner determines the effectiveness of such a resolution. It is worth adding that a general partner deprived of the right to representation in this way may still be appointed by other general partners as an attorney or proxy.

General partner objection

A general partner who does not agree to be deprived of the right to represent the partnership may object to a resolution amending the articles of association. The objection should be included in the minutes at the general meeting, and if the general partner was not present at the general meeting, he / she may raise an objection within one month from the date of adopting the resolution. The objection must then be made in writing with a signature certified by a notary.

Such an objection blocks the possibility of depriving a general partner of the right to represent a general partner as a result of an amendment to the articles of association by other partners. The objection will be examined by a local and substantive common court. The only way to deprive the company of the right to represent the company after an objection is raised is by a court decision.

Important! The personal liability of the general partner for the obligations of the partnership who has objected to the amendment to the statute depriving him of the right to representation and who has been deprived of this right by a court decision, shall cease from the moment of his removal from the register. On the other hand, if the general partner has consented to such an amendment to the articles of association or has voluntarily resigned from the right of representation, there are no changes in the scope of his responsibility for the partnership's obligations.