Conclusion by a shareholder of a limited liability company of an agreement guaranteeing the conduct of a board member. Gloss to the judgment of the Supreme Court of 9 May 2024, ref. II CSKP 1456/22

Abstract

The gloss deals with the Supreme Court's judgment of May 9, 2024 (ref. II CSKP 1456/22), which addressed the issue of guarantee obligations in limited liability companies. The case concerned an investment agreement under which the shareholders undertook to guarantee that the board members they appointed would not dismiss the proxies they chose. The Supreme Court held that such an undertaking was invalid, as a board member could not effectively limit his or her power to revoke a proxy, which follows from Article 109⁷ of the Civil Code and Article 208 § 7 of the Commercial Companies Code. The Supreme Court's position is based on the principle of freedom of the board of directors in the conduct of the company's affairs and the need to be loyal to the company. At the same time, the judgment is part of the trend toward limiting the freedom of contract in professional business, which raises important implications for the practice of commercial law.