Corporate Advisory Senior at RSM Poland
In our practice of corporate advisory we often come across a limited liability company limited partnership, i.e. a limited partnership where the general partner is a limited liability company. It is very often the case that the limited partner in such a limited partnership is a member of the general partner’s management board. If it is the case, you need to be careful about the representation of the limited partnership and its general partner, i.e. a limited liability company, in any activities related to the operations of your business.
In particular, in the case of amendments to the limited partnership agreement or, for example, the adoption of a resolution on the transformation of a limited partnership into another company, there are doubts as to how the general partner, i.e. the limited liability company, should be represented.
When the general partner is the limited partner at the same time
Problems related to the representation of a company having this legal form can be discussed on the example of an amendment to the limited partnership agreement referred to above. As a rule, in accordance with Article 9 of the Code of Commercial Companies (i.e. Journal of Laws of 2020, item 1526; “CCC”), any amendment to the limited partnership agreement requires the consent of all partners (i.e. both general partners and limited partners). If the partners agree to amend the provisions of the limited partnership agreement in force, the result may be that the same person represents the general partner and the limited partner, as well. Namely, a member of the management board of the general partner (limited liability company) would represent the general partner and, at the same time, would act on the other side, on their own behalf as the limited partner. In such a case, would it be plausible for the same person to act in two roles at the same time (performing an act with “oneself”)? This problem has turned out to be so critical that it was resolved by a resolution of the Supreme Court.
Power of attorney
As stated by the Supreme Court in a resolution adopted by a panel of 3 judges on 7 September 2018 (file reference: III CZP 41/18), when amending the limited partnership agreement as described above, the general rules of a limited liability company representation shall not apply (Art. 201 § 1 of the CCC), i.e. the limited liability company shall not be represented by its management board. The Supreme court has assumed that if a member of the management board of a limited liability company is, together with that company, a partner in a limited partnership, then Article 210 § 1 of the CCC , which regulates special rules of representation, shall apply to the limited liability company’s approval to amend the limited partnership agreement: representation by a proxy elected by a general meeting of shareholders of the limited liability company or representation by a supervisory board is necessary.
The Supreme Court pointed out that the provision in question is about concluding agreements between a limited liability company and its management board member in general; hence no distinctions are made between categories of such agreements. Therefore, the Supreme Court held that it shall apply to any and all agreements between a company and its management board member, regardless of whether they are anyhow related to the function the latter performs in the company’s management board. In the conclusion of any agreements, the company must therefore be represented by a proxy appointed by the general meeting of shareholders or by the supervisory board. What is important is that the rule described above applies not only to the conclusion of any agreement, but also, as the Supreme Court has emphasised, to its amendment, withdrawal from the agreement by the company, termination of the agreement by the company or its management board member, termination of the agreement by mutual consent of the parties, etc.
Appropriate representation of a company is a complex thing
As bluntly demonstrated by the above, in the case of a limited liability company limited partnership you have to observe the special rules of representation that will apply if a member of the management board of the general partner is at the same time the limited partner of the limited partnership. In such a case, instead of opting for a standard representation of a limited liability company by the management board, you have to go either for representation by a proxy appointed by the general meeting of shareholders of the limited liability company or representation by the supervisory board. This is extremely important for the practice of trading, because any breach of the rules of representation shall render the act performed absolutely null and void. You need to bear this in mind when planning any amendments to the limited partnership agreement or, for example, when planning to transform it into another company. Should you have any doubts, it is definitely worth seeking assistance from a competent advisor who is going to help you determine how to represent the parties to the agreement properly and prepare relevant documents.
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