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Commercial proxy - a good spirit of the company? ...

Karolina HAHN
International Department Assistant at RSM Poland

Each lawyer, but also almost every entrepreneur, at least once in his/her professional life encountered the institution of COMMERCIAL PROXY, which is an example of a classic commercial law institution. The regulation of the commercial proxy is currently governed in Chapter 3 of the Polish Civil Code in Art. 1091 – 1099 (hereinafter: CC).

The institution itself constitutes a specific type of a power of attorney that can be established only and exclusively by an entrepreneur who is subject to the obligation of registration in the register of entrepreneurs of the National Court Register (see Art. 1091 of the CC). Simply put, it can be said that every commercial proxy is a power of attorney but not every power of attorney is a commercial proxy.

To meet the expectations and needs of entrepreneurs, the legislator identified three types of commercial proxy:

  1. sole (also referred to as independent) – which makes it possible for a commercial proxy to act independently and freely on behalf of the principal;
  2. joint – which is characterised by the necessity of cooperation of all commercial proxies if a specific legal act is to be valid under applicable law;
  3. branch – which limits the scope of the commercial proxy's activity to the matters entered in the register of the enterprise's branch.

Informally, but for a long time already, people talked also about the so-called defective joint commercial proxy, which authorises the commercial proxy to act with another member of the management board of a given company (but not with another joint commercial proxy). Initial protests of the Supreme Court against the defective joint commercial proxy were dispelled after the amendment of the Civil Code, which entered into force on 1 January 2017. This amendment finally introduced into Polish law the possibility of granting this type of commercial proxy.

LIMITATION OF THE COMMERCIAL PROXY AND JUDICIAL PRACTICE 

Unfortunately, the specific nature of Polish legislation is characterised by the fact that it is subject to various changes too frequently and it happens that well-functioning institutions begin to incline towards bad legislative practices, or perhaps towards bad interpretation of legal practitioners. And thus, the commercial proxy, which in fact was to help entrepreneurs in running their businesses, more and more frequently starts to be treated simply with indifference, in particular by registry courts.

Moving from theory to practice, some time ago I encountered a company that had an independent commercial proxy established. As it turned out quickly, the established commercial proxy was only theoretically a commercial proxy. Acting within his/her powers, the individual commercial proxy signed the necessary registration documents that were filed in court. Surprisingly and contrary to the logic applied, the referendary conducting the registration proceedings called upon the applicant to submit an application signed according to the representation of the management board revealed in the excerpt of the company's entry in the National Court Register.

According to the doctrine position, a commercial proxy has an exceptionally broad range of powers and obligations as determined by law, which the commercial proxy may use, but the legislator also imposed an "embargo" on the acts of commercial proxies, which are limited to the objective sphere of operating a business. Thus, the "embargo" restricts activities undertaken on behalf of the principal to the scope of activities related strictly to conducting economic activity, within the meaning of Art. 551 of the CC. Each activity exceeding the specified sphere will be treated as exceeding the powers of a commercial proxy and the undertaken activities may not be accepted, mainly on the part of registration authorities.

To the best of our knowledge and the practice applied for many years, registry courts allowed for the possibility of signing submitted applications by commercial proxies of companies, treating them as applications related entirely to the company's business (i.e. a business in the subjective and objective meaning). Because although a commercial proxy gives authority to take actions strictly related to conducting economic activity, why more and more frequently do we encounter refusal to register the entry of changes in companies where commercial proxies were established?

Selected court ruling indicates that representation of a company in registration proceedings is not included in the activities related to conducting economic activity within the meaning of Art. 551 of the CC and this is why the company cannot be represented there by a commercial proxy or by a representative (even a professional one) established by a commercial proxy. Certainly not all jurists agree to that and, more and more often, we can hear voices against this practice. In the opinion of referendaries conducting registration proceedings, submission of applications for an entry in the register of entrepreneurs of the National Court Register remains in the sphere of organisational and legal relations of a specific entrepreneur (company), and, consequently, it applies to personal and not property relations, and thus, it is not covered by the authority to act for the company's commercial proxy.

The foregoing was confirmed by the District Court in Szczecin in the decision issued on 4 July 2014 (file ref. No. VIII Gz 111/14), which reads that the commercial proxy as a power of attorney does have a very broad objective scope, but it has to be included within the limits set by the statutory duty to remain within the sphere of activities related to conducting economic activity. Despite the broad range of activities, a commercial proxy shall not be understood as an unrestricted power of attorney or a power of attorney to perform all acts that the body managing the company is empowered to. That interpretation is contrary to Art. 1091 § 1 of the CC. First of all, a commercial proxy does not authorise the proxy to perform activities that relate to the organisational sphere of the principal and to perform the empowerments or legal obligations, independent from the matters of conducting economic activity. And registration duties are precisely such obligations.

To conclude the aforementioned considerations, one can certainly state that contrary to the popular opinions and beliefs, the institution of a commercial proxy has proven itself over the years, both theoretically and practically. Appointment of a commercial proxy in a company guarantees not only more efficient running of a business, but above all, it facilitates conducting economic activities. Time will show if the judicature in terms of the commercial proxy will be standardised, and registry courts will start to apply the jointly developed jurisprudence. However, limiting the possibility of commercial proxies to act within registration proceedings may effectively discourage entrepreneurs from the registration of this institution. Despite emerging complications, many companies still choose to establish a commercial proxy. Will this change in the absence of approval on the part of registry courts? We will wait and see.

Nevertheless, until the Supreme Court takes an official position and there is jurisprudence uniformity, registry courts will freely interpret the provisions of the Civil Code within the scope of powers and obligations of commercial proxies. All this will finally lead to the prolongation of pending proceedings and increase in costs, and the only injured parties in the absence of referendary unanimity will be common entrepreneurs, who, apart from time and money, will also lose significant amount of patience.