Business Judgment Rule
What is this?
The 2022 amendment to the Commercial Companies Code brings many revolutionary changes. In addition to the introduction of the holding law, another change is the introduction of the business judgment rule, which will apply to actions of:
Such a rule has already been introduced for members of the bodies of a simple joint-stock company.
Impact of the changes on the liability of (not only) board members
According to the amendments, persons mentioned above are not in breach of the duty to exercise diligence arising from the professional nature of their activities if, acting loyally to the company, they act within the limits of reasonable economic risk, including on the basis of information, analysis and opinions that should be taken into account under the circumstances in making a careful assessment.
Limits of reasonable economic risk
The rule being introduced determines when the duty of due diligence on the part of board members (and non-board members) has been observed. One of the prerequisites for exercising due diligence will be to act within the limits of reasonable economic risk.
Careful risk assessment should be based on information, analysis and opinions provided, in particular, by professional entities that are appropriate under the circumstances. Based on such data, an appropriate business decision should be made. The assessment of fulfilment of the duty of care will be made with reference to the specific situation.
New powers of the advisor to the supervisory board
It is also worth mentioning the new powers of the advisor to the supervisory board of limited liability companies, simple joint-stock companies and joint-stock companies.
If the limited liability company’s articles of association so permit, or – in case of simple joint-stock companies and joint-stock companies – company’s articles of association do not exclude or limit such a right, the supervisory board will be able to pass a resolution to have a certain matter relating to the company’s business or its assets examined by a selected advisor to the supervisory board at the company’s expense. Such an advisor will also be able to be selected to prepare certain analyses and opinions.
The new regulations will thus allow the supervisory board to audit certain activities of the company without the need for the supervisory board itself to finance such an examination. However, the articles of association of a simple joint-stock company or the articles of association of a joint-stock company may impose restrictions on the maximum remuneration of advisors.
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