The recent amendments to Articles 202 §1 and 369 §1 of the Polish Commercial Companies Code were intended to clarify the rules governing terms of office and mandates of management board members. The legislator’s objective was to bring order and eliminate interpretative uncertainty.
In practice, however, the changes have not removed all ambiguities.
Two statutory rules – one source of uncertainty
Under the current wording of the provisions:
- a term of office is calculated in full financial years, unless the company’s articles of association provide otherwise,
- the mandate of a management board member expires on the date of the annual general meeting approving the financial statements for the last full financial year of service.
The key concept is therefore the “full financial year”. And it is precisely this concept that raises practical difficulties.
The first financial year – is it always “full”?
If a company is incorporated in the first half of a calendar year, pursuant to the Accounting Act, its first financial year ends on 31 December of that same year. This period may, however, be shorter than 12 months.
Under the Accounting Act, a financial year is defined as a calendar year or another period covering 12 consecutive full calendar months. Consequently, the first (shortened) reporting period although constituting the company’s first financial year for accounting purposes – is not a “full” financial year.
Since the Commercial Companies Code explicitly refers to “full financial years”, a shortened first year should not, under a literal interpretation, be counted towards the term of office. Otherwise, the statutory requirement of “fullness” would lose its normative significance.
Appointment during the year – asymmetry of terms
Consider the following scenario: on 30 June, the supervisory board:
- reappoints management board member A, and
- appoints B as a new member of the management board.
Should the year in which the appointment takes place be counted towards their term of office?
In the case of A, the situation is atypical. Although A’s term of office formally ended on 31 December of the previous year, his mandate continued until the date of the annual general meeting approving the financial statements. Thus, he continued to perform his function without an ongoing term of office, but under a continuing mandate.
For B, the first half-year following appointment does not constitute a full financial year of service and, under a literal interpretation, should therefore not be counted towards the term of office.
The result is a structural inconsistency: the mandates of A and B may expire on different dates, even though both were appointed for the same length of term. Such an outcome undermines the functional coherence of the system.
If one applies the rule consistently: that the year of appointment does not qualify as a “full” financial year – A effectively benefits from a “bonus” period of service not counted towards the term.
Term of office vs mandate – a structural tension
The underlying dysfunction stems from the conceptual separation between the term of office and the mandate.
The term of office is the period for which a person is appointed.
The mandate is the legal authority to perform the function, and may last longer than the term of office.
Under the current framework, a mandate may extend beyond the expiry of the term of office until the annual general meeting approving the financial statements for the last full financial year of service.
In practice, this creates situations where the term of office has ended, yet the mandate continues. Companies frequently overlook the moment when reappointment should formally occur.
A possible alternative model?
It may be worth considering a model in which the term of office and the mandate expire simultaneously, for example, precisely on the anniversary of appointment. The appointing body would then be required to act in advance, in a manner analogous to the election of the President of the Republic of Poland.
Such a model would offer several advantages:
- full alignment between the term of office and the mandate,
- elimination of “bonus” periods of service,
- greater transparency for shareholders and corporate bodies.
The primary disadvantage would be the occasional need to convene a general meeting outside the ordinary annual cycle.
Conclusion
The amendments were intended to simplify and “close” the issue of terms of office and mandates. However, without a precise definition of a “full financial year” and clear guidance on how to calculate the term of office following mid-year appointments, interpretative uncertainty remains.
This article is based on a LinkedIn post by advocate Szymon Kaczmarek.