A business that is a natural person can appoint a commercial proxy
On 30 April 2018 new laws take effect bringing to an end the long dispute over the types of businesses allowed to appoint commercial proxies. Ultimately, businesses that are natural persons will be able to appoint commercial proxies.
The institution of commercial proxy has existed in the Polish legal system for almost one hundred years, since it was regulated by the Commercial Register Decree issued by the Chief of State on 7 February 1919. The institution of commercial proxy has been transformed significantly in recent years.
This relates primarily to practical problems caused by a resolution adopted by the Supreme Court of Poland on 30 January 2015 (III CZP 34/14) prohibiting granting power of commercial proxy only to act jointly with a member of a managing body, as this kind of proxy was not supported by any legal grounds.
This ruling led to numerous doubts with respect to businesses that had appointed proxies of this kind, and consequently, at the beginning of 2017, the Civil Code was amended to expressly allow this kind of proxy to be appointed.
The amendments concerned the types of proxy, but did not address in any way the question of who can appoint a commercial proxy. Under current law, this issue is regulated in Art. 1091(1) of the Civil Code. This stated that a business with an obligation to be registered in the business register was entitled to appoint a commercial proxy.
This provision was widely discussed in literature, among other things regarding whether it applies to every business for which there is a registration requirement (even if not entered in the register at that time) and the more fundamental issue of which register legislators in fact had in mind. This latter issue is discussed below.
What is commercial proxy?
Establishing the nature of the power of commercial proxy helps determine the range of entities able to appoint a commercial proxy. Under the cited Art. 1091(1) of the Civil Code, commercial proxy is a form of representation granted by a business (leaving aside for the moment the question of what kind of business legislators had in mind), which includes authorisation to perform actions in court and elsewhere, relating to business activity.
Commercial proxy is therefore a very broad solution giving the holder power to perform a wide range of transactions connected with business activity (subject to restrictions under Art. 1093 of the Civil Code, relating to sale or lending of a business enterprise and sale or encumbrance of real estate, which are transactions requiring a special power of attorney).
The advantage of commercial proxy over a general power of attorney is that it is not limited to the ordinary course of business. The advantages of commercial proxy can also be seen when compared to a power of attorney of a specific type and a special power of attorney. With respect to the last two powers mentioned, a business is not always able to predict the possible scenarios where the proxy will be needed to act on its behalf, and specify them in the power of attorney beforehand.
Also, because commercial proxy is an institution regulated by statute, when acting in a particular transaction on behalf of a business, the proxy is not required to demonstrate that the power to perform the transaction falls within their authority. The scope of authority is directly specified by statute.
Therefore commercial proxy is a practical solution, especially for businesses operating on a large scale. Primarily commercial companies (capital companies) are entities of this kind, but in some cases activity is conducted on a considerable scale by an individual—a business which is a natural person.
Laws in force prior to 30 April 2018
Under the existing version of Art. 1091(1) of the Civil Code, a business which has to be listed in the “register of business entities” is entitled to appoint a commercial proxy. A literal interpretation of this provision suggests that this means a business listed in the register that is part of the National Court Register. This would mean that only businesses operating in the form of a commercial company, cooperative or the like can appoint commercial proxies.
At the same time, under Art. 1097(4) of the Civil Code, “the death of a businessperson”, for instance, does not cause a commercial proxy to expire. This suggests that a natural person can also be a business able to appoint a commercial proxy. A natural person does not have to be entered in the commercial register of the National Court Register but in a separate database, the Central Registration and Information on Business (CEIDG).
In practice, the issue described above has not been settled in the legal literature. Arguments are made for both of these standpoints, while there is greater support for the view that only a business listed in the National Court Register can appoint a commercial proxy. Most authors agreed that the law needed to be amended accordingly to explicitly allow a business registered in the CEIDG to appoint a commercial proxy.
New laws (from 30 April 2018)
Provisions passed on 6 March 2018 implementing the Business Act and other business-related statutes amend Art. 1091(1) of the Civil Code (other changes made as part of the Constitution for Business are discussed here). The law will now expressly state that commercial proxy can be granted by a business obligated to be registered in either the CEIDG or the commercial register of the National Court Register.
The catalogue of types of commercial proxy that can be granted by a business which is a natural person is smaller than that applicable to entities registered in the National Court Register. A business of this kind will only be able to appoint an autonomous proxy (to a single person with authorisation to act autonomously) a joint proxy (to two or more persons authorised to act jointly) and, apparently, a branch proxy (for matters relating to a branch of an enterprise). It will not be able to grant any of the forms of commercial proxy solely exercised jointly with a member of a managing body (as under Art. 1094(11) these cover authorisation to act only or also jointly with a member of a managing body or shareholder with authorisation to represent a commercial partnership and thus do not apply to a natural person conducting business activity independently).
Although the level of interest the new legislation will receive from businesses cannot be predicted, it deserves to be received favourably and optimistically. It is in line with changes that have been proposed for a long time. It also has full potential to become a useful tool, particularly in the hands of businesses that conduct activity on a large scale but opt not to institutionalise it. The changes are also favourable from the point of view of counterparties dealing with those businesses. They will have greater certainty of the scope of powers of persons registered in the CEIDG as commercial proxies and acting in this capacity.
Maciej Szewczyk, legal adviser, Julia Dolna, M&A and Corporate Practice, Wardyński & Partners