Resignation from the position of a management board member in an incorporated company

5. August 2016

The letter of resignation from the position of a member of the management board of an incorporated company has legal implications for the resigning person and the company. For the management board member it means leaving the company and, above all, the release from the obligations which, if breached, could render him or her liable for the company’s liabilities. For the company it means a change in its management body and that involves a risk of appointing a wrong person.

Who should receive the board member’s resignation?

Despite the legal importance of this issue, until recently the case law was not consistent as to who should receive the board member’s letter of resignation. The conflicting court judgments brought uncertainty about the effective date of the resignation and the effectiveness of the resignation itself. This issue was finally decided by the Supreme Court in its resolution of 31 March 2016 (file no. II CZP 89/2015), in which the Supreme Court stated that a management board member of an incorporated company (other than a single-member company) should file the letter of resignation with the company represented in line with the statutory rules of representation. Generally, the management board represents the company in making and accepting declarations of intent. Declarations of intent towards the company and letters to the company may be served to one of the management board members or the company's commercial attorney (prokurent).

Management board's duties related to a board member's resignation

The management board should represent the company also in accepting the resignation letter from one of the board members. In such a case, the letter is deemed served at the time when one of the other board members or a commercial attorney can read it in the normal course of business. The Supreme Court also addressed a situation where the sole board member or all board members tender a resignation. The justification to the said resolution explains that the resignation letter should then be served to the company's address. The letter is deemed effectively served at the time it arrives at the company so that the actions which the resignation necessitates can be taken.

Furthermore, the Supreme Court held that the resignation letter might stipulate a different effective date. However, the letter of resignation may not be conditionally effective, i.e. its effectiveness may not be made dependent on fulfilling certain conditions.

Resignation of a sole management board member in a single-member company

Generally, board members may declare their resignation in any form (a traditional letter is recommended for evidence purposes). An exception to the above rule is the procedure applicable to declarations of intent made in a single-member company. A shareholder who holds all shares or is the sole shareholder whose shares belong to him and the company, and who performs at the same time the function of the sole management board member, must tender his or her resignation in the form of a notarial deed. The notary then notifies the registry court by forwarding a duplicate original of the notarial deed. The same applies to joint-stock companies.

In the justification to the resolution the Supreme Court emphasised both the board member's interest (meaning the ability to resign) and the company's interest (meaning the ability to take actions to form a proper governing body). It seems that this court resolution reconciles the interests of both parties and eliminates the uncertainties around the resignation from the management board.