Can a foreigner be a member of the management or supervisory board in a capital company?

Nowadays, more and more companies in Poland are looking for employees from abroad to strengthen their teams and bring new perspectives to the business. One of the places where foreigners may have the chance to develop their careers are the bodies of capital companies, such as the management board or the supervisory board. This article discusses the legal aspects of employing foreigners in these positions, and also outlining issues related to their residence and work permits.

General requirements for members of company bodies:

Full legal capacity

Pursuant to Article 18 § 1 of the Commercial Companies Code (KSH), only a natural person with full legal capacity may be a member of the management board, supervisory board, audit committee or liquidator. In other words, a foreigner who wishes to perform functions in the company’s bodies must meet all requirements provided for Polish citizens.

Restrictions arising from criminal convictions

Article 18 § 2 of the Commercial Companies Code stipulates that a person may not be a member of the management board, supervisory board, audit committee, liquidator or proxy who has been convicted with a final sentence for an offence specified, inter alia, in Articles 587-587², Article 590 and Article 591 of the Commercial Companies Code and Articles 228-231 and Chapters XXXIII-XXXVII of the Act of 6 June 1997. – Penal Code (Dz. U. – Journal of Laws 2021, item 2345 and 2447).

The prohibition ceases upon the expiry of the fifth year from the date on which the conviction becomes final, unless the conviction has been expunged earlier (Article 18 § 3 of the Commercial Companies Code). A convicted person may also apply to the court for exemption from the prohibition on holding office in a commercial company or for the duration of the prohibition to be reduced (Article 18 § 4 of the Commercial Companies Code). These provisions also apply to a member of the management board of a partnership and a member of the supervisory board of a limited joint-stock partnership (Article 18 § 5 of the Commercial Companies Code).

Forms of employment of foreigners as members of management boards or supervisory boards:

Corporate relationship

Members of the management board of limited liability companies are appointed by a resolution of the shareholders or, in joint-stock companies, by a resolution of the supervisory board. This means that a corporate relationship is established. The memorandum or the articles of association may regulate these matters differently, by way of illustration the employment of a management board member may take the form of an employment relationship or a civil law relationship.

A member of the management board may perform his/her function gratuitously or by drawing remuneration granted by a resolution of the shareholders’ meeting/supervisory board. The remuneration paid to a board member serving in an appointed capacity does not constitute the basis for the assessment of Social Security contributions.

Employment relationship

Pursuant to Article 68 of the Labour Code (LC), the employment relationship is established on the basis of appointment in cases specified in separate provisions. An appointment, within the meaning of the Labour Code, is a unilateral legal act that contains a declaration of intent:

1. the entrustment of a specific function (generally managerial) and;
2. the establishment of an employment relationship between the appointee and the employer.

The employment relationship by appointment is established for an indefinite period, and if, pursuant to specific provisions, the employee has been appointed for a fixed period, the employment relationship is established for the period covered by the appointment (Article 68 § 1¹ of the Labour Code). The termination of the employment relationship with an employee employed on the basis of an appointment is effected by dismissal.

Civil law contracts

A foreigner may be employed as a member of the management or supervisory board under civil law contracts, such as a contract of mandate or a managerial contract. With reference to civil law contracts, health, pension and disability insurance, and accident insurance (sickness insurance is voluntary) are compulsory.

Employment of foreigners as members of management or supervisory boards and residence and work permits

Work permit

Pursuant to Article 88 of the Act on the Promotion of Employment and Labour Market Institutions, a work permit is required if a foreigner, in performing a function in the management board of a legal person entered in the register of entrepreneurs or being a capital company in organisation or in managing the affairs of a limited partnership or a limited joint-stock partnership as a general partner, or in connection with granting him/her a power of attorney, stays the Republic of Poland for over a total of 6 months during a consecutive 12-month period.

In order to be issued with an employment permit, the conditions set out in Article 88c(4) of the Employment Promotion and Labour Market Institutions Act must be met. The provincial governor issues an employment permit if the company meets one of the two conditions.

Residence in Poland

Mere appointment to the management board does not grant the right to reside in Poland. In order to stay legally, a foreigner must hold a national visa, a Schengen visa from another country or benefit from visa-free travel (applies to Ukrainian citizens).

If the foreigner intends to stay in Poland for over 3 months, but not longer than 3 years, a temporary residence permit will be required. This permit may be granted on the grounds of taking up or continuing work on the territory of Poland or conducting business in Poland.

Limited liability company as a foreigner

Where the partners of a limited liability company are Polish citizens or Polish companies, the question of whether the company is a foreigner is not in doubt. However, if the composition of the partners is mixed or the partners are exclusively foreigners, it should be checked whether this automatically means that the company is a foreigner.

According to the Law of 24 March 1920 on the Acquisition of Real Estate by Foreigners, a company is a foreigner if:

1. a legal person and an unincorporated commercial company established in the Republic of Poland is controlled, directly or indirectly, by the persons or companies listed in paras. 1, 2 and 3;
2. the foreigner(s) hold(s) directly or indirectly more than 50 per cent of the votes at the shareholders’ meeting, also as a pledgee, usufructuary or under the agreements with other persons, or has a dominant position within the meaning of Article 4 § 1.4(b) or Article 4 § 1.4(c) or Article 4 § 1.4(e) of the Commercial Companies Code.

Foreigners may perform functions in the bodies of capital companies, such as the management board or the supervisory board, provided that certain legal requirements are met. A work permit and a temporary residence permit must ne issued in the event of a longer stay in Poland. It is also worth checking whether a limited liability company in which foreigners are shareholders is considered a foreigner under Polish law.

Authors:

Michał Skrzypczak, Legal Assistant

Jarosław Rudy, Attorney at Law