The board of directors or the board of directors?

admin on February 9, 2022

The board of directors or the board of directors?

Until the advent of the simple joint-stock company form, the dilemma of choosing between a management board or a board of directors did not exist. The Polish legal system had the only acceptable organisational model for Polish limited companies. It was based on the division of management and control functions between two independent bodies. The management function was performed by the company’s board of directors, while the supervisory function was performed by the supervisory board. With the emergence of the structure of a simple joint-stock company, this standard model ceased to be the only solution. A new type of body combining both management and control functions was introduced – the board of directors.

Management board vs. board of directors

In the case of a simple joint stock company, the board of directors may be the body having managerial competences. It consists of one or more members. The members of the board of directors are appointed and dismissed by the shareholders or the supervisory board (unless the articles of association provide otherwise). The function of the management board is to represent and manage the affairs of the company and the company during all the company’s judicial and extrajudicial actions.

The structure of a simple joint-stock company allows its founders to freely shape the internal structure of the company. It gives the possibility to resign from the board of directors and appoint the board of directors consisting of one or more directors divided into executive (managing) directors and non-executive (supervising) directors. This body combines management and control functions. If a board of directors is appointed in a company, there is no longer a supervisory board.

Depending on the size of the company and the number of directors, it is possible to separate the supervisory function within the company and assign it to non-executive directors, thus separating the management and supervisory competences between two categories of corporate officers, i.e. executive and non-executive directors.

In the case of smaller companies, it is worthy of consideration to entrust all directors with the conduct of the affairs of the company and the management of its business without separating the supervisory function within the board of directors. The legislature allows the board of directors to include only one director. This may be particularly applicable to smaller companies, where there is no need for a supervisory function within the management body. In view of the fact that there is no obligation to appoint a supervisory board, such solutions may lead to a significant reduction in the composition of company bodies and thus in operating costs.

Can the management board and the board of directors function simultaneously?

When establishing a simple joint-stock company, a deliberate choice must be made as to the management model. The company’s shareholders are free to choose whether the management board or the board of directors will be the central body of the company.

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