A technology company. Four shareholders, a team of 120, growing revenue. A PE fund submits an investment offer. Due diligence reveals that the articles of association date back to the company’s registration through S24, there are no management board rules, the last shareholders’ resolution was adopted two years ago, and strategic decisions were made on WhatsApp. The fund cuts its valuation by 15%.
Would your company be ready for such a test?
Growing technology companies (SaaS businesses, software houses, e-commerce companies) are often established quickly, with minimal structure. Registration through S24 for PLN 350, simplified articles of association, no governing body rules. That is enough at first. The problem arises as the company grows: new shareholders and investors come on board, a supervisory board is established, and budget and strategy decisions become more complex. This is when the absence of corporate governance starts generating real costs, from decision-making bottlenecks and tensions among shareholders to the personal liability of management board members.
In this article, I will explain how to identify the point at which an informal management model stops working, what legal and financial risks this entails, and what specifically needs to be done to put corporate governance in a growing company in order, without creating excessive bureaucracy.
Key concepts worth knowing
Before we move on, here are a few terms that will appear in this article:
| Concept | What it means |
|---|---|
| Corporate governance | A set of rules defining who makes which decisions within a company, how those decisions are documented, and to whom the decision-makers are accountable. It includes governing body rules, the articles of association, shareholders’ agreements, and internal procedures. |
| Decision matrix | A table assigning specific categories of decisions to the relevant governing body of the company (management board, supervisory board, shareholders’ meeting), taking into account financial thresholds and formal requirements. |
| Business judgment rule (BJR) | The business judgment rule, codified in Article 293 §3 of the Polish Commercial Companies Code (hereinafter: the CCC). It protects a management board member from liability if they acted within the limits of justified business risk, on the basis of appropriate information and analyses. |
| Shareholders’ agreement (SHA) | An agreement governed by civil law that regulates relationships between shareholders outside the articles of association. It covers matters including exit rules, veto rights, and mechanisms for resolving deadlocks. |
| Due diligence | A legal, financial, and operational review of a company conducted before an investment or transaction to verify whether its documentation and processes reflect the actual state of affairs. |
When an informal management model stops working
Most technology companies are established using a “quick start” model. Registration through S24, minimal articles of association, no governing body rules. With a team of 5 to 15 people, this is a rational approach: decisions are made by the founders, everyone knows one another, and communication is direct.
The problem builds gradually. Here are the signs that your company has passed the point at which informality starts becoming costly:
| Warning sign | What it means |
|---|---|
| Decisions “circulate” between people without a clearly designated owner | There is no decision-making authority matrix: no one knows who approves expenditure above a specified amount, who signs an agreement with a new client, or who makes hiring decisions. |
| Shareholders have different expectations regarding profit distribution and reinvestment | There is no shareholders’ agreement (SHA), so a dispute over dividends versus reinvestment blocks strategic decisions. |
| A new investor or fund requires a supervisory board | The company has no supervisory board rules, list of reserved matters, or reporting procedure; everything has to be built from scratch under time pressure. |
| The departure of one person paralyses support for the company’s governing bodies | There are no standardised processes, the meeting calendar, resolution templates, and archiving rules exist only in one employee’s head. |
| The articles of association date back to the company’s registration and have never been updated | The documents do not reflect the company’s actual operating model; they create an illusion of order rather than providing real protection. |
The amendment to the CCC of 9 February 2022 (which entered into force on 13 October 2022) raised the bar even further. The new provisions expanded the duties of supervisory boards, imposed an obligation on the management board of a joint-stock company to provide information proactively to the supervisory board (Article 380¹ of the CCC), and codified the BJR. For companies that had previously operated informally, this means higher standards, and greater risk.
Legal and financial risks of inadequate corporate governance
Confusion over decision-making authority does not disappear on its own. It usually resurfaces precisely when the stakes are highest: during an investment round, tensions among shareholders, a change of ownership, or an inspection.
Personal liability of management board members
Article 293 of the CCC provides that a management board member is liable to the company for an act or omission contrary to the law or the articles of association if it caused damage. The applicable standard of care is higher due to the professional nature of their role (Article 293 §2 of the CCC). The burden of proving the absence of fault rests with the management board member.
Article 299 of the CCC goes further: if enforcement against the company proves ineffective, management board members are jointly and severally liable for its obligations, with all their personal assets. The judgment of the Polish Supreme Court of 4 June 2024 (II CSKP 1985/22) confirmed that demonstrating the ineffectiveness of enforcement does not require enforcement proceedings to be directed against all of the company’s assets. The burden of proving that enforcement could have been effective rests with the management board member.
A management board member may be released from this liability by demonstrating that at least one of the following three conditions has been met:
- They filed a bankruptcy petition at the appropriate time or an order opening restructuring proceedings was issued.
- The failure to file the petition was not their fault.
- The creditor suffered no loss despite the petition not being filed.
Each of these conditions requires a documented decision-making process. Minutes of management board meetings, financial position analyses, and legal opinions are evidence that may determine the outcome of a dispute. A lack of documentation works against the management board.
The BJR (Article 293 §3 of the CCC) protects against liability, but only if all the relevant conditions are met: loyalty to the company, acting within the limits of justified business risk, and basing decisions on adequate information and analyses. Without minutes and documents, you have no evidence that these conditions were satisfied.
Defective resolutions and their consequences
Decisions made by the wrong governing body, under an incorrect procedure, or without the proper composition may be declared invalid or non-existent, with retroactive effect (ex tunc). Polish case law provides specific examples:
| Case | What happened | Outcome |
|---|---|---|
| XX Gz 203/22 | A shareholder was denied admission to the general meeting | The resolutions were challenged |
| XV C 504/17 | The supervisory board adopted a resolution on management board remuneration rules without proper authorisation | The resolution was declared non-existent |
| VII AGa 531/19 | A supervisory board meeting was convened improperly | The resolutions were challenged |
| I C 218/15 | No supervisory board rules | The validity of the board’s actions was disputed |
Each of these situations could have been avoided by putting corporate governance in order, adopting governing body rules, convening meetings properly, and documenting resolutions.
Shareholder tensions that block growth
Four programmer-shareholders with equal shareholdings. Two want to reinvest the profit, while the other two want a dividend. There is no shareholders’ agreement and no mechanism for resolving the deadlock. The company is at a standstill because every strategic decision ends in an impasse.
This is not a hypothetical scenario; it is a situation we encounter regularly. Without an SHA (shareholders’ agreement) or appropriate provisions in the articles of association, there is no formal way to resolve such a conflict outside court.
Lower valuation and due diligence problems
The cost of due diligence for a company that has operated for several years and has a complex situation may reach approximately PLN 100,000. But the true cost of inadequate corporate governance is not the review fee; it is a lower valuation, a delayed transaction closing, or the collapse of negotiations.
When a buyer or investor discovers during due diligence that no resolutions have been adopted for three years, the management board rules are out of date, and the articles of association have remained unchanged since registration, negotiations become more difficult. The investor sees a risk they do not want to assume and either lowers the valuation or requires additional safeguards.
New obligations following the 2022 CCC reform: what you need to know
The 2022 CCC reform changed the rules of the game for supervisory boards and management boards. If your company has or plans to establish a supervisory board, check whether it meets the new requirements.
Duties of the supervisory board
Article 219 of the CCC (limited liability companies) and Article 382 of the CCC (joint-stock companies) specify that the supervisory board exercises continuous supervision over the company’s activities in all areas, not only when approving annual reports.
The supervisory board’s new powers and duties following the reform include:
- Right to information subject to a deadline, the supervisory board may demand information, documents, and explanations from the management board, commercial proxies, and persons employed by the company (including under civil-law contracts). They must be provided without delay, but no later than 2 weeks after the request is made (Article 219 §4¹ of the CCC).
- Prohibition on restricting access, the management board may not restrict supervisory board members’ access to the requested information (Article 219 §4² of the CCC).
- Supervisory board committee, a new institution (Article 219¹ of the CCC). The supervisory board may establish an ad hoc or standing committee to perform specified supervisory activities. Establishing a committee does not release supervisory board members from liability.
- Supervisory board adviser, if the articles of association provide for this, the supervisory board may commission an adviser of its choice, at the company’s expense, to investigate a specified matter (Article 219² of the CCC).
- Annual supervisory board report, in a joint-stock company (Article 382 §3¹ of the CCC), the report must include, among other things, an assessment of the adequacy of internal control and risk management systems and an assessment of the management board’s compliance with its disclosure obligations.
Management board’s disclosure obligations towards the supervisory board (joint-stock companies: Article 380¹ of the CCC)
In a joint-stock company, the management board must inform the supervisory board proactively, without an additional request, in five categories:
- Management board resolutions and their subject matter.
- The company’s situation, its assets and operational, investment, and staffing circumstances.
- Progress in implementing development plans, including deviations from previously adopted plans.
- Transactions and events that materially affect the company’s financial position.
- Changes to information previously provided, if they materially affect the company’s situation.
Information in categories 1 to 3 must be provided at every supervisory board meeting. Information in categories 4 to 5 must be provided without delay. Form: written (except in situations requiring immediate disclosure).
The articles of association of a joint-stock company may exclude or limit these obligations, but unless you do so, they apply in full.
How to put corporate governance in order: decision matrix and documents
Putting corporate governance in order does not require building a bureaucratic machine. It requires clear rules: who makes decisions, what requires a resolution, when approval is needed, and how matters should be processed correctly.
Corporate decision matrix
This is a table assigning categories of decisions to the relevant governing body of the company. Without it, decisions circulate between people. No one knows whether a resolution is required, and the management board makes decisions that should be referred to the shareholders’ meeting.
The CCC provides for statutory financial thresholds that determine the required procedure:
| Provision | Scope | Threshold | Required action |
|---|---|---|---|
| Article 228 of the CCC | List of matters requiring a shareholders’ resolution | Specified by statute (including the disposal of the business or acquisition of real property) | Resolution of the shareholders’ meeting |
| Article 229 of the CCC | Acquisition of real property/fixed assets during the first 2 years | Price > 1/4 of the share capital and ≥ PLN 50,000 | Shareholders’ resolution (cannot be excluded in the articles of association) |
| Article 230 of the CCC | Disposal of a right or incurring an obligation | Value > twice the share capital | Shareholders’ resolution (the articles of association may modify this requirement) |
| Article 384¹ of the CCC (joint-stock companies) | Transactions with related parties | > 10% of total assets | Supervisory board approval |
Companies listed on the Warsaw Stock Exchange apply additional internal thresholds. For comparison:
| Company | Threshold requiring supervisory board approval |
|---|---|
| Asseco Poland, CD Projekt | 10% of equity |
| Ten Square Games | PLN 10 million net (liabilities), PLN 500,000 (transactions with a shareholder holding > 5%) |
| GTC | EUR 10 million (transactions), EUR 1 million (professional services) |
Your company does not need to be listed on a stock exchange to use a decision matrix. Set financial thresholds appropriate to the scale of your business, assign categories of matters to the governing bodies, and include them in the management board rules and the articles of association.
Governing body rules
The management board rules and supervisory board rules are documents that define:
- Rules for convening meetings (who convenes them, within what period, and in what form).
- The procedure for adopting resolutions, including resolutions adopted by circulation (in writing) and using electronic means of communication.
- How decisions are documented, minutes, signatures, and archiving.
- The division of responsibilities within the governing body (if the management board has more than one member).
- Rules for reporting to the supervisory board and shareholders.
The absence of rules is more than just a formal gap. Case law shows that improperly convening a meeting (VII AGa 531/19) or having no supervisory board rules (I C 218/15, II AKa 69/17) leads to challenges to the validity of resolutions, and, consequently, to the decisions based on those resolutions.
Shareholders’ agreement
The articles of association govern corporate relationships (but not everything can be included in them. A shareholders’ agreement (SHA) is a civil-law contract (based on Article 353¹ of the Polish Civil Code) the principle of freedom of contract) that regulates matters outside the scope of the articles of association.
| Articles of association | Shareholders’ agreement (SHA) |
|---|---|
| Effective against the company and third parties | Effective only between the parties to the SHA (contractual in nature) |
| Amendments require notarised signatures (limited liability companies) or a notarial deed (joint-stock companies) | No prescribed form (although written form is recommended) |
| Subject to registration in the National Court Register | Not subject to registration in the National Court Register |
| Limited ability to regulate personal relationships between shareholders | May regulate: exit rules (drag-along, tag-along), veto rights, deadlock resolution mechanisms, non-compete obligations |
An SHA does not replace the articles of association. It supplements them. A breach of the SHA does not invalidate a company resolution, but it gives rise to liability for damages (Article 471 of the Polish Civil Code) and may be secured by contractual penalties.
If your company has more than one shareholder and no SHA, every conflict over profit distribution, an exit from the company, or veto rights will be resolved either through negotiations under pressure or in court.
Three levels of corporate governance: from the minimum to full protection
Not every company immediately needs a comprehensive corporate governance system. The appropriate scope depends on its stage of development, number of shareholders, and investment plans.
Level 1: operational minimum
For companies with 2 to 3 shareholders, no supervisory board, and no external investors.
- Decision matrix, a table specifying which decisions may be made independently by the management board and which require a shareholders’ resolution. Include the financial thresholds under Articles 229 and 230 of the CCC as well as your own internal thresholds.
- Management board rules, rules for convening meetings, the procedure for adopting resolutions, and how decisions are documented.
- Update to the articles of association, if the company was established through S24, its articles of association do not contain provisions restricting the transfer of shares, granting preference rights, setting financial thresholds, or providing for investor mechanisms. It is time to change that.
Level 2: a solid foundation
For companies with 3+ shareholders, a supervisory board, or plans to raise investment within 6 to 12 months.
- Everything from level 1.
- Shareholders’ agreement (SHA), exit rules, veto rights, a deadlock mechanism, profit distribution rules, and non-compete obligations.
- Supervisory board rules, if a supervisory board exists or is planned. Take account of the new obligations introduced by the 2022 CCC reform.
- Corporate calendar, an agreed schedule of management board and supervisory board meetings, deadlines for preparing materials, and reporting standards.
- Checklists for supporting governing bodies, templates for resolutions, minutes, and notices. This eliminates reliance on one person’s memory.
Level 3: full protection
For companies preparing for an investment round, an M&A transaction, or a legal transformation.
- Everything from levels 1 and 2.
- Audit of existing corporate documentation, comparing the provisions of the articles of association, governing body rules, and resolutions with actual practice. Identifying discrepancies.
- Alignment session with shareholders, agreeing expectations regarding roles, involvement in decisions, the level of control, and the company’s development vision. Only then should these arrangements be formalised.
- Training for the management board and supervisory board, covering personal liability, the BJR, and the supervisory board’s new duties following the 2022 CCC reform.
- Data room preparation, organised documentation ready to be shared with an investor or buyer.
Five diagnostic questions for your company
Before deciding on the scope of changes, answer these five questions:
| No. | Question | If the answer is “no” |
|---|---|---|
| 1 | Do you know which decisions the management board can make independently and which require a shareholders’ resolution, and is this documented anywhere? | You need a decision matrix and updated articles of association. |
| 2 | Do the management board rules (and supervisory board rules, if applicable) reflect how decisions are actually made? | The rules need to be updated or drafted from scratch. |
| 3 | Do you have a signed shareholders’ agreement governing exit rules, profit distribution, and dispute resolution? | You need an SHA, before the first conflict arises. |
| 4 | Are management board meetings minuted and resolutions archived in a way that allows them to be retrieved? | A lack of documentation weakens BJR protection and makes it more difficult to defend a claim under Articles 293/299 of the CCC. |
| 5 | Would your company be ready for due diligence within 30 days? | If not, start with an audit of your corporate documentation. |
How we can help put your company’s corporate governance in order
We treat corporate governance as a company’s decision-making infrastructure, not as a set of documents to be filed away in a drawer. We design solutions tailored to the company’s stage of development, ownership structure, and business plans.
Our support includes:
- Corporate governance audit, reviewing the articles of association, governing body rules, and resolutions, and comparing them with actual practice. Identifying gaps and discrepancies.
- Decision matrix and governing body rules, designing the division of powers between governing bodies, setting financial thresholds, and preparing management board and supervisory board rules.
- Shareholders’ agreement (SHA), negotiating and preparing an SHA that includes exit mechanisms, veto rights, deadlock provisions, and profit distribution rules.
- Updating the articles of association, adapting the provisions to the company’s actual operating model, including by introducing investor clauses (drag-along, tag-along, preference shares).
- Due diligence preparation, organising corporate documentation, preparing a data room, and eliminating risks identified by investors.
- Training for management boards and supervisory boards, personal liability, the BJR, and disclosure obligations following the 2022 CCC reform.
We work with founders, management boards, and CFOs of technology companies, from startups to scale-ups. We understand the pace of work, limited resources, and pressure created by multiple concurrent projects.
Find out what should be put in order before the problem resurfaces during your next major decision
Corporate governance in a growing company is not a box-ticking exercise. It is a set of rules that either supports decision-making and protects the management board or creates bottlenecks, conflicts, and a risk of personal liability.
The larger the company, the more costly the absence of clear operating rules becomes. The 2022 CCC reform raised the standards expected of supervisory boards and management boards. Case law confirms that missing documentation and defective resolutions have real consequences, from liability for damages to a lower transaction valuation.
If your company is growing, planning an investment round, or has more than one shareholder, check whether your corporate governance is keeping pace with the company’s development. Contact us. We will help you identify gaps and plan the next steps.
Frequently asked questions
My company has 80 employees and three shareholders, do I really need formal corporate governance?
Yes. With three shareholders and a team of 80, decisions concerning the budget, hiring, contracts with counterparties, and profit distribution require clear rules. Without a decision matrix and up-to-date articles of association, you risk decision-making bottlenecks and shareholder conflicts. The minimum scope should include a decision matrix, management board rules, and updated articles of association.
What is the difference between management board rules and the articles of association, and do I really need both?
The articles of association regulate corporate relationships at a structural level: the composition of governing bodies, the powers of the shareholders’ meeting, and rules for transferring shares. The management board rules define the management board’s internal working procedures: convening meetings, adopting resolutions, and documenting decisions. You need both, articles of association without management board rules do not protect against defective resolutions, while management board rules without properly drafted articles of association will not resolve issues concerning decision-making authority.
How can I protect myself as a management board member against personal liability for business decisions?
The BJR (Article 293 §3 of the CCC) offers protection if all of the following apply: you act loyally towards the company, within the limits of justified business risk, and on the basis of appropriate information and analyses. Document the decision-making process: meeting minutes, legal opinions, financial analyses, and alternatives considered. Monitor the company’s financial position, the BJR does not protect against liability for failing to file a bankruptcy petition despite the statutory conditions being met.
We are planning an investment round in 6 months, what minimum corporate governance arrangements must we have before due diligence?
Updated articles of association (with provisions restricting the transfer of shares, setting financial thresholds, and establishing investor mechanisms), management board rules, a complete set of shareholders’ and management board resolutions from recent years, and a shareholders’ agreement (SHA) governing exit rules and dispute resolution. If the company has a supervisory board, it should also have supervisory board rules compliant with the requirements of the 2022 CCC reform. The cost of due diligence for a company with a complex situation may reach approximately PLN 100,000, organised documentation shortens the process and reduces the risk of a lower valuation.
We have conflicts among shareholders over strategic decisions, how can we introduce a deadlock resolution mechanism without escalating the matter to court?
A shareholders’ agreement (SHA) allows you to introduce a deadlock mechanism, a procedure for resolving a decision-making impasse. Typical solutions include escalation to a mediator, the right to buy out shares by one of the parties (shoot-out / Russian roulette clause), the right to join a sale (tag-along), or the right to force a sale (drag-along). An SHA is contractual in nature; it binds the parties, but not the company or third parties. A breach of the SHA gives rise to liability for damages and may be secured by contractual penalties.
How often should the management board and supervisory board meet, and how should decisions be documented?
The CCC does not impose a minimum frequency for management board meetings in a limited liability company; this is a matter for the management board rules. In growing technology companies, we recommend management board meetings at least once a month and supervisory board meetings once a quarter. Every meeting should be minuted, and resolutions should be signed and archived. The 2022 CCC reform requires the management board of a joint-stock company to provide the supervisory board with information on management board resolutions and the company’s situation at every supervisory board meeting, which means the materials must be prepared in advance.
