When the Boss Disappears (Court-Appointed Guardian For a Legal Entity)
Imagine you’re owed money by a company whose entire board of directors just resigned. Is this a brilliant dodge—a way to make yourself judgment-proof by simply walking away? Or picture this: the sole member of the management board sits in pretrial detention, unable to receive mail, sign documents, or access company accounts. What happens to the company? What happens to its creditors?
Polish law has an answer to these scenarios, though not an entirely straightforward one. The institution of the court-appointed guardian for a legal entity (known in Polish legal parlance as kurator dla spółki—literally, “curator for the company”) exists to prevent such situations from paralyzing commercial life. Article 42 of the Civil Code allows a court to appoint someone to act on behalf of a corporation that can’t represent itself. But the boundaries of this power—when it applies, what the guardian can actually do—remain contested terrain.
The Legal Foundation: When Does a Company Need a Guardian?
The registry court appoints a guardian for a legal entity when it cannot be represented or conduct its affairs due to lack of an organ or lack within the composition of the organ of a person authorized to represent it. That formulation—spare, technical—has generated two fundamentally different schools of interpretation, leading to completely different legal consequences.
Under the restrictive reading, “lack of an organ” means only situations where there are no properly appointed officeholders. The cause might be failure to appoint board members or expiration of all mandates (through death, resignation, and so forth—though this opens another question: how can all board members effectively resign simultaneously? That’s a topic for a different article). According to the restrictive position, broad interpretation of Article 42, Section 1 is impermissible—the registry court cannot appoint a guardian when mandates have been properly filled but the organ simply isn’t performing its functions or can’t perform them for whatever reason.
The expansive reading, grounded in the provision’s ratio legis and legislative evolution, takes a different view. Article 42, Section 1 establishes two separate prerequisites for appointing a guardian: inability to represent the legal entity and inability to conduct its affairs. Use of the disjunctive “or” indicates these prerequisites are alternative, not cumulative. This means a guardian can be appointed both when the legal entity cannot be represented and when it cannot conduct its affairs—two distinct factual states covered by the norm’s hypothesis.
The key lies in distinguishing three categories of factual situations. First, cases where the organ doesn’t formally exist at all—its officeholders weren’t appointed or their mandates expired. Second, situations where the organ formally exists and can actually perform its functions but for various reasons doesn’t—it neglects action, acts carelessly, or internal conflict paralyzes it. Third, cases where the organ was formally appointed but due to objective causes, independent of its will and long-lasting, cannot actually perform its representative and management functions.
The first case is obvious—a guardian can and should be appointed. The second is equally clear—the fact that the board takes no interest in the company’s affairs isn’t grounds for appointing a guardian. (This doesn’t impede participants in commerce; legal procedures involving such a company can proceed.) But the third category generates the most controversy—the board exists, yet objective prerequisites exclude performance of functions. Classic examples: the sole board member is in investigative detention, in a coma, missing, wanted by authorities, or located in a conflict zone without possibility of communication. In such cases the organ formally exists, its mandate hasn’t expired, but actual possibility of performing functions is completely excluded.
The 2018 Amendment: Changing the Guardian’s Paradigm
The amendment introduced by the Entrepreneurs’ Law of February 28, 2018, which took effect March 15, 2018, holds fundamental significance for interpreting Article 42. Before this amendment, Article 42 provided that the guardian’s task was exclusively “immediate implementation of either liquidation of the legal entity or enabling it, through appointment of proper organs, to undertake independent, correct action.”
The 2018 amendment significantly expanded the guardian’s competencies, introducing in Section 2 the formulation:
“Until appointment or supplementation of the composition of the organ mentioned in Section 1, or establishment of a liquidator, the guardian represents the legal entity and conducts its affairs within the limits specified in the court’s certificate.”
The ratio legis of this change was obvious—the legislature recognized that in commercial practice, situations occur where a legal entity cannot function for an extended period, and appointing a new organ may be hindered or impossible for factual reasons.
In such situations the guardian must not only bring about appointment of an organ but primarily substitute for that organ in conducting current affairs until normal functioning of the legal entity is restored. This change was fundamental—it transformed the guardian from an entity with purely organizational competencies (convening meetings, conducting liquidation) into a full-fledged representative of the legal entity who can conduct its affairs within a specified scope.
Linguistic analysis of the amended provision indicates unambiguously that the legislature separated two guardian functions. The first, specified in Article 42, Section 2, consists of representing the legal entity and conducting its affairs “within the limits specified in the court’s certificate”—meaning within the scope the court deems expedient and necessary under given circumstances. The second function, specified in Article 42, Section 3, consists of “immediately undertaking acts aimed at appointing or supplementing the composition of the legal entity’s organ authorized to represent it, and if necessary its liquidation.”
Use of the formulation “conducts its affairs” in Section 2 has general character and doesn’t limit the guardian’s competencies exclusively to acts connected with appointing a new organ. The legislature deliberately used “conducts its affairs” rather than “undertakes acts aimed at appointing organs”—this second function is specified separately in Section 3, indicating their separateness and complementarity. The guardian thus has two basic tasks: first, conduct current affairs of the legal entity to the necessary extent; second, strive to restore normal functioning through appointing organs or conducting liquidation.
Pretrial Detention as a Test of Article 42’s Limits
The interpretive dispute around Article 42 manifests particularly sharply in cases of long-term pretrial detention of a company’s sole board member.
According to the restrictive reading, temporary arrest doesn’t constitute grounds for appointing a guardian because the company’s organ exists—its mandate hasn’t expired, and the pretrial detention period is by definition time-limited. The company still has a representative organ, though its functioning is temporarily impeded. Appointing a guardian should primarily serve to bring about appointment of an organ authorized to represent the entity, not solve various other problems resulting from temporary absence of a board member.
However, this position completely ignores the specificity of penitentiary isolation and its effects on ability to perform management functions. Pretrial detention means physical isolation preventing personal appearance at shareholders’ meetings, censorship of correspondence under Article 217 of the Criminal Executive Code that de facto excludes conducting company affairs, lack of access to company documentation, email and banking systems, inability to sign documents in the form required by regulations, and complete inability to represent the company before administrative organs, courts and business partners.
The reality of conducting preparatory proceedings in Poland is such that organs in whose disposition the temporarily arrested remain often don’t consent to delivering correspondence whose delivery is legally necessary, fearing hidden forms of information transmission that might be smuggled in such communication. In many cases this actually occurs, causing criminal courts to sanction such practice, accepting communication restrictions exceeding the statutory scope of correspondence censorship.
In practice, a board president in pretrial detention is in a situation of factual impossibility of performing functions, rendering the company completely paralyzed. This isn’t a case of “non-performance of functions” in the sense of neglect, lack of diligence, or internal organ conflict—this is a case of objective impossibility of performing functions, constituting a functional equivalent of lack of organ.
Key to this argument is functional interpretation of Article 42, Section 1. The ratio legis of this provision isn’t exclusively formal “ensuring existence of an organ” in the sense of its appointment, but primarily ensuring actual possibility of representing the legal entity and conducting its affairs. The provision protects the legal entity’s interest and its creditors’ interests against effects of situations where the legal entity cannot function in legal commerce. Literal interpretation that ignores the provision’s purposes and concentrates exclusively on the organ’s formal status leads to absurd practical consequences.
The Guardian’s Competencies: Conducting Current Affairs Versus Appointing Organs
A fundamental interpretive dispute concerns the scope of the guardian’s competencies after appointment. Can the court-appointed guardian conduct the company’s current affairs within the scope of ordinary management, issue invoices documenting already-executed transactions, perform the company’s statutory tax obligations? Or are the guardian’s competencies limited exclusively to organizational acts aimed at appointing new management or conducting orderly liquidation?
The text of Article 42, Section 2 in the version effective since March 15, 2018, expressly and unambiguously states that the guardian “represents the legal entity and conducts its affairs within the limits specified in the court’s certificate.” This formulation has general character and prima facie doesn’t limit the guardian’s competencies exclusively to acts connected with appointing a new organ. Simultaneously, Article 42, Section 3 imposes on the guardian the obligation to immediately undertake acts aimed at appointing or supplementing the organ’s composition.
In case law and doctrine, the dominant position holds that these two provisions should be interpreted jointly—the guardian conducts the legal entity’s affairs to the extent necessary to secure its functioning and creditors’ interests, while simultaneously striving to restore the normal state through appointing organs. This isn’t a relation of mutual exclusion but of complementarity. The guardian isn’t the legal entity’s organ in the full sense, but its statutory representative with limited competencies designated by the court.
The Supreme Court in a resolution of September 23, 2010 (III CZP 54/10) stated that a guardian appointed pursuant to Article 42 isn’t authorized to take over the functions and scope of obligations of a company liquidator. The Supreme Court relied on earlier case law (decision of May 7, 2004, III CK 249/03), according to which a guardian appointed under Article 42 can perform acts of ordinary management in the company but doesn’t acquire management functions. In that decision the Supreme Court explained that a guardian of a joint-stock company appointed to appoint its organs doesn’t have authority to directly appoint management—cannot in this scope substitute for the general meeting or supervisory board. The guardian’s competence is to convene an extraordinary general meeting of shareholders to fill appropriate company organs.
Case law consistently emphasizes that the guardian cannot substitute for company organs or represent it in matters not concerning acts arising from the Civil Code. The Provincial Administrative Court in Warsaw in a judgment of February 19, 2015 (I SA/Wa 2354/14) ruled that a company guardian doesn’t have authority to file a motion for declaring invalidity of a nationalization decree according to administrative law provisions, as this exceeds the scope of the guardian’s authority.
Simultaneously, however, Article 42, Section 2 expressly states that the guardian “conducts its affairs within the limits specified in the court’s certificate,” meaning the court has discretionary competence to specify the guardian’s authority scope in a manner adapted to the concrete factual and legal situation of the legal entity. According to Article 603², Section 1 of the Code of Civil Procedure, the court isn’t bound by the scope of demand specified in the motion to appoint a guardian, which additionally confirms this discretion.
Acts of Ordinary Management and the Guardian’s Competencies
Particularly controversial is whether the guardian can perform acts within the scope of ordinary management, such as issuing VAT invoices documenting already-executed transactions, conducting correspondence with tax organs, or performing the company’s current reporting obligations. The catalog of acts requiring special authorization from the registry court was specified in Article 42, Section 4—under penalty of invalidity, the guardian must obtain court consent for acquiring and disposing of an enterprise or its organized part, and for performing legal acts based on which the enterprise or its organized part is given for temporary use. An analogous requirement applies to acquiring, disposing of, and encumbering real estate, perpetual usufruct, or a share in real estate.
This provision introduces division into acts the guardian can perform independently within authorization contained in the court’s certificate, and acts requiring additional permission. Doctrine and case law accept that Article 42, Section 4 refers to the division functioning in civil law between acts of ordinary management and acts exceeding this scope. Acts listed in Section 4 undoubtedly belong to the category exceeding ordinary management and require court consent.
By act of ordinary management one should understand handling current matters connected with ordinary exploitation of things and maintaining them in unimpaired condition within the framework of current purpose; everything not falling within these limits belongs to matters exceeding the scope of ordinary management. This definition has general character and in each case requires analysis of concrete case circumstances.
In the context of the guardian’s competencies, key significance attaches to the question whether issuing a VAT invoice documenting an already-executed sales transaction constitutes an act of ordinary management or exceeds the guardian’s competencies. On one hand, issuing an invoice isn’t a legal act sensu stricto—it’s a factual act of documentary character, performing a statutory tax obligation. According to Article 106b of the Value Added Tax Act, a taxpayer is obligated to issue an invoice documenting sale of goods. This obligation arises from the very fact of making the sale, not from the parties’ will, and has a public-law character.
On the other hand, issuing a VAT invoice produces specific effects in the sphere of civil-law obligations—it confirms performance of the contract, concretizes the receivable, constitutes grounds for demanding payment. In case of long-term non-issuance of an invoice, one can argue that its issuance by the guardian simply serves liquidation of documentary arrears arising during the period of lack of functioning organ.
Creditor Protection as the Guardian Institution’s Ratio Legis
The fundamental purpose of the guardian institution for a legal entity is protecting creditors against effects of lack of an organ authorized to represent it. Article 42 protects the legal entity’s interest and its creditors’ interests against effects of situations where the legal entity cannot function in legal commerce. Interpretation of this provision that ignores protective purposes and concentrates exclusively on the organ’s formal status leads to depriving creditors of possibility of realizing their rights.
In commercial practice, situations occur where a creditor performed all contractual obligations, paid the price including VAT, took over the contract subject, but due to inability to issue an invoice by the company whose management doesn’t function, suffers loss in the form of inability to deduct input tax. Such a state can last many months or even years if the organ’s inability to function has long-lasting character.
By refusing to appoint a guardian in a situation where the organ formally exists but factually cannot perform its functions for objective and long-lasting reasons, the court de facto deprives the creditor of possibility of realizing rights. The creditor cannot effectively pursue rights because on the other side there’s no entity capable of performing obligations. Simultaneously, the creditor cannot force appointment of new management, since the creditor isn’t a company shareholder and has no such competencies.
This situation is particularly severe in cases where the person performing the board president function is simultaneously the company’s sole shareholder. Then convening a shareholders’ meeting to appoint new management requires that person’s participation, which is impossible due to long-term absence or inability to act. National Court Register Act provisions don’t provide for possibility of registering changes in management composition without participation of the existing president in situations where that person is the sole shareholder. A situation without exit thus arises—the company cannot function, new management cannot be appointed, and the creditor cannot realize rights.
In such circumstances the guardian’s function cannot consist exclusively of “bringing about appointment of organs,” because this is factually impossible. The guardian must then conduct the company’s current affairs to the extent necessary to protect its creditors and perform basic legal obligations, while simultaneously striving to resolve the situation through company liquidation or finding another legal solution.
Period of Guardian Appointment and Its Extension
The legislature in Article 42¹, Section 1 introduced the principle of curatorship temporality—the guardian is appointed for a period not exceeding one year. The temporal limitation has as a rule rigid character, but in particularly justified cases, guardian appointment can be extended for a specified time if acts listed in Article 42, Section 3 couldn’t be completed before expiration of the period for which the guardian was appointed.
Extension of the guardian appointment period shouldn’t occur automatically. Each extension requires individual assessment of validity in the context of concrete case circumstances. The legislature didn’t specify maximum extension period for the guardian’s authority, meaning theoretically multiple extensions are possible, though each must be justified by special circumstances and made for a specified time.
The ratio legis of introducing the temporal limitation is the assumption that curatorship has transitional character and serves exclusively to restore normal functioning of the legal entity through appointing proper organs or conducting orderly liquidation. Long-term functioning of a company under guardian management isn’t a state desired from the standpoint of commercial certainty and economic efficiency. Simultaneously, in cases of objective impossibility of appointing a new organ, extending the curatorship period may be the only way to ensure continuity of the legal entity’s functioning and protection of its creditors’ interests.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
