Court rules non-compliance with representation rules invalidates non-compete agreement

A Polish appellate court has declared that agreements are absolutely invalid if they are not properly represented according to specific rules, particularly when a board member enters into a non-compete agreement with the company. The court's decision, issued by the Court of Appeal in Poznań, emphasizes the protection of limited liability companies and their shareholders from potential conflicts of interest.

The ruling stems from a case where a board member signed a non-compete agreement in their own name while already serving on the board. The court clarified that this act constitutes the moment of agreement conclusion. Consequently, the company should have been represented by a proxy appointed by the shareholders' meeting or by the supervisory board.

This judgment underscores the importance of adhering to corporate governance regulations. It ensures that transactions involving board members are conducted with appropriate oversight, preventing situations where an individual could act in a dual capacity without adequate checks and balances. The principle aims to safeguard the company's assets and interests from self-dealing or conflicts of interest.