Abolition of conflict of interest transactions regulation in the limited liability companies effective as of January 1, 2016
Subject to Section 59a of the Commercial Code, if a company acquires a property on a basis of contract concluded with its founder or shareholder for a consideration amounting to not less than 10 % of the authorized share capital value, the value of the contractual subject matter shall be determined by an expert opinion. This section introduces also other limitations and duties with respect to conflict of interest contracts (e.g. the effectiveness of such contract is bound to its filing in the collection of documents jointly with the expert opinion etc.).
While Section 59a currently applies to both limited liability company and joint stock company, as of January 1, 2016, its application will be limited only to the latter one. According to the legislator`s reasoning in an explanatory report to the Commercial Code`s latest amendment, a regulation of conflict of interest transactions in a limited liability company currently means an excessive administrative burden. After January 1, 2016, a limited liability company will be protected from the hidden contributions in kind by redrafted/new provisions on contribution pay-back prohibition.
It shall be also mentioned that as of July 1, 2015, Section 59a will be amended by a new provision, according to which a value of the consideration provided under the contract ineffective due to Section 59a shall be returned back to the company according to unjust enrichment provisions; the members of statutory body, who exercised their function at the time of its provision, do jointly and severely guarantee its paying back. In addition, also the persons who have been exercising the function of the statutory body member at the time the company has been idle in claiming the consideration shall guarantee its paying back if, with regard to all the circumstances, they knew or should have known thereon.
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