In our August briefing, we present a corporate case-law decision (Case No. 28 Cdo 945/2025) issued by a Supreme Court panel that is not specialised in corporate law. This time we shall guide you through attributability of knowledge and good faith to the collective body of a legal entity.
As one of the several relevant questions of law in the discussed case, the Supreme Court also considered good faith of a legal entity. The question was how various corporate body members’ knowledge of potential acquisition by prescription was attributable to the entire legal entity and whether that legal entity could have been in good faith under the previously applicable Civil Code when believing that it owned the thing at issue. In other words, the question was whether the entity could have assumed to be a rightful possessor.
The law provides that such a possessor ceases to be in good faith as soon as they become aware of facts that must have objectively cast doubt over their belief that the thing in question belonged to them rightfully. In the discussed case, such a fact was presumably known only to one of several members of the board of directors of a joint-stock company, i.e., one of several members of a collective body.
The Supreme Court referred to established case law that conditions the knowledge of a governing body on the knowledge of a majority of its members. Therefore, in line with the general rule, if one member of the board of directors is aware of a fact precluding good faith, it may not be sufficient to rule out good faith of the entire multi-member collective body. It would have to be shown that a majority of members of such a body were aware of such a fact.
However, case law has already established several exceptions to this general rule. These exceptions apply in particular where adherence to the general rule would be disproportionate, leading to manifest injustice. Thus, the courts held in the past, for example, that one employee aware of a certain fact is sufficient to attribute the knowledge to the whole entity. This might be, for instance, the head of the legal department handling legal affairs for the given legal entity.
What does the present decision imply? On one hand, it is certainly necessary to know the general rule for attributing knowledge to the collective body of a legal entity. On the other hand, legal entities must have an effective control system in place that will prevent, to the maximum extent possible, any excesses that could break the general rule to the detriment of the legal entity. We already stressed the importance of having such a system. And who is responsible for implementing it? It is, of course, the governing body of the legal entity.
