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Filling the Gaps in Polish Corporate Law

Filling the Gaps in Polish Corporate Law

Poland
Typography

On 30 November 2018, a new law implementing several changes to existing legislation (1), notably to the Civil Code and the Commercial Companies Code, as well as to tax laws, was announced. The new law, which will enter into force at the beginning of 2019 (with respect to matters commented on below, mostly as of 1 March 2019).

Once in force, the amendments will clarify many practical issues that companies now face. The new legislation will also lift or ease several bureaucratic burdens related to notifications and filings required under the tax and accountancy laws, and modify labour law and tax legislation in a manner generally favourable to entrepreneurs.

Selected implications for day-to-day corporate operations

  • Dividends – Receiving shareholders might need to return advance payments for dividends if the actual profit at the end of the given financial year turns out to be lower than the advance payments paid out for that year (or, naturally, if there is a loss).
  • AGM – The resolutions of the annual shareholders' meeting of a limited liability company (sp. z o.o.) can be adopted in writing (i.e. arguably there will be no need for an actual meeting in Poland). Moreover, there will be no requirement to attach the originals of the powers of attorney to the minutes of the shareholders' meetings of limited liability companies or general assemblies of joint stock companies (S.A.). Copies will suffice.
  • Resignation of board members – If there is only one management board member, he or she may resign only by submitting notice of resignation to the shareholders (in the case of a limited liability company) or supervisory board (in the case of most joint stock companies) at a shareholders' meeting (general assembly) at which the shareholders will decide on the appointment of a new management board. The resignation is effective as of the day following the day on which the shareholders' meeting (general assembly) was supposed to take place. The same rules will apply if all the members of the management board plan to resign at once. It also means that not all resignations will be immediately effective.
  • Liquidators – It will be clear from now on that the rules of representations of the company by liquidators may be set forth in the resolution on the opening of liquidation.

Selected implications for M&A processes and for corporate reorganisations

  • Remedy for actions by management board members taken beyond the scope of their authority (ultra vires) – If the management board member of a limited liability company or of a joint stock company acts without proper authorisation or after the expiry of his or her term in office, the actions which the member has undertaken can be rectified. Acting without proper authorisation is often red-flagged in due diligence reports. Pursuant to the modified provisions of the Civil Code, as of 1 March 2019, these situations will be tackled in a manner similar to the process of validating actions undertaken by a proxy acting beyond the scope of (or without) authorisation. Namely, the legal actions undertaken by a board member acting without proper authorisation will require confirmation by the company supposedly represented by the said board member. Unilateral actions (like granting power of attorney) will still be invalid, unless the addressee of the action, knowing and accepting the board member's lack of authorisation, asked the proper body of the company concerned to confirm the unilateral action in question. Interestingly, the new law will also apply to actions undertaken before 1 March 2019 (unless they were subject to examination within civil proceedings concluded and binding before that date).
  • Acquisition of shares from multiple minority shareholders – If as of 1 July 2019 at least three transactions (e.g. extension of a loan or purchase of assets/shares) being subject to tax on civil law transactions were made in the given calendar month (but the last of them not earlier than 14 days before the end of the given month), the taxpayer may prepare and file a single tax filing and make one aggregate tax payment (instead of multiple ones) by the seventh day of the subsequent month.
  • Liability of demerged entity – The new law is supposed to fill the existing gap related to the liability for debts of demerged companies. Now it will be clear that both the demerged company and the entity to which the assets (liabilities) of the demerged company are transferred are jointly and severally liable for liabilities assigned to the latter entity. Liability expires three years after the announcement of the demerger.

Our view

Most of the changes either embrace previous court rulings or clarify which of the concurring opinions of legal commentators should prevail. Therefore, the amendment is indeed welcome and generally positive.

By Krzysztof Pawlak, Counsel Schoenherr

Poland Knowledge Partner

Established in 1957, Wolf Theiss is one of the leading European law firms in Central, Eastern and South-Eastern Europe with a focus on international business law. With 300 lawyers in 13 offices located in Albania, Austria, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia and Ukraine, Wolf Theiss represents local and international industrial, trade and service companies, as well as banks and insurance companies. Combining law and business, Wolf Theiss develops comprehensive and constructive solutions on the basis of legal, fiscal and business know-how.

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