corporate | In Principle

In just a few days, it will be possible to carry out intergenerational succession in Polish companies through the vehicle of a family foundation. This new legal entity is designed to meet the needs of business owners, who until now have been condemned to relatively limited choices under general provisions, or could choose foreign jurisdictions to set up a family foundation (e.g. in Austria, Liechtenstein, Malta, or the Netherlands).

Along with the provisions allowing for establishment of a family foundation, entirely new tax provisions are being introduced, with attractive rules for taxation of asset transfers and foundation activities, but also a slightly too varied patchwork of tax rates.

Like any other legal form, a family foundation may also involve the risk that the management of assets will be delegated to incompetent persons, the foundation will act in a manner contrary to its stated purpose or the interests of its beneficiaries, or it will conduct business activity in areas not permitted for a family foundation. However, in the Family Foundations Act, the Polish parliament has provided certain tools to prevent such situations.

It is no secret that Polish family-owned businesses struggle with the issue of succession. This has prompted the parliament to introduce a new institution, the family foundation. It is intended to allow for multi-generational succession and protect against the fragmentation of assets, while securing the means to support family members and others close to the founder.

The amendments to Poland’s Commercial Companies Code which entered into force on 13 October 2022 standardised the calculation of the terms of management board members, introduced new duties to take minutes of management board and supervisory board meetings in limited-liability companies, and expanded the catalogue of offences resulting in a ban on serving as a member of corporate bodies or as a receiver or commercial proxy. The question is whether the amendment will have a positive impact on the functioning of corporate authorities.
The amendments to Poland’s Commercial Companies Code which entered into force on 13 October 2022 standardised the calculation of the terms of management board members, introduced new duties to take minutes of management board and supervisory board meetings in limited-liability companies, and expanded the catalogue of offences resulting in a ban on serving as a member of corporate bodies or as a receiver or commercial proxy. The question is whether the amendment will have a positive impact on the functioning of corporate authorities.

In recent years, ESG has been mainly about “E”—environmental aspects, which were most often subject to regulation. Now there is increasing emphasis on social (S) and corporate governance (G). A noteworthy measure in governance is the EU’s Gender Balance Directive, which came into force at the end of 2022. The directive is intended to ensure more balanced representation of women and men among directors of listed companies.

Poland’s Commercial Companies Code provides for a number of institutions strengthening the position of minority shareholders. One is that shareholders representing a fifth of the share capital may demand that the company’s supervisory board be elected by voting in separate groups (Art. 385). This is a departure from the statutory method of appointing the supervisory board by a resolution of the general meeting adopted by a simple majority of votes. One or more shareholders representing 20% of the share capital may demand that the supervisory board be elected in groups, even if the company’s statute provides for a different way of appointing the supervisory board, e.g. through personal entitlements.

An increase in the share capital of a limited-liability company without amending the articles of association is often used as a simpler, faster and, in theory, cheaper method of increasing the capital. But in practice, due to the ambiguous wording of the regulations, doubts may arise about this method of capital increase and the form of the documents required for its effective implementation. What should be kept in mind for a simplified share capital increase to be carried out correctly?

Over the past decade, Polish lawmakers have taken many efforts to adapt the functioning of businesses in legal transactions to the current technological realities. We have witnessed the launch of electronic registration of companies, as well as the transfer of much of the National Court Register’s activity to the web. More changes are planned for the coming years.

Commercial partnerships, including limited partnerships, operate in principle on the basis of mutual trust and close cooperation between the partners. The composition of a limited partnership is most often fixed, but this does not mean that the partnership has to be dissolved whenever a partner decides to leave. There are several possibilities for a partner to withdraw from a limited partnership. Two of them are provided for expressly in the Commercial Companies Code, but they may prove inadequate to the dynamic needs of commercial practice. The third, non-code way of leaving a partnership, however useful, raises some doubts.

In November 2022, the leaves were falling from the trees to the rhythm of ESG. First, the European Parliament and then the Council of the European Union approved the draft Corporate Sustainability Reporting Directive. Then the European Financial Reporting Advisory Group submitted the first set of draft European Sustainability Reporting Standards to the European Commission.

The Commercial Companies Code contains rules facilitating mergers of companies where there are few owners and little risk of harm to stakeholders, and thus the law allows certain provisions to be waived. But it is essential to apply the regulations properly so that the merger is carried out effectively and can be entered in the National Court Register.