Amendments to the Polish Commercial Code

Amendments to the Polish Commercial Code

The existing legal regulations in Poland do not fully address the problems associated with the operation of company groups. In order to enable companies to function more efficiently, and due to the rapidly changing market and the necessary adaptation of companies to current realities and needs, several changes are coming as a result of amendments to the Code. Today we will tell you about the 9 main changes.

There have been repeated calls for the current wording of the Commercial Companies Code to regulate the operation of groups of companies more precisely. It has been pointed out that the provisions should reflect the fact that companies are often viewed from a business perspective as a single economic entity. In response, on 1 October 2021, the Lower House of Parliament debated draft amendments to the Code and envisaged a number of significant changes, including the introduction of provisions on groups of companies (so-called holding law).

The draft amendments aim to streamline ownership structures in groups of companies and to clarify the rules of their operation. On the occasion of the introduction of the holding law, the planner also equips supervisory boards with tools for more effective supervision of companies and proposes to eliminate some of the doubts raised by entrepreneurs and representatives.

The most significant of the amendments to the Commercial Companies Code are set out below:

  • Introducing the formal possibility of forming a capital group with a common interest – subject to a decision by the shareholders of the subsidiary and disclosure to the CRA;
  • Issuing of binding instructions to subsidiaries by the parent company. The subsidiary’s board of directors will have a limited possibility to refuse to carry out such an order;
  • Introducing the possibility of compulsory redemption of shares of minority shareholders of a subsidiary (squeeze-out);
  • Right of minority shareholders of the subsidiary to apply to the court for the appointment of an expert to examine the group of companies;
  • Liability of the parent company to the subsidiary for damages related to the execution of a binding order (subject to certain conditions);
  • Liability of the parent company to the partners or shareholders of the subsidiary for a reduction in the value of that partner’s or shareholder’s share as a result of the subsidiary’s execution of a binding order;
  • Liability of the parent company to the creditors of the subsidiary in the event of ineffective enforcement against the subsidiary, unless there is no fault of the parent company or the damage was not caused by the subsidiary’s performance of a binding order;
  • Limitation of the liability of members of management boards and supervisory boards vis-à-vis capital companies – members of these bodies are not liable to the company for damages resulting from acts of loyalty to the company, within the scope of reasonable economic risk (i.e. the so-called business judgement principle);
  • Extension of the powers of supervisory boards, including the authorisation to use an independent consultant (at the company’s expense) or to create special committees.
  • In addition, the amendment introduces significant changes in the perception of companies as components of a larger organisation, such as a capital group. In this context, it is worth noting the changes to the liability rules within a group of companies.

Many analysts believe that the proposed amendments to the Commercial Companies Code and the new rules for groups of companies may be beneficial to certain entities. In particular, the proposed compulsory buy-out mechanism in a subsidiary could be used to strengthen the position of the parent company. Currently, the removal of minority shareholders in a limited liability company can only occur for good cause and by court order. The enactment of the proposed legislation will facilitate significant structural changes in certain groups of companies.

If you have any questions, please email office@progressholding.pl.

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