by Michał Żołubak, Siemiątkowski & Davies Warsaw law firm The Polish Government has started legislative works on the draft bill significantly amending the Commercial Companies and Partnerships Code[1]. The proposed changes are intended to provide more flexibility to entrepreneurs wishing to conduct (or conducting) business in the form of a limited liability company (spółka z ograniczoną odpowiedzialnością)[2]. Although, the draft of the bill has not yet been completed, new solutions and directions of intended changes can already be found in the official governmental assumptions to the draft bill[3] (the “Assumptions”). NPV shares and “1 PLN companies” According to the Assumptions the shareholders will be free to decide on the type of shares to be created in the company. Apart from the “old” type of shares (Par Value shares), the shareholders will be given an option to create the No Par Value (NPV) shares (udziały beznominałowe). Currently, payments to cover shares in the company (PV shares) are made towards obligatory statutory minimum capital (kapitał zakładowy). All amounts contributed by the shareholders to cover the NPV shares will be allocated towards a new type of capital created in the company – equity capital (kapitał udziałowy). Therefore, NPV shares and any amounts contributed by the shareholders to cover them, will not be related with the company’s statutory minimum capital (see below). As a result the NPV shares will facilitate financial restructurings of the company in the event of insolvency risks because the company will be able to issue them at the market price and without a need to complete formal procedures to change the company’s Articles of Association. Additionally, the amounts contributed by the shareholders towards the equity capital will be easily returnable to the shareholders (provided the solvency test is satisfied – see below) i.e. without completing convocation procedure[4] what otherwise had to be done if the shares were Par Value shares. According to the Assumptions the shareholders will be free to create NPV shares and PV shares in the same company (and hold both types of shares) as well as create companies with only NPV shares or only PV shares. Therefore, NPV shares will carry the same rights and obligations as the PV shares. As mentioned above the equity capital created by way of issuance of the NPV shares will become an alternative to the minimum capital (and PV shares). The Assumptions provide that the present statutory level of the minimum capital of the company amounting to PLN 5,000 is arbitrary and does not provide for sufficient security of the company’s creditors. Therefore it is intended to decrease the statutory level of the minimum capital to PLN 1.00 along with introduction of new instruments providing more security for the company’s creditors. Solvency test and comfort of the company’s creditors One of the instruments that is intended to provide more security to the company’s creditors is the solvency test. The solvency test will apply in the event when the company intends to pay its shareholders any amounts arising from the corporate relationships. In such case the company’s management board will be vested with the duty of care since any payments will require a statement of the board that they will not result in the company’s failure to pay its liabilities (during normal course of business) within one year. The above statement (resolution) of the company’s management board will have to be filed with the Commercial Registry, thus being publicly available. The solvency test will also apply to the existing type of the company (i.e. based exclusively on the minimum capital with PV shares). Additionally, the management board of the company will be obliged to perform periodic assessments of the level of company’s solvency as well as risks of the significant loss to the company. In such cases the board will have to convene a shareholders’ meeting thus the shareholders will be aware of the risks and will be able to take appropriate steps to avoid them. The company’s creditors’ comfort should also be increased since the company will be obliged to create a supplementary capital (kapitał zapasowy) to cover future losses[5]. The supplementary capital will amount to 5% of the company’s debts (liabilities) but not less than PLN 50,000. The duty to create the supplementary capital will arise only if the company makes profits. It will be obliged to create such reserves against 1/10 of the profits gained. The supplementary capital should provide more security to the company’s creditors since its amount will correspond with the company’s actual scope of business what stands in contrast with the current minimum capital requirement the level of which is arbitrary. Summary Polish law regulating the company is going to be significantly amended. The aim of the intended revisions is to make this type of company a more competitive form for operating a business compared to the Western European regulations[6]. The possibility of creation of NPV shares and “1 PLN company” should provide the shareholders with some more flexibility in conducting their business. The company’s creditors should enjoy more comfort since the solvency test and other instruments are going to be introduced. All the above changes are welcomed but because the draft bill is not announced yet, it is hard to fully assess the bill’s purview and the scope of the impact of changes resulting therefrom. Especially the idea of “1 PLN company” and the solvency test should result in further simplification of the company’s operations – e.g. the requirement to indicate the amount of the minimum capital on the company’s website or business letters etc. should be abandoned. According to the Assumptions the new regulations should enter into force as of 1st January 2015, but as mentioned above the final scope of changes is yet to be seen.
[1] The Act dated 15th September 2000, Commercial Companies and Partnerships Code (Journal of Laws No. 94, item 1037 as amended). [2] For the needs of this article the “company” shall mean limited liability company (“spółka z ograniczoną odpowiedzialnością”). [4] In general the company has to notify the creditors about the planned decrease of the minimum capital and secure their (even potential) claims. Only after that the amounts may be returned to the shareholders. [5] Creation of such type of capital is currently mandatory in regards to the joint stock company (spółka akcyjna). [6] Similar regulations already exist in Finland, France, Germany and Netherlands.