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18 May 2022

The president signed the holding law

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Law

We briefly recall the most important changes introduced to the Polish legal system by the said amendment to the Commercial Companies Code.

On April 4, 2022, the President signed the government bill amending the Commercial Companies Code (KSH) and certain other acts (print 1515). Earlier, the Sejm rejected the Senate’s resolution rejecting the bill. Due to this, the new regulations refer to a large extent (but not only!) To the legal relations between parent companies and their subsidiaries, hence they are often referred to as the so-called “Holding law”.

Below, we briefly recall the most important changes introduced to the Polish legal system by the amendment to the Commercial Companies Code.

 

Holding law

For the first time in the Polish legal system, regulations concerning the law of a group of companies (holding law) appear, referring directly to actual holdings.

A statutory definition of a “group of companies” is introduced – as a parent company and a company or subsidiaries that are capital companies, guided by a common strategy in order to achieve a common interest (interest of a group of companies), justifying the parent company exercising uniform management over a subsidiary or subsidiaries . It is worth emphasizing that, according to the Act, a “group of companies” is a qualified relationship of dominance and dependence between companies that follow a common economic strategy. It is therefore necessary to distinguish a “group of companies” from the “ordinary” relationship of dominance and dependence between companies, as referred to in Art. 4 § 1 point 4 of the Commercial Companies Code. It is essential for group law that the parent company and subsidiary of a group of companies must also take into account the “interest of the group of companies” in addition to the own interests of each company.

Participation in the group of companies is voluntary. It requires adopting a resolution of the shareholders’ meeting (general meeting) of the subsidiary with an indication of the parent company and disclosure of participation in the group by entering a note in the register. The parent company may issue binding instructions to the subsidiary participating in the group regarding the conduct of the company’s affairs.

More on the institution of binding orders and responsibility for their execution: < under this link >.

 

Changes in the law of compulsory buyout and repurchase of shares (stocks) of minority shareholders (squuze-out and sell-out)

The legislator has increased the availability of the use of the institution of compulsory buyout of shares (stocks) – squuze out, moving this institution also to a limited liability company. So far, the squuze out has been available only under the provisions of S.A. In addition (both in the case of S.A. and sp.z o.o.), the statutory thresholds for its application have been liberalized – in principle, a compulsory buyout may apply to shares or stocks representing no more than 10% of the share capital by the parent company that has at least 90% of the share capital ( so far, squuze out was only possible with regard to minority shareholders representing no more than 5% of the share capital by shareholders representing at least 95% of the share capital).

Identical statutory solutions – i.e. introducing the institution also in sp.z o.o., liberalization of the application conditions (the same as in the case of squueze out) were applied to the sell-out institution – compulsory repurchase of shares / stocks belonging to minority shareholders of a subsidiary.

It is worth noting that the above (new regulations) regarding squuze-out or sell-out apply to companies participating in the group of companies. Regardless of this, the current squuze out (sell-out) mechanism on general principles for private S.A. (Art. 418 of the Commercial Companies Code), including the conditions for its application, remain unchanged.

 

Broader powers of supervisory boards, more effective supervision

The new regulations provide for more specific rights and obligations of the supervisory board in order to increase the effectiveness of supervision in capital companies. The amendment to the Commercial Companies Code also places emphasis on the effectiveness of maintaining the information balance between the management board and members of the supervisory board, and on the control mechanisms of supervisory boards.

The provisions introduce, among others: the right of the supervisory board to request preparation / submission of information, documents, reports, explanations, the obligation of the management board to provide certain specific information to the supervisory board on its own initiative, new reporting obligations of the supervisory board, regulations on supervisory board committees, a new instrument as an advisor to the supervisory board (an external entity with expertise and qualifications to audit specific issues).

 

Changing the liability rules for members of the management board and members of supervisory boards

The rules of liability of members of corporate bodies will be based on the category of “business judgment” – the business judgment rule. The amendment to the Commercial Companies Code explicitly stipulates the obligation of loyalty of members of the management board and supervisory board of capital companies. A member of the body is obliged to perform his duties with due diligence resulting from the professional nature of his activity and to remain loyal to the company. In practice, based on the principle of business assessment of the situation, a member of an authority does not breach the obligation to exercise due diligence if he or she has consulted, in the performance of his duties, analyzes that should be taken into account in the given circumstances when making his assessment.

 

A new way of shaping the term of office and mandates of members of company bodies

The amendment resolves the doubts of the doctrine and jurisprudence regarding the determination of the moment of expiry of the mandate in connection with the end of the term of office. As a general rule, the term of office is calculated in full financial years (unless otherwise stated in the articles of association).

 

An extended catalog of people excluded from performing functions in company bodies

The catalog of persons excluded from being a member of the body, liquidator, and proxy has been expanded. The extension of the catalog of excluded persons is related to the extension of the catalog of crimes for which a person to be a member of the body, liquidator or commercial proxy cannot be convicted by a final judgment. In the criminal part of the Commercial Companies Code, additional types of crimes appeared.

You can read more about the liability of members of bodies in capital companies based on the new regulations in the article by Urszula Brzezińska-Grzęda and Tomasz Fiałek (ALTO)<under this link >

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