Incorporating in 2001
As I mentioned in the last "Legal Side" column, a true revolution is awaiting Polish commercial lawyers (and of course their clients) with the arrival of the 21st century. Among the numerous changes in the law destined to take effect as of Jan. 1, 2001, the new Code of Commercial Partnerships and Companies is likely to have some of the furthest-reaching consequences.
With the introduction of the Code, some of the most routine questions posed by our clients will now cease to be simple (at least for a while). One of these formerly routine questions was: "How do I set up my business in Poland?"
Although the Code introduces several new forms of partnerships and corporations, the tried-and-true limited-liability company (the famous Sp. z o.o.) is likely to remain one of the most popular forms of doing business in Poland. While the overall process for setting up a limited-liability company under the Code appears to be similar to the one under the current law, certain novelties and numerous new detailed regulations would suggest that anyone desiring to set up a new limited-liability company should proceed with caution.
As under the current law, one of the first steps under the Code for setting up a limited-liability company is the execution of articles of association in the form of a notarial deed. The Code specifies a number of mandatory provisions such as: the name of company and registered office, scope of business activity, share capital, number and nominal value of shares acquired by particular shareholders, etc. Currently, the Code also lists several provisions that are mandatory in specific cases. Of course, shareholders are free to introduce other provisions into their articles of association as long as they are not contrary to the Code or to generally applicable provisions of law.
The Code introduces an extra element of importance to the execution of the articles of association. Upon its execution, a "limited-liability company in organization" is created. Generally speaking, this new status allows a company to acquire rights, undertake to perform obligations and be a party in court proceedings prior to registration. Several other important provisions regulating the operation of companies in organization (including those dealing with liability for obligations) have been introduced as well. These new regulations should hopefully help solve some of the theoretical and practical difficulties that have arisen under the current law with respect to the status of a limited-liability company not yet entered into the commercial register.
The second step under the Code is the payment of share capital. The Code regulates this issue in somewhat greater detail than current law. The most significant and obvious change relates to the amount of the share capital. The minimum share capital of a limited-liability company now amounts to zl. 50,000 (previously zl. 4,000). Similarly, the minimal nominal value of one share has been increased to zl. 500. Anyone thinking of incorporating a limited-liability company in Poland will definitely have to reconsider any previous calculations as the minimum share capital has been raised over twelvefold.
The third step in incorporating a limited-liability company under the Code is the appointment of the company's governing authorities. A limited-liability company must have a management board. Generally speaking, a limited-liability company does not need to have a supervisory authority (supervisory board or audit committee), except if required by a specific provision or the company's articles of association. The shareholders may appoint the members of the company's governing authorities in the articles of association or at a later time as long as these persons have been named prior to filing an application for the registration of the company.
Once the shareholders (and their hardworking lawyers, of course) complete all of these initial steps, the management board of the limited-liability company in organization is ready to file an application to the registry court for entering the company into the register. The Code sets forth a number of requirements regarding the application, many of which will appear familiar to anyone with experience in setting up companies under current law. Some novelties do occur, of course. A rather interesting one to note is that the application must contain the home addresses of the company's management board members. Without going into excruciating detail, I would like to remind you that other aspects of the registration process will be governed by the new law on the national court register, which also comes into force on Jan. 1. On entry into the court register, a new limited-liability company will be born. Various other formalities remain to be finished before starting business, but let's leave these for post-registration desserts.
Lest I be accused of only dwelling on the negative aspects of change, I will close on an optimistic note. In many cases, minor mistakes made in the process of incorporating a limited-liability company will not automatically entitle the court to refuse registration. Certain mistakes will only need to be fixed upon request within a specified deadline, whereas others should even be ignored by the court. Let us hope that the courts will take a liberal view on issues that can be interpreted in different ways, giving us time to learn the new rules of incorporation under the new Code.
This article has been prepared by Lejb Fogelman, the managing partner of Hunton & Williams' Warsaw office, with the assistance of Bartlomiej Ziebinski, an associate attorney.
