The newer, friendlier administrative audio
With all the changes in interpretation and law over the last few years, it is possible that not all your paperwork is up-to-date or complete. Combine this natural fear with the well-publicized accounts of large and small business being driven to bankruptcy by aggressive administrative officials, and you might feel the first signs of panic.
The new Act on Freedom to Conduct Business Activities is no panacea for all that ails Poland's business climate. At least, though, it gives us some warm, fuzzy language on the role of administrative authorities and, more substantively, places some restrictions on administrative audits.
As the name of the act implies, it starts by reaffirming freedom to conduct business on equal terms. It then states that administrative authorities are to support entrepreneurial development by creating favorable conditions for doing business, especially for small and medium-sized enterprises (SMEs). Further, it gives the promise that some of these authorities may be allowed to provide specific assistance to business, including by providing interpretations of law (starting next year).
I can't imagine that pointing out to Pani X at Ministerstwo Y that she has an obligation to be helpful is likely to get you anything. But at least we see some substance regarding those dreaded audits. The act lays out the procedures for an audit and restricts the length of audits. Take note; it also places some obligations on businesses with respect to audits.
So, how will that audit look? On the fateful day, a helpful civil servant will appear at your door, show you her badge and hand you her authorization to conduct the audit. Take a good look at the authorization. It should indicate, among other things, the following information: legal basis (a cite to appropriate law), the identity of the person standing in front of you, the authority conducting the audit, its scope, and its start date and planned finish date. Next, you should put the authorization in a safe place (not the round file)-but more on this later.
The Act also specifies the maximum length of all audits within one year. For SMEs, the maximum length is 4 weeks. For all other businesses, it's up to 8 weeks.
The act introduces a definition for SMEs that is based on revenue and/or number of employees. You fall into the medium-sized category if you have annual revenues of less than E50 million, balance sheet assets of less than E43 million and less than 250 employees. The same criteria are used for the definitions of a small enterprise (revenues and balance sheet assets not exceeding E10 million; less than 50 employees) and a micro-enterprise (revenues and balance sheet assets not exceeding 2 million; less than 10 employees).
For those concerned that bad luck comes in pairs, the Act at least prevents simultaneous action. Except for a few specified exceptions, two administrative authorities may not conduct audits at the same time.
All businesses must maintain an audit log. During the audit, the civil servant will write into the log information about the audit, including the authority conducting it, its scope, the number of the authorization, the start and finish date, any administrative recommendations and a specification of the audit methods. If you received any administrative recommendations, you will need to note later in the log, as appropriate, either that you complied with the recommendation or that the authority withdrew the recommendation.
Going back to that authorization that you received, you need to keep all authorizations and audit protocols, preferably in the same safe place that you maintain the audit log. Administrative authorities may request to review these documents at any time.
In light of the mixed reviews that Poland has received lately on its business climate, it is reassuring to see that the government has a desire to encourage business activities. Moreover, it is particularly refreshing to see an attempt to rein in those real and perceived tendencies for administrative authorities to be overzealous or moored in practices that date from a bygone era.
Judith Gliniecki is a partner with Rymar i Wspólnicy.
The new Act on Freedom to Conduct Business Activities is no panacea for all that ails Poland's business climate. At least, though, it gives us some warm, fuzzy language on the role of administrative authorities and, more substantively, places some restrictions on administrative audits.
As the name of the act implies, it starts by reaffirming freedom to conduct business on equal terms. It then states that administrative authorities are to support entrepreneurial development by creating favorable conditions for doing business, especially for small and medium-sized enterprises (SMEs). Further, it gives the promise that some of these authorities may be allowed to provide specific assistance to business, including by providing interpretations of law (starting next year).
I can't imagine that pointing out to Pani X at Ministerstwo Y that she has an obligation to be helpful is likely to get you anything. But at least we see some substance regarding those dreaded audits. The act lays out the procedures for an audit and restricts the length of audits. Take note; it also places some obligations on businesses with respect to audits.
So, how will that audit look? On the fateful day, a helpful civil servant will appear at your door, show you her badge and hand you her authorization to conduct the audit. Take a good look at the authorization. It should indicate, among other things, the following information: legal basis (a cite to appropriate law), the identity of the person standing in front of you, the authority conducting the audit, its scope, and its start date and planned finish date. Next, you should put the authorization in a safe place (not the round file)-but more on this later.
The Act also specifies the maximum length of all audits within one year. For SMEs, the maximum length is 4 weeks. For all other businesses, it's up to 8 weeks.
The act introduces a definition for SMEs that is based on revenue and/or number of employees. You fall into the medium-sized category if you have annual revenues of less than E50 million, balance sheet assets of less than E43 million and less than 250 employees. The same criteria are used for the definitions of a small enterprise (revenues and balance sheet assets not exceeding E10 million; less than 50 employees) and a micro-enterprise (revenues and balance sheet assets not exceeding 2 million; less than 10 employees).
For those concerned that bad luck comes in pairs, the Act at least prevents simultaneous action. Except for a few specified exceptions, two administrative authorities may not conduct audits at the same time.
All businesses must maintain an audit log. During the audit, the civil servant will write into the log information about the audit, including the authority conducting it, its scope, the number of the authorization, the start and finish date, any administrative recommendations and a specification of the audit methods. If you received any administrative recommendations, you will need to note later in the log, as appropriate, either that you complied with the recommendation or that the authority withdrew the recommendation.
Going back to that authorization that you received, you need to keep all authorizations and audit protocols, preferably in the same safe place that you maintain the audit log. Administrative authorities may request to review these documents at any time.
In light of the mixed reviews that Poland has received lately on its business climate, it is reassuring to see that the government has a desire to encourage business activities. Moreover, it is particularly refreshing to see an attempt to rein in those real and perceived tendencies for administrative authorities to be overzealous or moored in practices that date from a bygone era.
Judith Gliniecki is a partner with Rymar i Wspólnicy.
