The times they are a changing
At a time when everybody is looking to the New Year with the usual hope for change, most Polish lawyers wish they were facing less novelty in 2001. The reason for this unorthodox attitude to the New Year is that Jan. 1, has been earmarked as the day on which revolutionary changes to the laws of Poland will take effect. It will mark the introduction of three important new acts that will affect every person doing business in Poland. In addition to the usual anxiety induced by change, the effect has been magnified by loopholes, ambiguities and apparent contradictions in the three new acts and, perhaps even more importantly, the fact that some amendments to these acts are already on the drawing board.
While we could wax on with long polemics about the new acts until we are blue in the face, it will not change the fact that we will still be living with them over the next few years. While no single article could hope to point out all of the significant changes, I would like to signal some of the more important things to consider in the coming months.
The three laws at issue are the Law on Commercial Activity (Prawo o Dzialalnosci Gospodarczej) of Nov. 19, 1999; the act on the National Court Register (Ustawa o Krajowym Rejestrze Sadowym") of Aug. 20, 1997; and the Code of Commercial Partnerships and Companies (Kodeks Spolek Handlowych) of Sept. 15, 2000.
The Law on Commercial Activity intends to regulate in one place all principal issues related to doing business in Poland. The new Law supersedes a number of existing laws on business activities, including those on the conduct of business activities by foreigners and on branch and representative offices. Thus, one law will regulate both business activities conducted by foreigners and those conducted by Polish persons and entities.
The all-encompassing Law is based, in relation to foreign persons, on the principle of reciprocity, and as such it clearly illuminates the intention of the legislators to open the Polish market further. As a result, from Jan. 1, foreign investors will have full discretion as to the form by which they will conduct their business activities, with reservation of reciprocity. Foreign investors hailing from countries that do not treat Polish entities and persons reciprocally should take heart. In addition to the limited-liability company and joint-stock company forms with which they are so familiar, these investors will also be able to do business in the form of a limited partnership.
The new Code of Commercial Partnerships and Companies makes it worthwhile to consider whether you come from a country granting Poles reciprocity. It adds to the list of permissible forms of business three new types of entities: the general partnership (spolka jawna), the professional partnership (spolka partnerska) and the joint-stock limited partnership (spolka komandytowo akcyjna). These last two types of entities are entirely new to the Polish legal system.
As we are on the subject of establishing a business in Poland, it is worth mentioning one of the potential problems that Jan. 1 ushers in. The Law on Commercial Activity stipulates that "entrepreneurs" may only conduct "commercial activities" if they are recorded in the commercial register. The Act on the National Court Register, not surprisingly, also addresses the issue of registration. It provides that an application for registration must be submitted within seven days from the moment that an event justifying registration occurs. As a result of this potential conflict, you are prohibited from doing business prior to registration, but at the same time, you are required to start doing business prior to registration to justify your application for registration. We can only hope that the Registry Courts will have the presence of mind to adopt a rational and practical interpretation of these two laws if a pending amendment to the Act does not solve the problem in the meantime.
For those who already have businesses up and running in Poland, the most important thing about Jan. 1 is that the three-year clock for bringing current businesses in compliance with the new corporate requirements begins ticking. Among other changes, the new Code increases the threshold of minimum share capital for limited-liability companies from zl. 4,000 to zl. 50,000 and for joint-stock companies from zl. 50,000 to zl. 500,000.
There is also good news on the share capital front. The Code introduces an important and long-awaited change to provisions regulating the capital of a joint-stock company. A joint-stock company may now have authorized share capital, or as close to an equivalent as the continental system of legal thinking permits. Correspondingly, the shareholders of a joint-stock company may adopt resolutions on the increase of the share capital of a joint-stock company within specified minimum and maximum bands. This change should give great holiday cheer to all publicly held companies that have had to do legal acrobatics with underwriters to structure a way of issuing shares to the public that assures that all will be bought before even being made available for purchase.
Another change introduced by the new Code suggests that you may be getting better acquainted with your local notary. The Code substantially increases the number of corporate documents that must be prepared in the form of a notarial deed. For example, a sale of shares in a limited-liability company or a declaration of a sole shareholder addressed to a company will not only need to be in writing, but will also need to be certified by a public notary.
In short, enjoy New Year's Eve, but be prepared to roll up your sleeves upon your return to work in January.
This article was prepared by Lejb Fogelman, the managing partner of Hunton & Williams Poland, with the assistance of Joanna Fonfara, an associate attorney.
