From this post you will learn:
– Whether running a business as a joint stock company in Poland is really as complicated as commonly accepted.
Advantages and disadvantages of a joint stock company in Poland
A joint stock company in Poland, like a limited liability company (more here), is a capital company. A joint-stock company in Poland is considered to be one of the most complicated forms of running a business. In fact, it has certain obligations that are not present in other types of companies. The disadvantages of a joint-stock company in Poland include the high cost of setting up and running a company, the obligation to keep full accounts or the need to have a high share capital of at least PLN 100,000 (which is a significant difference to a limited liability company, which you can read about here). Nevertheless, it also has a number of advantages that other companies do not offer. The unquestionable advantages are the possibility to raise capital by issuing shares, the exclusion of liability of shareholders or the possibility to inherit shares, as well as extensive possibilities for building corporate governance in the company and mechanisms for securing minority shareholders.
What taxes apply to a joint stock company in Poland?
A joint-stock company in Poland, as a legal entity, is a taxpayer of typical public law duties. Thus, a joint-stock company in Poland pays VAT on its transactions (although it may be subject to exemptions) or real estate tax if it owns real estate.
The company is a taxpayer of corporate income tax (CIT). In the case of a distribution of profits of a joint-stock company in Poland, which is made by way of a dividend to a shareholder, income tax (PIT if the shareholder is a natural person or CIT if the shareholder is a legal person) is also paid by its partners (shareholders). Polish tax regulations (of course, upon fulfilment of certain conditions, including above all the condition of capital ties at an appropriate level) offer the possibility of dividend exemption in the case of profit distributions between capital companies.
Smaller joint-stock companies in Poland may apply a flat tax rate of 9% to their income. Here, it is necessary that the company meets certain conditions. Such a possibility exists if the company’s revenue in the previous financial year, converted into Polish zloty, did not exceed an amount equivalent to the EUR 2 million, and the company is a start-up. Thus, this company also offers a number of tax advantages, similarly to a limited liability company (more here).
What kind of Social Security is applicable to a joint-stock company in Poland?
Being a shareholder of a joint stock company in Poland does not entail the obligation to pay social security contributions. Of course, if the joint-stock company in Poland employs employees, then it will be the payer of contributions for these persons and will be obliged to fulfil all formalities towards the Social Insurance Institution.
What kind of accounting is required of a joint-stock company in Poland?
Every joint stock company in Poland is obliged to keep full accounts. An additional obligation has been imposed on joint-stock companies in Poland in the form of not only the preparation of financial statements, but also the audit of each annual report by an independent auditor. Joint stock companies in Poland are therefore not allowed to keep simplified accounting or a tax ledger.
Who represents a joint stock company in Poland?
As in the case of a limited liability company (more here), in its day-to-day operations a joint stock company in Poland is represented by its board members. Serving as a member of the board of directors is a big responsibility and in certain cases board members may be liable for their actions (as you will read below).
Pursuant to Article 373 § 1 of the Commercial Companies Code, if the board of directors is composed of more than one person, the manner of representation of the company should be specified in the company’s articles of association. If the articles of association do not contain any provisions specifying the manner of representation, two members of the management board acting jointly or one member of the management board acting jointly with a proxy are required to submit declarations on behalf of the company. At the same time, it should be borne in mind that pursuant to Article 373(2) of the Commercial Companies Code, declarations made to the company and service of letters may be effected on one member of the management board or a commercial proxy. Thus, even if joint representation is in force in the company, any declaration of will of the counterparty (e.g. on the termination of a contract) may be made to any member of the management board of a joint-stock company.
Who is liable for the debts of a joint stock company in Poland?
Liability for debts in a joint-stock company in Poland is, in principle, similar to that of a limited liability company. The company therefore has its own assets from which creditors should first seek to satisfy their claims. The company’s shareholder does not bear any responsibility for the company’s debts, except as described below. Thus, in the event of, for example, the company’s bankruptcy, the shareholder risks only the funds he or she has paid to the share capital of the company.
However, the Commercial Companies Code provides for a certain situations in which a shareholder’s liability may arise. Prior to the entry of a joint-stock company in Poland in the register, shareholders are liable for the company’s obligations arising during that period. This liability is of a joint and several nature. Shareholders are liable together with the company and the persons acting on its behalf while the company was in organisation.
However, this type of liability is limited to the amount of the unpaid contribution to cover the shares subscribed for by the shareholders concerned.
A member of the management board of a joint stock company in Poland, like a member of the management board of a limited liability company, is liable for the company’s tax arrears, the due date arose while he or she served as the member of management board. However, in order to speak of the board member’s liability, first the execution from the Polish joint-stock company’s assets must be ineffective. The liability of several members of the management board is joint and several and covers all their assets. In addition, the provisions of the Tax Ordinance allow a board member to evade this liability if he or she demonstrates that a bankruptcy petition had been filed in due time or that restructuring proceedings within the meaning of the Restructuring Law had been opened at that time or an arrangement had been approved in the proceedings for the approval of an arrangement referred to in the Restructuring Law. In addition, a member of the management board may prove that the failure to file a motion for declaration of bankruptcy was due to no fault of his or her own, or may indicate the company’s property from which enforcement will enable the company’s tax arrears to be satisfied in a substantial part.
As regards the liability of a member of the management board, attention should be drawn to Article 490 of the Code of Commercial Companies, which allows claims (including against members of the management board) to be pursued on general principles, i.e. on the basis of civil law provisions. If a member of the management board grossly fails to fulfil his or her obligations and thereby causes damage to the company’s property, it will be possible to direct claims against him or her.
When is a joint stock company in Poland formed?
The process of formation of a joint stock company in Poland involves several essential stages. First, the articles of association must be adopted and signed. Subsequently, it should be enough for all the shares of the company to be taken up by persons who, by subscribing to those shares become shareholders. With the subscription of shares comes the shareholder’s obligation to make a specific contribution in cash or in kind. Once all shares have been taken up, the company is incorporated and thus a joint stock company in organisation comes into existence. A joint-stock company in Poland in organisation may acquire rights and incur obligations in its own name, as well as sue and be sued. The formation of a company in organisation is also characteristic of a limited liability company. (which you can read about here).
Prior to 1 March 2021, written declarations by the parties to the transaction, either on the share document or in a separate document – the sale agreement – and the transfer of possession to the purchaser were sufficient to transfer ownership of registered shares in a non-public company. In the case of bearer shares, the mere issue of a share document was sufficient. However, on 1 March 2021, revolutionary changes concerning shares in joint-stock companies in Poland came into force, the effect of which is, among other things, that ownership of shares currently only passes upon entry in the shareholder register. As the law currently stands, once a sale agreement has been concluded, an application must be made to the entity maintaining the shareholder register for an amendment to the register. The deadline for making an entry in the shareholders’ register is seven days.
When doing so, the parties to a share transfer transaction should bear in mind that the articles of association may make the disposition of registered shares subject to the company’s consent or otherwise restrict the disposition of registered shares.
Model Articles of Association of a joint stock company in Poland
For the time being, it is not possible to set up a joint stock company in Poland under s24 (such a possibility exists, for example, in the case of a limited partnership, which you will read about here). Consequently, there is no uniform template for a joint stock company in Poland statutes in circulation. What should be included in the Articles of Association of a joint stock company in Poland in order to be valid and effective is set out in the Commercial Companies Code.
The Articles of Association of a joint stock should specify such elements as:
– the company’s name and registered office;
– the object of the company’s business;
– the duration of the company, if specified
– the amount of the share capital; and the amount paid before registration to cover the share capital.
In addition, the Commercial Companies Code specifies additional provisions that may or may not be included in the articles of association. However, in their absence, they are ineffective against the company. For example, the articles of association may contain provisions that provide for share-related performance obligations in favour of the company (in addition to the obligation to pay for the shares). Thus, if such a provision is not included in the articles of association, the joint stock company in Poland will have no basis to claim a performance obligation from the shareholder, other than full payment for the shares.
Can the articles of association of a joint stock company in Poland be terminated?
A shareholder of a joint stock company in Poland does not have the right to terminate the articles of association of a joint stock company in Poland. Therefore, it is not possible, as in the case of partnerships, to withdraw from the company by means of a unilateral declaration of intent such as termination.
How to withdraw from a joint stock company in Poland?
The first way is first and foremost the disposal of shares. The company’s articles of association may provide for various types of restrictions on the sale of shares. However, such restrictions may only apply to registered shares. It is not possible to restrict the disposition of bearer shares. For example, a provision may be included in the articles of association requiring the approval of the board of directors expressed in the form of a resolution or a pre-emptive right to acquire shares to other shareholders.
Another possibility is the redemption of shares. Here, as in a limited liability company, the redemption procedure involves the acquisition of shares by the company and their subsequent annihilation. In order to be able to carry out the redemption procedure, the articles of association of the company must contain appropriate provisions in this regard.
Dissolution of a joint stock company in Poland
The Commercial Companies Code specifies the reasons for the dissolution of a joint-stock company in Poland, indicating that the dissolution of the company may occur as a result of, inter alia:
– the occurrence of causes provided for in the articles of association;
– if the general meeting adopts a resolution on dissolution of the company or;
– if the registered office of the company is transferred abroad.
In the event of the occurrence of a cause resulting in the dissolution of the company, it is necessary to conduct a liquidation process. Only upon completion of the liquidation process, which in the case of a joint-stock company in Poland will last for at least one year, it is possible to remove the company from the register of entrepreneurs. Unlike in the case of a limited liability company, the liquidation process involves the obligation to announce twice in the MSiG the fact that liquidation has been opened. Creditors have up to 6 months from the date of the last announcement to report their claims to the company.
Shares in a joint-stock company in Poland, like shares in a limited liability company, are a property right and are subject to inheritance. In a joint-stock company, it is not possible to introduce a provision in the articles of association by virtue of which the entry of heirs in place of a deceased shareholder is restricted or excluded. Shares are therefore inherited in accordance with the general rules. Shares as property rights may be bequeathed to a specific person in a will, or they may be the subject to a specific bequest. In the absence of the application of these institutions, the shares will be inherited according to the statutory rules. Although it is not possible to exclude the entry of heirs into the company, it is indicated that it is possible to include a provision in the articles of association of a joint stock company in Poland pursuant to which a shareholder’s shares will be automatically redeemed.
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If you wish to find out about types of companies n Poland please watch our video:
You may also read a bit more about a joint stock company in Poland here