Dr Kinga Ziemnicka-Klebba | In Principle

This issue continues to raise numerous doubts under Polish law. The doubts surround the number of financial statements required by law to be prepared in relation to the conversion, the reporting period covered by each financial statement, and the obligation for the financial statement to be examined by an auditor and approved by the competent body. Of particular importance is the correct determination of the period for which the first annual financial statement of the company post-transformation (the “new” company) must be prepared, which directly affects the method for distribution of profit from the company prior to transformation (the “old” company) and the limitations on distributions.

An appraisal of assets in the course of corporate reorganisations is a required element for determining their value when transferred from one company to another as a result of a merger or demerger. But the procedure for reorganising companies is often lengthy, and during the course of the procedure components of the transferred assets or liabilities may change due to ordinary or extraordinary circumstances. Or the appraisal itself may change. This raises a fundamental question of the extent to which the reorganisation documentation must be modified, including the draft terms of merger or demerger, and how these changes can be reflected in the accounting records without having to redo the entire reorganisation procedure.

The 15 September 2023 amendment to Poland’s Commercial Companies Code introduced a number of changes to the cross-border merger procedure. Such a merger has its peculiarities because it is subject to the laws of more than one EU member state. During a cross-border merger, a number of practical aspects can significantly affect the speed and efficiency of the procedure.

In previous articles, we have outlined the advantages of establishing a family foundation, the scope of business activities permitted for foundations, and tax issues. Now we turn to the rights and obligations of persons involved in the operation of a family foundation. The foundation operates through its bodies (management board, supervisory board, and assembly of beneficiaries), but it cannot be established and function without the founder and beneficiaries. The Family Foundations Act regulates the tasks and powers of all of these entities, giving the founder relatively wide latitude to set the rules for the foundation’s bodies in the statute. This allows these policies to be tailored flexibly to suit the foundation’s operations and purposes.

Like any other legal form, a family foundation may also involve the risk that the management of assets will be delegated to incompetent persons, the foundation will act in a manner contrary to its stated purpose or the interests of its beneficiaries, or it will conduct business activity in areas not permitted for a family foundation. However, in the Family Foundations Act, the Polish parliament has provided certain tools to prevent such situations.

The Family Foundations Act, entering into force on 22 May 2023, introduces the family foundation into Polish law as a new legal entity designed for collecting property and managing assets in accordance with the founder’s will and paying benefits to beneficiaries. Therefore, the objectives of a family foundation are different from those of existing foundations, which are non-governmental organisations operating for public benefit and not for profit.

Along with a foundation and a non-profit company, a representative office of a foreign foundation is one of the legal forms through which charitable activities can be carried out in Poland. However, due to a sparsity of regulations, the functioning of representative offices of foundations in Polish law is not entirely clear. The topic is particularly timely, as with the outbreak of war in Ukraine many foreign foundations wanting to operate in Poland have voiced the need to open representative offices here. Previously, such outposts were relatively rare, as there was little need for them.

Poland’s Forest Act significantly interferes with trading in forest land. This raises the question of which legal actions causing the transfer of ownership in forest land trigger a right of the State Treasury to acquire the land.

The recent amendment to the Commercial Companies Code introduces a number of important changes for companies, especially companies operating within corporate groups. This raises the question of whether companies should adapt their corporate documents to reflect these changes.

Among many problems facing businesses now is efficient management and decision-making when members of the company’s governing bodies cannot appear in person at headquarters for various reasons. Technology ensures efficient communications, but the possibility for corporate bodies to take resolutions remotely has been debatable in some situations.

An issue concerning businesses at present is the problem of settlements between them resulting from non-culpable inability to perform contracts. This is an area that may require the Parliament’s intervention if current regulations prove insufficient.

Numerous sectors of the economy have been paralysed. The problem is not just closings or restricted access to a range of services, but also absence of staff due to illness, quarantine or childcare. Consequently, businesses cannot operate normally or perform their obligations on time. A lack of supplies by one company often carries over to an inability of its customers to fill their own orders. This bogs down the whole economy. We await systemic solutions allowing Polish businesses to survive. But before they arrive, it’s a good time to examine the regulations currently in force.