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New regulations for small businesses

The Act Amending the Business Freedom Act and Certain Other Acts entered into force on 19 May 2016. The changes mainly affect Poland’s small business register—the Central Register and Information on Economic Activity (CEIDG).

The amended Business Freedom Act clarifies certain terminology used in the regulations but also introduces entirely new solutions governing small businesses.

Holding rights to real estate

Under one of recent changes, small businesses (sole traders and simple partnerships) are required to hold legal rights to the address entered in CEIDG (Business Freedom Act Art. 16a). The act does not specify what form such rights should take, but it was explained in the justification for the bill (7th Sejm print no. 3761) that it could be based on a written or oral understanding, a unilateral or multilateral transaction, a court ruling or an administrative decision. Thus the law provides for an open catalogue of legal grounds for using the premises listed as the place of business, for example a coworking space or a post office box. It is essential, however, that the business be entitled to use the address.

When filing an application for entry in CEIDG, the business does not have to enclose any document confirming the right to the premises, and the legal basis is not disclosed in the register. However, it must be presented if demanded by the minister for economy, if the minister learns that the business lacks the right to use the address (Art. 35(1a)). Then if the business fails to demonstrate the right to use the address or apply for a change of address, the authority will issue a decision deleting the business from CEIDG (Art. 35(2a)).

In that situation, a third party whose address is used by a business in the register without a legal right to the address can demand that the address no longer be published in CEIDG (Art. 35(2b)). The purpose of these rules includes improving the security of commerce, facilitating enforcement of claims against businesses by their creditors, and improving the situation of victims of dishonest businesses. However, because the right to an address is not verified when the business applies for entry of the address in CEIDG, and the legal response to filing of a fictitious address is delayed, this change will not fully eliminate the problem of registering businesses under false addresses.

Exchange of information, correction and deletion of entries in CEIDG

The amendment has straightened up the rules concerning mutual exchange of information between CEIDG and the National Criminal Register, bankruptcy courts and other entities (Business Freedom Act Art. 31).

The period for waiting for deletion of businesses from CEIDG has also been shortened in certain instances. The new rules provide that businesses which have suspended their activity and fail to apply for an entry on resumption of their activity within 24 months will be deleted from the register immediately (within 7 days). Moreover, the removal will not be done pursuant to an administrative decision by the minister for economy, as in the past, but as a purely technical operation from which no appeal will lie. This procedure for deletion will also occur if information is entered in the system concerning a legally final ruling prohibiting a person from conducting economic activity (this does not apply to a ruling prohibiting the conduct of a specific activity) or concerning the person’s death.

The process for correcting obvious errors in CEIDG entries has been expedited. Art. 35(5) of the Business Freedom Act now authorises local communes converting paper applications into electronic entries to correct data in CEIDG if the entry does not correspond to the data submitted by the business in the hard copy of the application. Previously, errors made when entering data in CEIDG were corrected only through an order to correct the entry issued by the minister for economy.

Deciding not to commence activity, and other changes

Another change in force from 19 May 2016 is enabling businesses to withdraw an entry in CEIDG. This applies when the person provides in the application a future date for commencing activity but decides before that date not to go through with taking up the activity. In that situation, the person may apply for deletion of the entry. Now such a person will be removed from the register (Business Freedom Act Art. 29a), whereas before the person would continue to appear in CEIDG.

The amendment also expands the range of information included in the register pursuant to Art. 25(1) of the act. Now CEIDG may contain, for example, the telephone number of the business (if provided) and details concerning statutory representatives (if required).

The amended regulations also provide businesses with new options for registering for social insurance and public health insurance, but these changes will be effective only a year after entry into force of the amending act.

The amendment to the Business Freedom Act that entered into force on 19 May 2016 thus introduced several new solutions, but most of the changes only tidied up the existing system.

Julia Dolna, M&A and Corporate Practice, Wardyński & Partners