Author: kancelaria

This article discusses further important changes introduced by the amendment to the Commercial Companies Code (hereinafter: “CCC”). They regard mainly the members of management board, supervisory board or review panel. It is worth bearing them in mind, as the amendment implements rules of liability that are completely new for the Polish legal system. We know them from the majority of the common law jurisdictions, such as USA, Canada or England.

1. Business judgement rule

One of the important changes introduced by the last adjustment to CCC is the so-called business judgement rule. It is worth keeping it in mind, as it excludes the liability for damage caused to the company as a result of erroneous decisions of its bodies, as long as these decisions were taken within the limits of justified business risk on the basis of information adequate to the circumstances.
Every member of management board, supervisory board or review panel should maintain due diligence resulting from the professional character of their activity when performing their obligations and to remain loyal towards the company. The above obligations are considered met provided that, when acting loyally with regard to the company, one acts within the limits of justified economic risk, including on the basis of information, analyses and opinions that should be taken into account in given circumstances when performing a careful assessment.
Thus, the circumstances accompanying the decision-making of the bodies will be evaluated. The members of bodies who made wrong decisions while performing the obligations diligently and loyally will be protected in the event of causing damage to the company.
In line with the case law of the Polish Supreme Court, any reckless actions performed without maintaining due diligence stemming from the professional character of the activity shall remain sanctioned (see the decision of the Supreme Court of 24th July 2014, II CSK 627/13).

2. Action or omission in the interest of a group of companies

Additionally, in relation to issue of a binding order, a management board member, supervisory board member, review board member, authorised clerk or liquidator of the company participating in a group of companies will be allowed to invoke action or omission in a specific interest of a group of companies if the company disclosed its participation in a group of companies. These entities will not incur liability for damage caused by performing a binding order, including under Article 293, Article 303125 and Article 483 of the Code of Commercial Companies. This applies both to the bodies of the subsidiary company and, accordingly, to those of the dominant company, operating in the interest of a group of companies.

3. Obligations of supervisory boards

Together with exclusion of liability, however, the amendment brings about a specification of obligations of supervisory boards, which shall include:
• evaluation of reports from activity of the accompany and the financial statement for the previous financial year within the scope of their compliance with account books and documents, as well as with the actual status,
• evaluation of applications of the management board regarding distribution of profit or coverage of loss,
• elaborating and submitting to the meeting of shareholders or the general meeting of shareholders an annual report from results of evaluation referred to above and a report from activity of the supervisory board for the previous financial year (report of the supervisory board).

4. Supervisory board’s right to demand information, documents, reports or explanations.

For the purposes of performing its obligations, the supervisory board will be entitled to examine all the documents of the company, perform audit of the company’s assets and demand the management board, authorised clerks and other persons employed by the company to prepare or provide any information, documents, reports or explanations regarding the company, including in particular its activity or assets.

The object of the demand may also be information, reports or explanations regarding subsidiaries and related entities that are in possession of the obligated body or entity.

The information, documents, report or explanations referred to above would be provided to the supervisory board immediately, but in any case not later than within two weeks from the date of such demand being reported to the obligated body or person, unless a longer period is specified in the demand. The management board would also not be allowed to limit the access of supervisory board members to the information, documents, reports or explanations indicated.

I. WHAT IS MONKEYPOX AND WHAT ARE ITS SYMPTOMS?

Monkeypox is a zoonotic infectious disease caused by the monkeypox virus (MPXV) in the Orthopoxvirus genus. In favourable conditions it can be transmitted between humans through close contact with infectious material from lesions of infected individuals, as well as via droplets in case of prolonged face-to-face contact. The virus may also spread through infected objects. Initial symptoms of the disease include high fever, headache and back pain, enlarged lymph nodes and severe fatigue. A further symptom is the appearance of a rash that persists for 2 to 4 weeks. While the rash is present, the patient may spread the disease and the scars left by the scabs are very deep and may take even up to 4 hears to heal.

In the past, infections and outbreaks of monkeypox were limited to Africa, with only isolated cases appearing in Europe that did not lead to outbreaks. On 7 May 2022, the United Kingdom reported the first case of monkeypox in Europe in an individual travelling from Nigeria. By 27 May 2022, a total of over 300 cases of monkeypox were confirmed. As of today, i.e. 3 June 2022, no cases have been identified in Poland.

II. MONKEYPOX IS NOW OFFICIALLY AN INFECTIONS DISEASE IN POLAND

On 27 May, the Minister of Health issued new regulations:

• Regulation of the Minister of Health of 27 May 2022 on monkeypox and monkeypox virus infections,
• Regulation of the Minister of Health of 27 May 2022 amending the regulation on infectious diseases requiring hospitalisation,
• Regulation of the Minister of Health of 27 May 2022 amending the regulation on notifying suspected and confirmed infections, infectious diseases and resulting deaths.

According to the first regulation, an announcement was made that monkeypox and monkeypox infections are subject to regulations governing the prevention and treatment of infections and infectious diseases in humans.

Pursuant to the second regulation, people who are infected or sick or suspected to be infected or sick with monkeypox are subject to mandatory hospitalisation. In addition, the regulation implements mandatory quarantine or epidemiological supervision on individuals exposed to infection or coming into contact with the MPXV virus. Mandatory quarantine in monkeypox infections will last 21 days – same as in the case of Ebola, smallpox and viral haemorrhagic fevers – counting from the day following after the last day of exposure or contact.

The third regulation requires physicians and paramedics to report any cases of suspected or confirmed monkeypox infections or deaths caused by the disease. Cases are reported by telephone and confirmed in writing or electronic form.

All three regulations entered into force one day after their publication, i.e. on 28 May 2022.

III. TREATMENT OF MONKEYPOX

As of today, no targeted treatment exists. Specialists claim that antiviral medications or cowpox antibodies may be of some effect against the virus. It is also likely that those vaccinated against smallpox will be protected against the MPXV virus. Note is also made of a new smallpox vaccine, registered as ImvanexTM. The vaccine contains a modified Ankara-MVA cowpox strain. As of today, the vaccine is not registered for use in preventing monkeypox or available in retail.

Experts stress that at the moment there is no cause for significant alarm and believe that the virus does not pose a significant danger to the human population.

 

 

 

 

 

In connection with recent changes in laws, we would like to indicate that a new property development act (act of 20 May 2021 on protecting the rights of buyers of residential abodes or single-family units and the Property Developer Guarantee Fund) will enter into force starting from 1 July 2022. The act will implement the following changes:

I. Property Developer Guarantee Fund

The act will create the Property Developer Guarantee Fund (the “PDGF”), used to safeguard the money paid by buyers, in particular in case of a bankruptcy of a property developer or a bank. In connection with the above, property developers will be required to pay an additional contribution to the PDGF from each payment made by buyers. The act specifies the maximum amount due in contributions, i.e.:

• 2% in case of open residential escrow accounts (ORA),
• 2% in case of closed residential escrow accounts (CRA).

The ultimate amount due in contributions will be determined by secondary legislation, but initial announcements have already been made that initial contributions could amount to 1% in respect of ORAs and 0.1% in respect of CRAs.

The contribution will be non-refundable, meaning that they will not be refunded even if the buyer or property developer rescinds the agreement. If an agreement is rescinded and a new agreement is made with a new buyer, contributions paid on payments made by the previous buyer will not be credited against contributions due on payments made by the new buyer. The property developer will have to pay another contribution and the previous contribution will not be refunded.

II. Reservation agreement

The act is also the first piece of legislation to regulate reservation agreements. It is defined as an agreement between a property developer or a business other than a property developer and a person interested in the sales offer, in the matter of agreeing to temporarily take a residential abode or single-family unit of the reserving party’s choice off the market.

Starting from July, any such agreement will be invalid unless made in writing and a maximum amount of the reservation fee will be set. The fee will not exceed 1% of the price of the abode or single-family unit specified in the sales brochure. The brochure will therefore become an important part of the offer.

A property developer who commences sales is required to prepare a sales brochure with information on a given development project. The amount of any potential reservation fee must therefore be considered when preparing the brochure.

The act also specifies the information that must be included in a reservation agreement:

1. parties to the agreement, place and date of the agreement;
2. price of the residential bode or single-family unit selected by the reserving party from the sales offer;
3. amount of reservation fee, if agreed by the parties;
4. how long the residential bode or single-family unit selected by the reserving party will be taken off the market;
5. location of the abode in a building;
6. usable floor area of the residential bode or single-family unit, floor area and layout of rooms.

After the act enters into force, any reservation agreement will need to be appended with a document confirming the consent or undertaking to grant consent referred to in article 25 subsection 1 item 1 or 2 of the new property development act (consent of the bank for subdivision of property without encumbrance and transfer of ownership of property following the payment of the full price by the buyer).

The reservation fee is credited towards the purchase price. According to the act, if a development agreement is made, the developer must transfer the reservation fee into a residential escrow account kept for the development project or task, no later than within 7 days of entering into the agreement.

III. Refund of the reservation fee

The act provides for the prompt refund of the reservation fee if:

1. The reserving party fails to obtain a loan or promise of a loan due to a negative assessment of their creditworthiness;
2. The developer introduces changes to the sales brochure or documents attached to the brochure without informing the reserving party.

The act provides for the refund of double the amount of the reservation fee if:

1. The developer fails to comply with its obligation under the reservation agreement – e.g. offers the abode for sale despite entering into a reservation agreement;
2. Prior to entering into a property ownership transfer agreement a reservation agreement was made and the developer fails to remedy the defects in the abode included in the handover record and the buyer therefore refuses to sign the ownership transfer agreement.

The developer can otherwise retain the reservation fee. However, we recommend including another condition for refunding the reservation fee in the agreement, i.e. when the Developer refuses to enter into a Development Agreement due to reasons attributable to the Developer, as in our opinion this is a rational solution that will prevent the terms of the agreement from being found to be abusive.

IV. Term of the reservation agreement.

The agreement is made for a fixed term. If the reserving party is seeking a loan, the agreement must account for the time required to obtain a decision to grant a loan or loan promise.

The minimum term of the agreement should be around 2 months. According to the mortgage loan act, the bank has 21 days to make a loan decision from the date of receiving a loan application, and the customer then has 14 days to accept or refuse the decision, meaning that the minimum term of the reservation agreement should be from 1.5 to 2 months.

V. Sales brochure

The sales brochure and attached documents are an integral part of the development and reservation agreements.

The developer has the following obligations in connection with the brochure:

• Persons interested in entering into a development or reservation agreement must be provided with the brochure and attached documents free of charge (prior to entering into the agreement), irrespective of whether they request for the brochure and attached documents;
• In case of any changes in the data or information included in the brochure or attached documents, information about the changes must be provided to persons interested in entering into an agreement in the same form as the brochure, in good time enabling the interested party to review the contents of the documents prior to entering into a reservation or development agreement;
• During the term of any reservation agreement, the developer must inform the reserving party of any changes to the sales brochure or attached documents in a way enabling the reserving party to identify the changes by stating what they concern.

According to the model form specified in the act, the brochure should include i.a. the following information:

• Prior experience of the property developer (example of a completed project);
• Purchase price;
• Date of commencing and completing construction works;
• Date of transfer of ownership of the property to the buyer;
• Information on the property, with details for the scope of finishing works completed in a shell and core built property (date on which the occupancy permit became final and effective or on which the construction of a single family unit was completed, floor area of residential abode or single family unit, price of the property, date of issue of a certificate confirming the separation of a residential abode, date of establishing separate ownership of residential abode, as well as information on the uniform guarantee limit available in case of bankruptcy of the bank where the residential escrow account is kept,
• An outline of the development plan of the project area and its surroundings, showing the building and material considerations concerning the location of the project resulting from the current use of adjoining areas;
• Conditions on which the customer may rescind the development agreement.

VI. Rescinding the development agreement

The development act provides for various deadlines for the rescinding of the development agreement by the buyer:

• 30 days of the date of the agreement if:
  • the development agreement does not include terms required by regulations;
  • information in the development agreement is inconsistent with information in the sales brochure or attached documents;
  • the developer does not provide the buyer with the sales brochure or attached documents or does not inform the buyer of changes to information in the sales brochure or attached documents;
  • data or information in the sales brochure or attached documents based on which the buyer entered into the development agreement are inconsistent with the actual or legal circumstances as at the date of entering into the agreement;
  • the sales brochure based on which the buyer entered into the development agreement does not contain the data or information stipulated in the model sales brochure form;
• 120 days of a date specified in a separate notice if the developer failed to transfer the right of ownership to the buyer within the deadline stipulated in the development agreement;
• 60 days of entering into the development agreement if the developer fails to obtain the consent of the mortgage creditor or promise of the consent referred to in article 25 subsection 1 item 1 or 2 

The developer may rescind the development agreement:

• if the buyer fails to participate in the handover of the residential abode or single family unit or signing of a deed transferring the rights under the development agreement to the buyer despite being twice served with a written notice at least 60 days apart, unless the buyer was unable to participate in the handover or signing due to a force majeure event;
• within 30 days of serving the buyer with a request for payment – if the buyer fails to make the payment within the deadline or in the amount required in the agreement despite being requested in writing to pay the outstanding amounts.

VII. Presumption of admission of defects by the developer

During the handover of the premises, a written record is made where the buyer may specify any defects in the residential abode or single-family unit. The buyer’s refusal to accept the handover of the premises due to a material defect will also be recorded in the record, as well as whether the developer admits or rejects the existence of the material defect.

Within 14 days of signing the record, the developer will be required to provide the buyer with information whether it admits or rejects the existence of the defects with a statement of reasons for its rejection of the defects.

If the developer fails to notify the buyer of its admission or rejection of the existence of defects within the statutory deadline of 14 days, it will be deemed to have accepted these defects.

Where the developer admits the existence of defects, it will be required to remedy them within 30 days of signing the record. If the developer is unable to remedy the defects within this deadline despite exercising due diligence, it will be required to specify a different date for remedying the defects and provide reasons as why it was unable to remedy them within the original deadline; any such new deadline may not cause unreasonable inconvenience for the buyer.

Furthermore, the act entitles the buyer to have the defects remedied at the developer’s expense if the developer fails to remedy the defects within 30 days, fails to specify an additional deadline for remedying the defects and fails to remedy the defects within an additional deadline specified by the buyer.

ASSISTANCE FOR LOAN BORROWERS

High inflation that has been persisting over the recent period, the resulting increase in interest rates and rising mortgage instalments, has forced the search for new solutions to help mortgage borrowers.

Consequently, the Government has adopted a bill on crowdfunding for business ventures and assistance to borrowers, which is expected to come into force on 1 July 2022.

The bill aims to assist in the repayment of mortgage loans. The package of solutions envisaged in the bill consists of three pillars:

• the first pillar assumes the introduction of the so-called “repayment holidays”. It means is that it will be possible to suspend loan repayments for 8 months for all mortgage borrowers who have loans in Polish currency (PLN) and whose real estate is used for their own housing needs. Borrowers will be able to use them in any two months of the third and fourth quarters of the current year and in one month in each quarter of 2023. The repayment holidays will apply to both the principal amount in the instalment and the interest. Additionally, the deadline for repayment of the instalment will be postponed without incurring any additional interest;
• the second pillar of assistance provides for the possibility of subsidising loans for people who are in a difficult financial situation. Hence, the government intends to transfer additional funds to the Borrowers’ Support Fund. As a result, the Fund’s budget will be increased and it will be possible to offer support to more mortgage borrowers than before.

The bill provides that the maximum amount of support will e PLN 2,000, and can be paid out for up to 36 months – which gives a total of PLN 72,000 of aid.

In turn, the repayment of this loan will begin after two years in equal and interest-free 144 instalments.  What is more, a part of the granted support may be cancelled provided that the first 100 instalments are paid on time.

To receive the support set out in this pillar, one of the following conditions will have to be met:

1. at least one of the borrowers must have the status of the unemployed;
2. monthly mortgage repayment costs must exceed 50 percent of monthly income;
3. in 2022, the monthly income after deduction of mortgage costs shall not exceed PLN 1552 per person in a one-person household and PLN 1200 per person in multi-person households;

• in turn, the third pillar assumes the replacement of the WIBOR index (i.e. the index which translates into higher loan instalments) with another index which will allow for lowering loan instalments.

 

CROWDFUNDING PLATFORMS

Furthermore, the bill also adjusts Polish law to EU regulations on crowdfunding for business ventures, i.e. it will regulate the activity of shares based crowdfunding platforms. The activities of crowdfunding platforms will be supervised by the Polish Financial Supervision Authority.  The Authority will have special supervisory powers, e.g. it will be able to suspend specific crowdfunding offers or suspend the providers’ activity. It will also introduce civil and criminal liability regarding the accuracy and truthfulness of information provided in informational documents drawn up in connection with the crowdfunding offer.

The new solutions will be beneficial primarily to small and medium-sized enterprises, which will be able to receive access to optional financing. For them, the limits will be raised, which will allow them to obtain higher capital.

Minister of Health Adam Niedzielski informed at a press conference that from 16 May the state of epidemic will be transformed into the state of epidemic emergency.  The epidemic state was in force in Poland from 20 March 2020.

According to the Act of 5 December 2008 on preventing and combating infections and infectious human diseases, the state of an epidemic is a legal situation introduced in a given area in connection with the occurrence of epidemic in order to undertake anti-epidemic and preventive measures specified in the Act to minimise the effects of the epidemic.

A state of epidemic emergency, on the other hand, is a legal situation introduced in a given area in connection with the risk of an epidemic.

Many restrictions have already been cancelled – since 28 March it has not been necessary to cover the mouth and nose with a mask in closed spaces, with the exception of buildings in which medical activity is carried out and pharmacies. In addition, there is no longer an obligation to be referred for isolation and quarantine due to COVID-19 disease, and Covid wards and temporary hospitals for COVID-19 patients have been closed down.

Since the beginning of April, the rules for prescribing PCR tests have changed – a PCR test can be ordered by a doctor, for example before admission to hospital, if he or she deems it necessary. It is, however, no longer possible to get a free COVID-19 test at, for example, pharmacies and mobile swabbing stations, and it is no longer possible to sign up for a test yourself via online form or via a helpline consultant.

But, the abolishment of the state of epidemic will not actually change much. The provisions of the Covid Law will still remain in force. Most of the regulations amended in connection with the COVID-19 epidemic, are conditional on the existence of either a state of epidemic emergency or a state of epidemic.  Consequently, the introduction of a state of epidemic emergency means that these provisions still remain in force. Only the abolition of both the state of epidemic and the state of epidemic emergency would bring more significant changes.

The Minister’s decision was based on the recent improvement of the epidemic situation in Poland. However, the Minister has not ruled out the possibility that legal changes associated with the increase of coronavirus infections may occur again in the future. Therefore, the situation is being monitored and it is necessary to remain on alert, as there may be another increase in SARS-COV-2 infections in the autumn. In view of this, it is possible that the state of epidemic emergency will be transformed back into a state of epidemic.

 

 

We would like to present to you the significant changes concerning evictions that have been introduced recently. These may be of key importance for property managers and landlords in particular.

On 14 April 2022, an amendment to the Law on Assistance to Citizens of Ukraine was published (Act of 8 April 2022 on amending the Law on Assistance to Citizens of Ukraine in connection with the armed conflict on the territory of Ukraine and certain other laws, Journal of Laws of 2022, item 830, hereinafter:  “special purpose act” (in Polish: “specustawa”). It repeals the ban on evictions and restrictions on real property auctions, facilitates assigning a PESEL number, introduces new forms of support and broadens the definition of a citizen of Ukraine. The amendment is therefore of significant importance not only for Ukrainian citizens, but also, inter alia, for creditors whose debtors occupy premises without any legal title.

Until now, the total ban on evictions was in force, as introduced in Article 15zzu of the Act of 2 March 2020 on special solutions related to preventing, counteracting and combating COVID-19, other infectious diseases and crisis situations caused by them (i.e. J./ L. of 2021, item 2095, as amended). Pursuant to it, during the period when an state of epidemic emergency or a state of epidemic declared due to COVID-19 was in force, no enforcement titles ordering the vacating of residential premises were executed.

Therefore, it was not relevant that the tenant did not pay rent or did not have a legal title to the premises at all – during the coronavirus outbreak no one could be evicted. Admittedly, this provision did not apply to the situation of lending a building or its part to Ukrainian citizens for residential purposes, pursuant to Article 68 of the special purpose act. In this case it was exceptionally possible to evict the tenants.

However, the latest amendment introduces a total repeal of the eviction ban. It was repealed under Article 20 of the special purpose act, which came into force on 15 April 2022. Thus, from now on, the Covid regulations will not protect indebted tenants occupying premises without a legal title. In this context, it is already possible to start enforcing court judgments ordering eviction. It should be noted, however, that due to the large number of evictions in the near future, bailiffs will have a lot of cases, whereas they are limited by time.

Another change implemented by the amendment is the repeal of restrictions on the real property auctions in situation the debtor still lives there. The amendment applies to the Code of Civil Procedure, specifically Article 952¹ § 5 of the CCP. Prior to the amendment, Covid regulations had introduced a ban on auctioning off a residential apartment or land property developed with a residential building, if it was used to provide for the debtor’s housing needs. However, the special purpose act abolishes the above restrictions and repeals Article 952¹ § 5 of the CCP. This change came into force retroactively, i.e. it is effective from 24 February 2022.

In the near future, it is therefore possible to proceed not only with evictions, but also with the auctioning of debtors’ property, even when it is used for residential purposes.

In the latest edition of the prestigious ranking “The Legal 500 Europe, Middle East & Africa 2022″ of 11 April 2022, JLSW Law Firm has been honoured once again. Law firms and individual lawyers from over 80 European countries, including Poland, are ranked in various categories. JLSW Law Firm 2022 is recommended in the area of construction law.

JLSW has been selected as a specialist in construction and public procurement law. JLSW provides legal services to buyers and contract providers, which means that our clients range from construction contractors to companies in the energy sector and architects.

The Legal 500 is a prestigious international ranking of several thousand law firms. For over 30 years, every year, on the basis of an in-depth, material analysis of completed projects and clients’ opinions, it identifies and recommends the best specialists in over 20 areas of law and 150 jurisdictions.

To be included in the ranking, a firm describes its achievements over the past year and provides a list of contacts of people who, based on their experience of cooperation over that period, can give recommendations to the firm. The ranking honours law firms that provide the most professional and innovative advice to clients around the world.

By using a comprehensive research programme which is updated every year, The Legal 500 is able to precisely reflect the current state of the legal services market in a particular country and in a particular field. The ranking is therefore a reliable source of information about professional and trustworthy specialists.

Further to the previous article, which was published on our website on 14 April 2022, this time we would like to discuss in more detail the issues relating to groups of companies and binding instructions.

The amendment of the Code of Commercial Companies (hereinafter: “CCC”) introduces the definition of a group of companies in Article 4 § 1 item 5¹. A group of companies is defined as a parent company and a subsidiary or subsidiaries, being companies, guided, in accordance with a resolution on participation in a group of companies, by a common strategy to pursue the common interest (interest of a group of companies), justifying the exercise of a uniform management by the parent company over the subsidiary or subsidiaries.

Therefore, the definition of a parent company will also be amended to be understood as a commercial company that exerts a decisive influence on the operations of a subsidiary or a subsidiary cooperative, in particular by concluding an agreement between the parent company and the subsidiary providing for the management of the subsidiary or the transfer of profits by it.

The new regulations clarify the grounds for companies comprising a group of companies to follow a common economic strategy. As indicated in the amendment substantiation, this is intended to enable parent companies to exercise uniform management over their subsidiaries. As a result, the key term in the regulation will be „the group interest”, which, in addition to the company interest, should also be taken into account in the activities of the parent company and the subsidiary, unless they are intended at harming the creditors or minority shareholders of the subsidiary.

The provisions of Section IV are to introduce detailed regulations for participation in a group of companies. First of all, both the participation in a group of companies and the designation of the parent company will require a resolution adopted by the general meeting of shareholders or the general meeting of the subsidiary. These facts will have to be disclosed by the parent company and the subsidiary in the Register of Entrepreneurs at the National Court Register. In case of parent companies having their registered offices outside Poland, disclosure of the above information in the subsidiary’s register will suffice.

Another key change in connection with the introduction of a group of companies is the institution of binding instructions. Parent companies will be entitled to issue binding instructions to subsidiaries participating in the group of companies. The binding instructions may concern the handling of the company’s affairs, provided that they are justified by the interest of the group of companies and are not in conflict with specific provisions. Referring to the issued instruction, the subsidiary’s management board will have to adopt a resolution on the execution of the instruction and inform the parent company thereof, or adopt a resolution on refusal to execute the instruction and inform the parent company thereof.

The amendment allows subsidiaries to adopt a resolution on refusal to execute instructions, if:

• the execution would lead to the company’s insolvency or threat of insolvency,
• there is a justified fear that the instruction is in conflict with the company’s interest and will cause damage to it that will not be repaired by the parent company or another subsidiary being a member of the group of companies within two years of the event. Moreover, the company deed or articles of association may provide for other grounds for refusal.

The draft also indicates the requirements to be met by a binding instruction, i.e.:

• it must have the written or electronic form;
• it must indicate:
  • the subsidiary’s conduct expected by the parent company in connection with the execution of the binding instruction,
  • the interest of the group of companies that justifies the execution of the parent company’s instruction by the subsidiary,
  • the anticipated benefits or damages for the subsidiary, if any, which will result from executing the parent company’s instruction,
  • the anticipated manner and time for compensating the subsidiary’s damage incurred as a result of executing the parent company’s instruction.

In addition, the amendment introduces also other regulations relating to groups of companies, such as:

• the parent company’s right of access to the subsidiary’s documents,
• the right of the subsidiary’s shareholders or minority shareholders to file a motion with a court to appoint an expert to examine the accounts and operations of the group of companies,
• the parent company’s liability towards the subsidiary for any damage connected with the execution of a binding instruction and not remedied within the time limit set out in the binding instruction, unless it is not culpable,
• the parent company’s liability towards the subsidiary’s shareholders for reduction in the value of their shareholding resulting from the execution of the binding instruction by the subsidiary.

 

On 4 April 2022 President Andrzej Duda signed the amendment to the Code of Commercial Companies passed by the Polish Parliament. The amendment is of significant importance for all limited liability companies. The changes implemented by the amendment will enter into force six months after the date of its publication.

The amendment introduces into the Commercial Companies Code a definition of a group of companies, and consequently, the definition of a parent company will also be changed. The newly amended regulations also contain a (quite non-transparent) concept of group’s interest, as well as rules concerning participation in a group of companies and the obligation to notify this fact in the register of entrepreneurs of the National Court Register.

Another significant modification is the introduction of the institution of binding instructions that a parent company may issue to its subsidiary in connection with the aforementioned group’s interest, as well as reasons for a subsidiary’s refusal to execute a binding instruction, and rules for the parent company’s liability towards its subsidiary for any damage incurred as a result of executing a binding instruction that was not remedied within the period indicated in the binding instruction.

According to the legislator’s concept, the new regulations are intended to enable a parent company to exercise uniform management over its subsidiaries.

Moreover, the amended regulations also include modification of the statutory rules of liability of members of supervisory boards and management boards in corporate companies. The act introduces the business judgment rule. The idea is that this rule excludes liability for any damage caused to the company as a result of decisions made by the authorities which turned out to be wrong, provided that they were made within the limits of justified business risk and based on information adequate to the circumstances.

The amendment also specifies the obligations of supervisory boards, which will include:

• evaluation of reports on the company’s activities and financial statements for the previous financial year in terms of their compliance with the accounting books and documents, as well as with the factual situation,
• evaluation of the management board’s proposals concerning profit distribution or loss coverage,
• preparing and submitting to the general meeting of shareholders an annual report on the results of the evaluation referred to above and a report on the activity of the supervisory board for the previous financial year (supervisory board report).

In order to be able to diligently perform the aforementioned duties, supervisory boards will have the right to access all documents of the company, review its assets, and request binding explanations from members of the management board, proxies and persons employed in the company or cooperating with the company.

What is more, supervisory boards of limited liability companies and joint-stock companies will have the right to establish ad hoc or permanent committees of the supervisory board; also, a new element is the institution of a supervisory board advisor.

The amendment also provides for a squeeze-out procedure, under which a subsidiary may request its parent company to buy out the shares or stocks of minority shareholders (representing not more than 10% of the share capital), if the parent company holds directly at least 90% of the share capital of the subsidiary.

The changes provided for in the amendment also involve the rules of taking minutes of the management board’s resolutions, as well as inviting to the supervisory board’s meetings.

The discussed amendment to the Code of Commercial Companies is one of the largest and most extensive changes to this act since it was adopted. Given its scale, the individual issues which will be affected by the amendment will be discussed more comprehensively in the next posts.

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The war in Ukraine is having a huge impact on numerous areas of our lives, private, professional and public ones. Entrepreneurs have already noticed a significant increase in the prices of products, fuels and other raw materials necessary for their businesses. In addition, entrepreneurs employing Ukrainian workers have got into a difficult situation overnight, due to the sudden loss of these workers. Indeed, most of the Ukrainian men employed by Polish entrepreneurs have returned to Ukraine to defend their country.

The significant rise in prices, the disruptions in raw material supply chains and the ever-increasing inflation rate may generate further problems, for example, those related to mutual settlements and keeping the deadlines of concluded contracts, in particular public procurement contracts. These types of contracts specify rigid frameworks for performance by contractors, and a failure to meet the deadline for performance of a public procurement contract often results in the imposition of severe contractual penalties by contracting authorities. The same applies to remunerations of contractors, who, at the time of setting the price for their tenders, did not take into account the possibility of such a dramatic change in the de facto global situation.

 

When can a public procurement contract be amended?

The Public Procurement Law provides for the possibility of amending contracts. The relevant regulation is contained in Article 455 of the Public Procurement Law (“PPL”), which lists the circumstances in which an amendment to the contract is permissible and does not require holding a new contract award procedure.

The parties to public procurement contracts can amend their contracts based on the review clauses, as indicated by Article 455.1.1 of the PPL. This provision assumes that the content of a public procurement contract may be amended based on clear, precise and unambiguous contractual provisions, provided for in the procurement notice or in the contract documents. The type and scope of the amendments, as well as the conditions for introducing them in the contract, must be specified. It should be borne in mind, however, that the provisions regarding the rules for introducing price changes must not provide for amendments which would modify the general nature of the contract.

However, in the current situation, Article 455.1.4 of the PPL is gaining particular importance. It provides for the possibility to amend contracts due to circumstances that the contracting authority, acting with due diligence, could not have predicted, provided that the amendment does not modify the general nature of the contract, and the price increase caused by each subsequent amendment does not exceed 50% of the value of the original contract.

For example, in order to justify the need to amend a part of the contract that concerns remuneration with a sudden increase in fuel prices following the outbreak of the war in Ukraine, it must be proved that the increase in the price of fuel, which constitutes one of the main costs of contract performance, was caused by circumstances that the contracting authority, acting with due diligence, could not have predicted. The outbreak of the war in Ukraine and the high inflation rate, both of which resulted in a sudden significant increase in fuel prices, could be regarded as such circumstances.

 

Substantial amendment to a public procurement contract

When introducing amendments to a public procurement contract, one should bear in mind the content of Article 454 of the Public Procurement Law, which introduces the requirement to conduct a new contract award procedure in the event of a substantial amendment to the contract.

Section 2 of the above-mentioned provision indicates what kinds of amendments should be regarded as substantial. Thus, “an amendment to a contract is substantial, if it changes significantly the nature of the contract in relation to the original contract, in particular if the amendment:

• introduces conditions which, had they been applied in the contract award procedure, would or could have attracted other contractors, or would have resulted in the acceptance of different tenders;
• disturbs the economic balance of the parties to the contract in favour of the contractor, in a way that is not provided for in the original contract;
• significantly extends or reduces the scope of benefits and obligations resulting from the contract;
• consists in replacing the contractor to whom the contract has been awarded with a new contractor, in cases other than those indicated in Article 455.1.2.”

We may expect that in the near future contractors will start appealing to contracting authorities to introduce relevant amendments to public procurement contracts, and the contracting authorities’ task will be to precisely analyse the possibilities and grounds for introducing amendments to the contracts, in accordance with the Public Procurement Law.