Amendment of the Code of Commercial Companies

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.

Keep tuned to our News section for further updates.

You might be also interested in...