The Council of Ministers has just adopted the basis for a new law changing the Code of Commercial Companies in much the same way as the Dutch law on the BV was changed in late 2012 (see Bulletin 40).
The motivation is also similar: the competition from other EU countries on the ease of setting up companies. In the Netherlands, we can see that it has worked. The flex BV (with a minimum share capital of EUR 0.01 instead of EUR 18,000) has caused a significant increase in the establishment of new companies.
During the period from 1 October 2012 to 30 September 2013, the number of newly created BVs in the Netherlands rose by 55% compared to the last year of the old BV (from 39,889 to 61,979 new companies). A similar effect was noted in Poland when in 2008 the minimum share capital of a limited liability company (in Polish: spółka z ograniczoną odpowiedzialnością or in short sp. z o.o.) was lowered from PLN 50,000 to PLN 5,000.
According to information from the Prime Minister’s office, the Poles want to go a step further than the Dutch in that no capital structure will be required for a sp. z o.o. If, however, the shareholders decide to create a capital structure, the minimum capital will be PLN 1.00.
A sp. z o.o. will be allowed to issue shares without a nominal value. This will allow much greater flexibility for existing companies to attract new shareholders. Corporate rights will be determined based on the number of shares rather then on their nominal value.
In replacing the traditional function of share capital, i.e. protection of creditors, a number of regulations will be introduced. One of them is a mandatory reserve capital of 5% of the total amount of company obligations, with a minimum of PLN 50,000.
As in the Netherlands, a liquidity test will be introduced before payment of profit. This means that before any payment of profit share to shareholders can take place, the management board will have to issue a declaration that the company will be able to meet its obligations for the year to come.
Recently, one of my clients had a case in which the client wanted to pay out a dividend before the sale of a Dutch BV. The question arose as to who would bear responsibility for the declaration of the management board before the sale if the new management after the sale drove the company into bankruptcy. None of the Dutch lawyers I consulted on the subject dared to give a clear answer.
In addition, the obligation of the management board to call a shareholders’ meeting about the further existence of the company if a serious risk to its further existence is noted will be formalised by an annual declaration that there is no such risk.
The above-mentioned additional obligations of the management board, which according to the Ministry should come into force on 1st January 2015 (though this seems unlikely based on the current status of the legislative process), will also apply to existing companies and constitute an important increase in the potential personal liability of members of the management board.
Therefore, what appears on paper to be a simplification may in fact have a paralysing effect on the functioning of sp. z o.o.s as ultimately the purpose of any company is to make a profit for its shareholders.
As with all new regulations, a lot will depend on the way in which the courts interpret the rules and those who have been doing business in Poland for a while know that this may vary or as they say in Polish: “to różnie bywa”.