The Management Board is one of the company’s bodies responsible for conducting the company’s affairs and representing it externally. Based on the regulations concerning a limited liability company, according to the provisions of the Commercial Companies Code, its members may be chosen from among the shareholders as well as from outside their group. Article 201 § 4 of the Commercial Companies Code states that members are appointed by a resolution of the shareholders’ meeting, unless the company agreement provides otherwise. Persons appointed to the body may perform their functions based on an employment contract, a letter of appointment, a management contract, or a managerial agreement. However, the provisions are silent on remuneration for members of the management board. It is generally accepted that such remuneration may be granted but is not obligatory. Therefore, in business practice, different scenarios can be observed. In some companies, the management board consists solely of shareholders who perform their duties on a voluntary basis, while in others, external persons manage the company and receive appropriate remuneration. There are also cases where both shareholders and outsiders sit on the board and perform their duties without pay. In this article, we primarily aim to explain the issue of unpaid services provided by management board members and their consequences under tax law.

Unpaid benefits under the Corporate Income Tax Act

Under Article 7(1) of the Corporate Income Tax Act (CIT), “the subject of taxation is income consisting of the sum of income earned from capital gains and income earned from other sources of revenue. In the cases referred to in Articles 21, 22 and 24b, the subject of taxation is revenue.” The provisions contain an open catalogue of taxable events under the discussed regulations. According to Article 12(1)(2) of the CIT Act, this catalogue includes “the value of received goods or rights, as well as the value of other benefits in kind, including the value of goods and rights received free of charge or partially free of charge, as well as the value of other unpaid or partially paid benefits.” However, the CIT Act does not provide a definition of unpaid benefits. The regulation only indicates how the value of such benefits should be determined. Due to the lack of a definition, doctrine and the tax authorities have identified characteristics that such a benefit should meet. Following the work of Radosław Kowalski, it is indicated that an unpaid benefit occurs when the recipient has no obligation to provide a counter-performance, and one party receives a benefit at the expense of the other. Such a benefit will not occur if the party performing the benefit will receive some advantage in the future. In summary, the benefit arises when the taxpayer obtains a certain economic advantage that does not entail the necessity of incurring expenditure, cost, obligation to pay remuneration, or issuing another equivalent. Thus, the essential feature of unpaid benefit is the absence of the obligation to provide a counter-performance by the recipient.

Unpaid benefit by a management board member who is not a shareholder – tax consequences

To indicate the consequences under the CIT Act related to a management board member performing their duties without remuneration, two scenarios must be considered. Let us examine the first case, in which the service is performed free of charge by a person who is not a shareholder of the company. In this case, based on the case law of administrative courts and numerous tax interpretations, it must be assumed that a benefit occurs on the part of the company. Thus, the person sitting on the management board performs their duties without pay, and the other party is not obliged to provide any counter-performance. Consequently, in this scenario, the unpaid service by the member will cause income on the company’s side, which will be subject to taxation.

Unpaid benefit by a management board member who is a shareholder – tax consequences

Now let us analyse the case in which the management board member is a shareholder of the company and performs their duties without remuneration. Recently, several tax rulings favourable to shareholders have been issued in this regard. Currently, the tax authority states that performing the function of a management board member without pay by a shareholder does not constitute a benefit for the company under the CIT Act. This position is justified by the fact that, for example, a shareholder who simultaneously sits on the board expects to receive an appropriate economic advantage in the future in exchange for performing their duties as an owner. It is also pointed out that such a shareholder holds specific proprietary rights in the company, such as the right to dividends or the right to a share of the company’s assets upon liquidation. The rulings emphasise that a particularly important element in this situation is the managerial factor, which lies with the shareholder serving on the board. The shareholder, acting with due diligence in their role as manager, expects that this will eventually result in certain economic benefits. Analysing this situation in this way, the authorities indicate that performing management duties without remuneration and sitting on the board as a shareholder will not result in income for the company.

On 15 September this year, an amendment to the Commercial Companies Code and certain other acts will come into force. The amendment primarily aims to implement into the Polish legal system the Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 concerning cross-border conversions, mergers and divisions of companies. The new regulations will introduce revised rules concerning cross-border transformations of business entities. In addition to changes regarding cross-border operations, the amendment also introduces new rules concerning domestic transformations. This solution is primarily intended to prevent discrimination against Polish entities participating in these processes compared to entities in the cross-border context. Besides changes to the Commercial Companies Code, the amendment also brings novelties in ten other acts, including the Act on the National Court Register, the Tax Ordinance Act, and the Act on Supervision over the Financial Market. In this article, we will focus mainly on the new solutions concerning cross-border and domestic transformations, mergers, or divisions of companies, which will be included in the Commercial Companies Code, as well as on the rights and obligations of the bodies and employees of companies resulting from cross-border transformation, merger, or division.

Key changes in the Commercial Companies Code

The amendment will introduce new solutions especially regarding the capacity of companies to merge, divide, or transform. Among these, the following should be highlighted:

• equalising, with regard to reorganisation, both domestic and cross-border status of the limited joint-stock partnership and capital companies;
• granting the limited joint-stock partnership full capacity to merge and divide;
• extending the possibility of mergers for partnerships;
• allowing cross-border division and cross-border transformation of capital companies and limited joint-stock partnerships;
• new types of cross-border operations, including, among others, a new type of domestic partial division of a company (division by separation) and a previously unknown simplified type of domestic and cross-border merger (merger by acquisition);
• introduction of conflict-of-law rules in the case of cross-border operations;
• clarification of the content of the transformation plan resulting from cross-border operations and the management board’s report containing the justification of the operation, especially the necessity to include in the plan information regarding the principles of dividing the assets of the divided company, which were not included in the cross-border division plan, and consequently the principles of liability for the obligations of the divided company;
• introduction of a two-tier system of legality control of transformations, including the involvement of the Head of the National Revenue Administration in issuing certificates of compliance with the law for cross-border operations. Additionally, the control will also be conducted by authorities of the Member State competent for the company resulting from the cross-border transformation, merger, or division;
• determination of the expert’s liability rules in the case of cross-border transformation and prohibition of annulment of cross-border operations.

 

What benefits do employees of a company resulting from a cross-border transformation gain?

On 26 May this year, an act was signed that determines forms of employee participation in a company resulting from cross-border transformation, merger, or division. Additionally, the new regulation specifies the rights and duties of employees and company bodies subject to cross-border transformation, merger, or division. The act will come into force on 15 September. Like the amendment to the Commercial Companies Code, it primarily implements Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 into the domestic legal order. The provisions foresee three types of rights as possible forms of employee participation in a company arising from cross-border processes:

1. Firstly, employees will gain the right to appoint or elect a specific number of members of the supervisory board or the board of directors.
2. The second form of participation provided by the act is the right to recommend members of the supervisory board or the board of directors.
3. Employees will also have the possibility to object to the election of certain members of the supervisory board or the board of directors.

Moreover, the act assumes that exercising participation rights will be possible through two different models. The first one provides for the creation of a so-called negotiation team, which will become the representation of the employee side. Within this model, negotiations will be held before cross-border processes take place. The act provides that the outcome of the talks should be an agreement between the negotiation team and the company’s relevant bodies. The agreed consensus will determine the form of the chosen participation. The second model assumes the application of so-called standard rules. In this scenario, the form of participation will be implemented only after the cross-border transformations. This means that no negotiation team will be appointed, since in this case, the company’s relevant bodies will adopt a resolution on applying the standard rules. This model assumes the whole process will be conducted with the participation of a representative team and on terms directly resulting from the act.

Summary

The described changes will come into effect on 15 September. The novelties will have significant impact on business entities planning or considering cross-border or domestic transformations, as well as on the employees of companies involved in these processes. The amendment to the Commercial Companies Code will expand the possibilities to carry out particular transformations by introducing new types of operations and broadening the merger and division capacities for certain companies. Besides new opportunities, the regulation will also introduce some additional obligations for company bodies and a two-tier system of legality and correctness control of individual transformations. The second discussed act regarding forms of employee participation in companies resulting from cross-border transformation, merger, or division also holds key importance for entities in commercial turnover and their employees. Companies should carefully familiarise themselves with the regulation to understand how employees are entitled to participate in these processes and what procedures must be carried out in this respect. Furthermore, employees should also acquaint themselves with the upcoming changes to be fully aware of their rights and duties.

People who decide to join the structure of a limited liability company often ask themselves whether it is worthwhile to have a prokurent in the company. They wonder what benefits appointing such a proxy may bring, what risks might be involved, and if so, what costs they will have to bear as a result of their decision. Anyone considering having this particular form of proxy in their firm should become familiar with exactly who a prokurent is, the types of prokura that exist, what a prokurent’s duties in the company may include, and how to properly and legally appoint such a proxy. Acquiring knowledge on these issues will allow the company to make the best decision tailored to its needs and to carry out the entire procedure correctly. Thanks to elementary information about this type of proxy, those operating within the company will be able to fully utilise the opportunities offered by having a prokurent. Additionally, it should be noted that having a basic understanding of the role of the prokurent and their responsibilities will help avoid misunderstandings and irregularities concerning their activities after appointment. In this article, we will present the most important information about this special kind of proxy, outline its advantages and possible drawbacks, and explain the key elements of the appointment procedure.

Who is a prokurent and what types of prokura exist?

The institution of prokura is regulated in Chapter III of the Civil Code, specifically in Article 109¹ § 1, which states that “Prokura is a power of attorney granted by an entrepreneur subject to the obligation of entry in the Central Registration and Information on Business Activity (CEIDG) or in the register of entrepreneurs of the National Court Register (KRS), which authorises the proxy to perform judicial and extrajudicial acts related to the operation of the enterprise.” Thus, as indicated by the provision, the prokurent is a special kind of proxy, more precisely a commercial proxy, who can only be appointed by an entrepreneur registered in CEIDG or KRS. The Civil Code distinguishes three types of prokura: sole, joint, and mixed. In the case of the sole prokura, the power of attorney is granted to only one person, who is authorised to act independently within a defined scope. Joint prokura involves appointing more than one prokurent, with each authorised to act only jointly with the others. The mixed prokura, also called improper prokura, requires the prokurent to act together with another member of the management board. Additionally, Article 109⁵ of the Civil Code recognises a fourth type — so-called branch prokura, where the prokurent operates only within matters registered in the branch register of the enterprise.

What scope of powers does a prokurent have in the company?

Analysing the provisions, it can be concluded that the prokurent has a wide range of powers and competencies in representing the company externally, because unless we specify restrictions when appointing them, they may represent the company alone, even in cases where management board members’ authority is sometimes limited. Pursuant to Article 109¹ § 1 of the Civil Code, the prokurent is empowered to perform judicial and extrajudicial acts connected with running the business. This means, for example, that they may conclude contracts on behalf of the company, incur liabilities, represent the company before authorities, clients, and courts, or employ staff. However, their powers are legally limited: they cannot grant further prokura or general powers of attorney, sell the enterprise or real estate belonging to the enterprise, lease the enterprise temporarily, or encumber real estate belonging to the enterprise. Therefore, while the prokurent may broadly act on behalf of the company, they are not unlimited. There is also the possibility, when appointing a prokurent, to shape their scope of authority differently than directly provided by law. Consequently, if you are considering appointing a prokurent and wish to define their powers differently or are unsure whether a particular act falls within their competence, it is advisable to consult a legal firm for advice to tailor the power of attorney optimally.

How to appoint a prokurent?

According to Article 109² of the Civil Code, the prokura, under pain of nullity, must be granted in writing. The document granting the power of attorney must explicitly state the authorisation for the person to represent the specific entity. Additionally, in the case of a prokurent in a limited liability company, pursuant to Article 208 § 6 of the Commercial Companies Code, the consent of all management board members must be obtained. The person receiving the power of attorney must also agree to it. Only a natural person with full legal capacity can become a prokurent. It is also important to remember that the role of prokurent cannot be combined with the function of a management board member. Once the prokura is properly granted, it must be registered in CEIDG or KRS. However, it is worth noting that the Supreme Court in the ruling of 20 October 2005 (case ref. II CH 120/05) held that the prokura is valid even if it has not been entered in the relevant register. From an entrepreneur’s perspective, the prokura may be revoked at any time by authorised persons. It also expires upon the death of the prokurent, removal of the entity from CEIDG or KRS, or in the event of the company’s liquidation. Revocation or expiry of the prokura must also be recorded in the relevant register.

Summary

In summary, it can be stated that a prokurent can be a useful person in a company because they can represent the company externally to a wide extent without involving management board members in their activities. Such a solution relieves the governing body of the responsibility of running the company day to day and allows them to dedicate more time to internal matters. It also expands the number of persons who can act on behalf of the company without the need to increase the size of the management board. Furthermore, thanks to the prokurent’s activity, the company can gain better organisation. The prokura facilitates and accelerates performing certain actions for the company. Another advantage of appointing a prokurent is the ease of their revocation, which can be done at any time by authorised persons. Regarding the drawbacks of this proxy, it is worth mentioning their limited civil and criminal liability, as well as the lack of personal liability for the company’s obligations. Hence, despite having extensive powers, the prokurent’s responsibility for their actions is quite narrow. It should be emphasised that this may lead to the prokurent carrying out certain activities with less diligence than a management board member, whose liability is much broader. Therefore, having a prokurent can be beneficial for the company, but it is crucial to appoint a responsible person who will act in the company’s best interests.

In a limited liability company, the general meeting of shareholders adopts decisions in the form of resolutions on many matters significant from the perspective of the company’s activities and its shareholders. The activity of the body representing the owners should, in principle, be focused on the interests of the company and its members. Accordingly, resolutions passed by the general meeting of shareholders are expected to be positive for the company’s development, compliant with the law, respectful of good practices prevailing in broadly understood commercial dealings, and not harmful to the interests of the shareholders. However, despite this, in limited liability companies, the owners are not always in agreement on all matters concerning the company’s operations. Conflicts may arise between shareholders regarding decisions made. Additionally, minority shareholders may be dominated in the decision-making process by the majority, who do not always act in their favour. Apart from conflicts, some shareholders, driven by various motives, may also seek to make decisions contrary to the company’s interests, infringing on the interests of other shareholders, or breaching legal regulations. Consequently, as a result of conflicts, attempts to circumvent the law, or unlawful actions, resolutions may be passed which, broadly speaking, contravene the provisions of the Commercial Companies Code. Nevertheless, the law provides shareholders and other company bodies with tools to challenge such resolutions and remove them from the legal framework. In this article, we will explain how the mechanism for challenging resolutions works — when resolutions can be contested, who may challenge them, what effects the challenge entails, and what are the key elements of such proceedings.

Who can challenge resolutions?

The list of persons entitled to challenge resolutions of the General Meeting of Shareholders is specified in Article 250 of the Commercial Companies Code (CCC). Primarily, shareholders of the company have the right to challenge resolutions. It is important to note, however, that their standing is not unlimited, as the law clearly sets out the circumstances under which they may oppose a resolution. Firstly, a shareholder who participated in the general meeting, voted against a resolution, and requested that their opposition be recorded in the meeting minutes may automatically challenge that resolution. Another case arises when a shareholder was unjustifiably excluded from participating in the general meeting. Additionally, a shareholder who was absent from the meeting may challenge a resolution if the meeting was improperly convened or a resolution was adopted on a matter not included in the agenda. In the case of written voting, a shareholder may file a complaint against a resolution if they were excluded from the vote or voted against the resolution and lodged an objection within two weeks of receiving notice of the resolution. Besides shareholders, other company bodies such as the management board, the audit committee, or the supervisory board and their members are also entitled to oppose resolutions.

Grounds and effects of lodging a complaint against a resolution

The Commercial Companies Code specifies grounds on which a resolution of the general meeting of shareholders may be challenged. It is essential to distinguish between two separate situations and types of claims that may be brought against a resolution. A resolution may be repealed based on a claim filed by an entitled party if it conflicts with the company’s articles of association, good customs, harms the company’s interests, or aims to the detriment of shareholders (Article 249 CCC). On the other hand, if a resolution contravenes legal provisions, a claim for declaration of invalidity of the resolution may be brought pursuant to Article 252 CCC. The Code, in Article 254, also sets out the effects of a final judgment annulling a resolution. According to §1, “A final judgment annulling a resolution shall be binding in relations between the company and all shareholders as well as between the company and the members of its bodies.” Moreover, “§2. In cases where the validity of a company action depends on the resolution of the general meeting of shareholders, annulment of such resolution shall not affect third parties acting in good faith.” §4 provides that the same effects apply to judgments issued following claims for declaration of invalidity. In case of uncertainty whether to bring a claim for repeal or invalidity of a resolution, or regarding the consequences of each type of claim, it is advisable to seek professional advice from a legal counsel.

Key elements of the procedure

It is worth addressing key aspects of the procedure related to challenging resolutions. A claim for repeal should be filed within one month from the date of becoming aware of the resolution, but no later than six months thereafter. For a claim of invalidity, the right to file expires within six months from learning of the resolution, but not later than three years after its adoption. The claim must meet the formal requirements set out in the Code of Civil Procedure. It is crucial that the circumstances justifying the annulment or invalidity of the resolution are presented clearly and comprehensively. Therefore, in case of doubts regarding the content or arguments of the claim, consulting a legal professional is recommended. Pursuant to Article 253 CCC, the company is represented in such disputes by the management board or a special proxy appointed for this purpose. A final judgment repealing or declaring invalid a resolution should be submitted by the management board to the registry court within seven days.

Summary

In summary, the procedure for challenging resolutions of the general meeting of shareholders in a limited liability company is an important mechanism preventing irregularities within the company. Claims against resolutions enable minority shareholders to have a real influence on company matters and to protect their interests within it. Additionally, such claims remove from the legal framework resolutions that are inconsistent with applicable law, aim to circumvent the law, harm the company’s or shareholders’ interests, or violate the company’s articles of association. The procedure also provides other company bodies, such as the management board, supervisory board, or audit committee, with a judicial tool to control decisions made by shareholders. Hence, understanding the resolution challenge mechanism is valuable both for shareholders and members of other company bodies who have standing to challenge resolutions.

In companies, disputes may arise among shareholders due to differing opinions, mutual animosities, or matters of a financial nature, which negatively impact the development and operations of the business. There are also situations where one partner acts detrimentally to the interests of the company and the relationships within it. Sometimes the only solution to such an impasse is the exclusion of the unruly partner involved in the dispute. The institution of exclusion is regulated in the Commercial Companies Code under Article 266. This procedure allows, through a court decision, the exclusion of a troublesome shareholder and, in the longer term, the restoration of efficient and effective functioning within the company. The main purpose of this procedure is to protect the interests of the company, the relationships prevailing within it, as well as to extinguish growing conflicts among shareholders. Therefore, in this article, we will present what the procedure of excluding a shareholder from the company entails — namely who may initiate this procedure, for what reasons a shareholder can be excluded, and what the consequences of such exclusion are.

Who and on what grounds may request the exclusion of a shareholder?

The provisions regulating the institution of shareholder exclusion are of a mandatory nature, meaning that this procedure cannot be excluded in the company’s articles of association, nor can its mode or grounds be specified differently. According to Article 266(1) of the Commercial Companies Code, the request to exclude an unruly shareholder is submitted by the remaining shareholders if they represent more than half of the share capital. This means that in such a situation, all other members must act against the shareholder in question. Paragraph 2 of the same provision allows for some modification in this respect. The company’s articles of association may specify a smaller number of shareholders who can submit the request, provided they hold more than half of the share capital. In such a case, the defendants will be the other shareholders. It is worth noting that the request made by the shareholders is, in practice, a lawsuit filed with the court, containing a demand to exclude a specific shareholder or shareholders from the company. Article 266(1) states that the court may exclude a given shareholder for important reasons concerning them. Case law and doctrine indicate that grounds justifying exclusion include competitive activity, persistent and unjustified failure of a shareholder to attend meetings, the impossibility of conflict-free cooperation with the shareholder, or loss of trust. The reason supporting exclusion must relate to the shareholder personally, meaning it must be connected to their personal or financial sphere. It is also important to note that the shareholder’s fault is not relevant when determining the grounds for exclusion. Furthermore, the articles of association may, to clarify the procedure, contain an exemplary list of important reasons related to the shareholder that constitute grounds for exclusion.

Procedure and consequences of excluding a shareholder from the company

A case concerning the exclusion of a shareholder from a limited liability company is a matter of property rights. It proceeds under civil procedure, and the court’s decision is issued in the form of a judgment. Pursuant to Article 40 of the Civil Procedure Code, the competent court is that of the company’s registered office. It is worth noting that throughout the ongoing court proceedings, the defendant shareholder retains their shareholder rights. However, under Article 268 of the Commercial Companies Code, it is possible to suspend these rights if there are important reasons for doing so. When a court judgment on the exclusion of a given shareholder is issued, in order to become effective under Article 266(3), their shares must be taken over by the other shareholders or third parties. The purchase price is determined by the court based on the actual value of the shares on the day the lawsuit is served. According to Article 267(1), the court sets a deadline for the remaining shareholders within which the payment due to the excluded shareholder for the taken-over shares must be made. If the court-ordered payment is not made within the deadline, the court’s judgment on the exclusion becomes ineffective. The ineffectively excluded shareholder has the right to claim damages from the remaining shareholders. Therefore, it is crucial, following a favourable court ruling, to fulfil the obligations related to the takeover of shares from the excluded shareholder and payment of the court-specified amount within the stipulated timeframe. If all procedures connected to the payment for the taken-over shares are properly conducted, the shareholder is deemed excluded from the date the lawsuit was served. It is worth pointing out, however, that this does not affect the validity of acts in which the shareholder participated after the lawsuit was served.

Summary

In summary, the institution of exclusion from a limited liability company can serve as a lifeline in situations of escalating conflicts among shareholders or detrimental actions by one of them against the company. It allows for the judicial exclusion of an unruly shareholder from the company, which can help swiftly resolve internal conflicts or simply remove a shareholder acting against the company’s interests. The institution primarily aims to protect the company, its structure, and the relationships prevailing within it. At the same time, it should be noted that the regulations regarding this institution allow for a fair exclusion of a given shareholder, as the provisions guarantee the shareholder’s recovery of an appropriate monetary sum for the shares taken over. Additionally, the entire procedure is subject to court supervision. In case of doubts regarding the construction of the lawsuit or other procedural elements, it is advisable to seek professional legal advice.

In July 2022, the President signed the Act on Crowdfunding for Business Ventures and Support for Borrowers. The vast majority of its provisions came into force within 14 days of its announcement, with certain exceptions. One of these was Article 48 of the Act, which concerned amendments to the Commercial Companies Code. These regulations began to apply only on 10 November of the current year. The provisions introduced a ban on crowdfunding for limited liability companies, which under previous law was fully legal. Equity crowdfunding, under the previous legal framework, was one of the forms of crowdfunding financing used, whereby an entrepreneur operating as a limited liability company obtained a certain grant or funding through a public offer from private investors. Companies issued shares in exchange for specific financial contributions. Entrepreneurs used the obtained funds to finance various projects or investments. Crowdfunding was generally conducted via online crowdfunding platforms directed at an unlimited audience. Therefore, it is worth becoming familiar with the changes introduced by the new regulation.

New prohibitions and consequences of their breach

The new prohibitions are regulated in Article 182(1) and Article 257(1) of the Commercial Companies Code. The first stipulates that an offer to acquire shares in a company may not be made to an unspecified addressee and acquisition of shares may not be promoted by advertising or any other form of promotion directed at an unspecified addressee. It can therefore be stated that these provisions completely prohibit previously used methods of attracting investors or funds. Entrepreneurs, under the current legal framework, may not encourage the acquisition of existing or new shares by means of advertisements or other promotional forms addressed to an unlimited audience. It should be emphasised that the ban covers all activities or actions that directly or indirectly aim to persuade an investor to decide to financially support a given venture. In practice, this means that companies will cease to organise events, meetings, or business breakfasts. It is important to underline that these prohibitions significantly limit entrepreneurs’ possibilities regarding financing and seeking new groups of investors. It can be said that under the previous legal framework, companies had a much broader range of options, and obtaining the necessary funds for a given investment was considerably easier. Failure to comply with the new rules may result in serious and severe consequences for entrepreneurs. According to Articles 595(1) and 595(2) of the Commercial Companies Code, anyone who breaches these prohibitions may be subject to a fine, restriction of liberty, or imprisonment for up to six months. It should be noted that the legislator has introduced very strict sanctions in the new provisions, which is particularly reflected in the penalties of restriction or deprivation of liberty. Therefore, attempts to breach these prohibitions may have painful and long-lasting effects for the company and the individuals involved.

Which forms of financing remain available?

Despite the introduced bans, limited liability companies will still be able to use certain forms of financing for projects or ventures. This includes issuing bonds and taking out loans using crowdfunding.

None of the prohibitions discussed in this article cover the above-mentioned activities. It should also be noted that there are currently no indications suggesting any future changes. Consequently, entrepreneurs will still be able to issue bonds and take out loans through crowdfunding to obtain additional funds.

Summary

In summary, the introduced bans are certainly significant from the entrepreneurs’ perspective. These provisions completely change the sphere of crowdfunding and private investor acquisition by limited liability companies. The new regulations eliminate one form of activity which, under the previous legal framework, was widely used and legal. Business entities must adapt to the changes that have already taken place and definitively end equity crowdfunding. Companies must change the previously used methods and rely on the forms of crowdfunding financing that are available and legal under the current regulations.

For many years, digitisation and computerisation have been increasingly expanding across various spheres of life. More and more matters, both private and professional, are handled using laptops or mobile phones. Instead of going to offices to fill in paper forms, we use their online equivalents, which we complete at home or work without personal visits. Instead of traditional post, we use electronic mail, and essential documents are stored on computer media rather than in paper form. Digitisation and computerisation of different areas of our lives undoubtedly save time, offer greater flexibility, accelerate certain processes, and also provide financial benefits. Modern technologies have been increasingly present for years in law and the activities of public administration bodies. This is evident, among others, in the possibility of holding remote hearings, presenting evidence electronically, or the growing number of government online portals through which various matters can be handled without leaving home. Another digital revolution is taking place in the area of e-deliveries. It will affect lawyers, offices, but also entrepreneurs registered with CEIDG and KRS. In this article, we will focus primarily on presenting the most important issues concerning e-deliveries and their consequences, which will be particularly significant for companies and entities operating in legal transactions.

From when is the obligation to have new mailboxes for entrepreneurs?

E-deliveries are practically intended to be the equivalent of a registered letter with acknowledgment of receipt. According to legal provisions, such delivery produces the same legal effects as a registered letter with acknowledgment of receipt. Matters regarding electronic mailboxes and e-deliveries are regulated in the Act on Electronic Deliveries. This regulation imposes an obligation to set up such electronic mailboxes for, among others, non-public entities registered in KRS or CEIDG. The Act also provides different deadlines for fulfilling this obligation based on the type of entity. A different deadline is set for public authorities and entrepreneurs registered in KRS or CEIDG. It is worth noting that entrepreneurs have been granted somewhat more time to comply than public entities or professional representatives. According to the provisions, entrepreneurs registered in KRS before 10 December 2023 must set up an e-delivery address no later than 10 March 2024. Entities newly registered in KRS after 10 December 2023 will automatically receive an electronic delivery address (it will be created along with other formalities). As regards sole proprietorships, entities registered in CEIDG before 31 December 2023 must comply by 1 October 2026. All entrepreneurs registered in CEIDG from 1 January 2024 will also automatically receive electronic delivery addresses. However, it should be noted that the update of the obligation with the final date does not prevent older entities from setting up an electronic mailbox earlier. It is also worth pointing out that foreign entrepreneurs not registered in KRS will not be subject to the obligation to have an e-delivery mailbox. However, companies conducting business in Poland and holding a Polish tax identification number (NIP) will have the option to set up the appropriate mailbox.

E-delivery mailbox — is it worth setting it up earlier?

The regulations introducing e-deliveries do not provide for any sanctions for failing to set up an electronic mailbox during the transition period. However, many experts point out that having one will be beneficial and convenient both for entrepreneurs and public authorities, which will start using it earlier. E-deliveries will speed up communication with offices, allowing entrepreneurs to save time. Additionally, they will gain certainty of security and convenience regarding sent correspondence. Public administration bodies will be able to communicate more easily with entrepreneurs and send them relevant documents. Setting up an e-delivery mailbox will enable business entities to handle matters more quickly and conduct administrative proceedings more efficiently. Another motivation for setting up the address may be the earlier opportunity to familiarise oneself with the e-delivery system. The sooner the mailbox is set up, the more smoothly one will adapt to new procedures and learn how to use them.

What is the procedure for setting up an e-delivery mailbox?

Setting up an e-delivery mailbox will be possible by using a public service or via commercial service providers. If you decide to use the first option, you should submit an electronic application through the website www.biznes.gov.pl. The office will then check whether the application is complete and correct. In case of errors or omissions, the entity will be requested to complete it within 7 working days. If the application is approved by the office, it will be necessary to activate the mailbox and the e-delivery address. If the mailbox is activated via a public provider, the address will automatically be entered into the electronic address database. However, when using private services, an additional obligation will arise for the entrepreneur. In this case, it will be necessary to submit an application to add the mailbox to the electronic address database. When the relevant entry is made, the obligation to use e-deliveries will be fulfilled. From that moment on, public administration bodies will deliver correspondence to entrepreneurs exclusively in electronic form.

 

 

On 21 February, the Supreme Court issued a landmark resolution regarding the obligation of a partner in a two-person limited liability company to be covered by social security, in a case where one of the partners holds a dominant position. In this case, the shareholding structure was divided in a 99% to 1% ratio. The Supreme Court ruled that: “A partner in a two-person limited liability company holding 99 per cent of the shares is not subject to social security under Article 6(1)(5) in conjunction with Article 8(6)(4) of the Act of 13 October 1998 on the Social Security System.”

The resolution in question, case no. SN III UZP 8/23, was issued in proceedings to determine whether there was an obligation to be covered by social security. The starting point was the judgment of the District Court in Lublin of 19 October 2022, which dismissed the partner’s appeal against the decision of the pension authority. In the challenged decision, the Social Insurance Institution (ZUS) held that, as an employee of the contribution payer, i.e. the limited liability company, the partner was not subject to compulsory pension, disability and sickness insurance during the disputed period. The pension authority argued that the appellant held 99 per cent of the company’s shares and should therefore be treated as a sole shareholder. As such, the authority considered that the appellant, as the sole shareholder, could not be covered by employee insurance based on an employment contract. The partner disagreed with the ZUS decision and the judgment of the court of first instance, and the case was referred to the second instance. The Court of Appeal in Lublin stated that there is no predetermined legal criterion which makes it possible to determine that a given company is a single-member limited liability company. Having serious doubts, the second-instance court referred a question to the Supreme Court: “Does a partner in a two-person limited liability company holding 99 per cent of the shares, enabling them to freely shape the content of resolutions at the shareholders’ meeting and make decisions regarding the company’s operations, fall under the social security system pursuant to Article 6(1)(5) in conjunction with Article 8(6)(4) of the Act of 13 October 1998 on the Social Security System?”

As a result, the Supreme Court issued a resolution clearly stating that a partner in a two-person limited liability company holding 99 per cent of the shares is not subject to social security on the same basis as persons conducting non-agricultural business activity.

The Supreme Court justified its decision primarily with a strict interpretation of Article 8(6)(4) of the Social Security System Act, which indicates that a person conducting non-agricultural business activity includes a sole shareholder in a limited liability company, and partners in a registered partnership, limited partnership or professional partnership. Therefore, Judge Zbigniew Korzeniowski explained in the oral justification that the resolution is a direct application of the provision of Article 8(6)(4) of the Social Security System Act. Thus, one cannot speak of a single-member limited liability company if there are two partners. In such a situation, the issue of one partner holding a dominant position becomes secondary. It is irrelevant how the shares are distributed – one of the partners may even hold 99 per cent. What matters is the existence of two shareholders. Consequently, Article 8(6)(4) of the Social Security System Act does not apply to a limited liability company with two partners, regardless of the shareholding ratio.

For years, the Social Insurance Institution (ZUS) applied an interpretation of these provisions that was disadvantageous to dominant shareholders. The authority treated majority shareholders of limited liability companies as persons conducting non-agricultural business activity. ZUS based its practice on the concept of the “illusory minority partner,” i.e. one holding less than 10 per cent of the shares. This concept was justified by the limited rights of such a partner within the company and the complete control of the dominant partner over its operations. However, these arguments did not convince the court.

This resolution should be viewed positively. The judgment breaks with the previously applied practice of the Social Insurance Institution of treating company partners as entrepreneurs for the purposes of contribution obligations. It also clarifies the doubts surrounding such cases. It is to be hoped that the resolution will prompt a change in the pension authority’s approach.

Case reference: SN III UZP 8/23

On 20 June 2024, the Court of Justice of the European Union (CJEU) ruled on a request for a preliminary ruling submitted by the Rechtbank Den Haag (District Court of The Hague) in case C-540/22 regarding the compliance of Dutch law with the freedom to provide services in the European Union, addressing the issue of whether Ukrainian citizens posted from one EU country to another must obtain an additional residence permit in the host country.

Posting of Ukrainian citizens for more than 90 days

In the case at hand, Ukrainian workers were posted by a Slovak service provider to perform work in the Netherlands. The duration of their work was extended, exceeding 90 days within a 180-day period. Under Dutch law, in such situations, third-country nationals are required to hold a residence permit specifying its period of validity and the cost of obtaining it. Consequently, the Dutch court referred the case to the CJEU to determine whether national provisions requiring a residence permit after 90 days are consistent with the EU freedom to provide services.

The main points of dispute were:

1. The obligation to apply for a residence permit – the applicants contested the requirement to obtain an additional residence permit in the Netherlands after 90 days.
2. The validity period of permits – the Dutch residence permits were only valid as long as the Slovak residence permits, making them shorter than the period of employment.
3. Fees for permit applications – the fees charged for residence permit applications were five times higher than those for certificates of lawful residence for EU citizens, which the applicants deemed excessive.

Through the preliminary questions, the referring court essentially sought to determine whether Articles 56 and 57 TFEU should be interpreted as precluding national provisions under which, where a service provider established in one Member State posts workers who are third-country nationals to another Member State for a period exceeding 90 days in any 180-day period, those workers are required to hold an individual residence permit in the latter Member State. Such a permit would be valid only for the same period as the residence and work permit issued in the first Member State, or in any case for no more than two years, and its issue would be subject to the payment of fees equivalent to those charged for ordinary work permits for third-country nationals.

Limiting the validity of work permits for posted workers

In the present case, the Secretary of State, taking into account the extension of the posting period, issued residence permits which were limited to the validity period of the Slovak residence permits, collecting the relevant fees. The applicants challenged this interpretation, invoking the principle of the freedom to provide services under Article 56 TFEU, arguing that such an obligation and its validity period should not be disproportionate. The CJEU held, however, that such national regulation may be justified if it serves to prevent illegal entry and residence, which is a legitimate objective in the general interest, such as maintaining public order and security. Workers employed by companies established in another Member State therefore cannot automatically benefit from access to the labour market of the host country if their stay exceeds 90 days within a 180-day period.

Additional fees

Regarding the amount of fees due for residence legalisation applications, the facts of the case showed that this amount was equal to the fees payable for an ordinary work permit for a third-country national – an amount five times higher than the fee for a certificate of lawful residence for an EU citizen. The applicants argued that such high fees hindered the freedom to provide services.

CJEU ruling

The CJEU emphasised that high fees for obtaining a residence permit may hinder the freedom to provide services, although it noted that EU law does not prohibit Member States from charging such fees. However, the key point is that such fees must not be disproportionate in light of the freedom to provide services as set out in Article 56 of the Treaty on the Functioning of the European Union (TFEU).

In the present case, Articles 56 and 57 TFEU should be interpreted as not precluding national provisions under which, where a service provider established in one Member State posts workers who are third-country nationals to another Member State for a period exceeding 90 days in any 180-day period, those workers are required to hold an individual residence permit in the host Member State. This permit may be limited in validity to the duration of the residence and work permit issued in the first Member State, or in any case to two years, and may be subject to fees equal to those for ordinary work permits for third-country nationals, provided such requirements are not disproportionate.

Practical conclusions

The CJEU ruling confirms that the Dutch requirement for additional residence permits for Ukrainian nationals in the host country is permitted, even when they already hold a residence title in the country of employment. Nevertheless, each case involving the posting of Ukrainian nationals from one EU Member State to another must be individually assessed to determine whether the conditions for legally working in the host country are met, including the possibility of exceptions from the requirement to obtain additional permits. Should you require assistance with posting Ukrainian nationals to another EU country, we invite you to contact us. We provide legal services to businesses, including online: https://atl-law.pl/delegowanie-pracownikow-i-zatrudnianie-cudzoziemcow/

Contribution Holidays Still in 2024

On June 7, 2024, the President signed an amendment to the Act on the Social Insurance System and certain other acts, thereby introducing contribution holidays for entrepreneurs. The law will come into force on the first day of the month following four months after its publication, i.e., on November 1, 2024.

The justification for the bill states that social insurance and related contributions are among the most sensitive topics in discussions about doing business in Poland, and the social insurance system should reflect the principles of social justice. The proposed solution aims to provide significant support for the microenterprise sector registered in CEIDG, without putting the Polish social insurance system at risk.

What Are Contribution Holidays?

Under the so-called contribution holidays, entrepreneurs will be exempt from paying pension, disability, and accident insurance contributions for one month each year, at a time of their choosing. During this month, these contributions will be covered by the state budget. Notably, if the entrepreneur was voluntarily covered by sickness insurance in the month of application and the preceding month, this contribution will also be covered. However, contributions to the Labor Fund and Solidarity Fund may also be waived—but unlike the others, they will not be covered by the state budget.

Who Qualifies and Under What Conditions?

To benefit from contribution holidays as an entrepreneur, you must:

1. In the calendar month preceding the month of application, have no more than 10 people (including yourself) registered for pension, disability, accident, or health insurance;
2. In the two calendar years preceding the year of application, either not generate income from non-agricultural business activity, or generate income in at least one of those two years not exceeding the PLN equivalent of 2 million euros (calculated using the average exchange rate published by the National Bank of Poland on the last working day of the calendar year preceding the year of application);
3. Not conduct non-agricultural business activity for a former employer (for whom you performed the same tasks as an employee) in the calendar year prior to applying, or in the year you started the business;
4. In the month preceding the application, be covered by pension, disability, and accident insurance due to your non-agricultural business activity.

How to Apply for Contribution Holidays?

Entrepreneurs can only be exempted from paying contributions upon request—this must be submitted through an electronic form available on the ZUS platform. The exemption will apply only to the entrepreneur—not to employees or cooperating persons, for whom contributions must still be paid under standard rules.

When to Apply for Contribution Holidays in 2024?

Applicants must submit their request in the month preceding the month for which they wish to be exempt from contributions. Therefore, if an entrepreneur wants to benefit from the contribution holiday in 2024, the application must be submitted in November.

For the month covered by the exemption, the entrepreneur is still obligated to submit a settlement declaration and individual monthly reports by the 20th of the following month.

If you need assistance with issues related to the Social Insurance Institution (ZUS) or would like to learn more about available contribution preferences, feel free to contact us remotely: https://atl-law.pl/prawo-pracy-sprawy-zus/