In the near future we will be facing an extensive amendment of the Commercial Companies Code.  The changes will concern mainly two areas: holding company (corporation) law and corporate governance.

Group of companies and binding instructions

Particularly interesting are the plans to introduce the corporation law together with the concept of the so-called group of companies, in which what guides the parent company, and the subsidiary is the interest of the group of companies in addition to the interest of the company. The purpose of the corporation law is to enable uniform management of subsidiaries in order to pursue a common interest and a common economic strategy within a group of companies.

Within a group of companies, it will be possible for a parent company to give binding instructions to a subsidiary. Members of the management board of the subsidiary will not be liable for damage caused to the company as a result of carrying out such an instruction. While the execution of binding instructions may be in the interest of a group of companies, it may often involve the occurrence or risk of damage for the subsidiary. Therefore, the planned amendments provide for and regulate in detail the issue of a parent company’s liability for damage caused by the execution of binding instructions, both towards the subsidiary or its shareholders and towards its creditors.

Another noteworthy solution planned for a group of companies is the possibility of compulsory buyout of minority shareholders of the subsidiary company holding not more than 10% of the share capital under the sell out and squeeze out procedures. This is a new solution, particularly for limited liability companies. The institution of the compulsory buyout of minority partners or shareholders is – on the one hand – aimed at strengthening the position of the dominant company (squeeze out), while – on the other hand – constitutes protection of minority partners and shareholders (sell out).

Amended corporate governance – strengthened supervisory boards

The amendment to the Commercial Companies Code provides for the strengthening of internal control in companies by increasing the effectiveness of supervisory boards and providing them with ongoing access to information on the state of affairs of the company. To this end, supervisory boards are to be equipped with new or improved tools for exercising control, such as:

  • possible use (at the company’s expense) of the services of an independent advisor,
  • the right to obtain information directly from the company’s employees,
  • possible establishment of special committees of the supervisory board,
  • the obligation – explicitly stated in law – of the management board to provide certain information to the supervisory board.

On the other hand, the supervisory board is to be obliged to prepare and present an annual report on its activities.

Business Judgement Rule

The legislator recognises that risk is a permanent feature of business activity. Therefore, those who diligently and loyally perform their duties are to be protected in case their decisions turn out to be wrong in the future. The draft amendments to the Commercial Companies Code aim to exclude the liability of members of the company’s bodies for damage caused to the company as a result of a decision which, in time, turned out to be wrong, though was taken within the limits of a justified business risk. In this context, the actions of board members are to be evaluated taking into account when and how decisions were made, and not only from the perspective of the effects of such decisions.

Effective date of the amendment

The bill is already after the first reading in the Polish Parliament (Sejm). As it stands, it provides for a 6-month period for the new provisions to enter into force.

How can we help you?

We are following the draft amendments to the Commercial Companies Code to keep you informed on the status of the amended regulations.

We will be happy to answer your questions related to the planned amendment.

We will help you analyse the extent to which the planned amendments to the Code are worth applying from the perspective of your business.    

 

 

Author: Wiktoria Chwiedosik

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