New Polish corporate group law – advantages and risks connected with the regulation

1. Major aspects of Polish corporate group law:

a) groups with subsidiaries in Poland have the right to set up a registered corporate group;

b) this is an “opt in” regulation, which means that parent and subsidiary companies are not obliged to form a registered corporate group, but they are now given the option to do so

c) the regulation does not constitute a complete regulation of group law but addresses only selected issues related a registered corporate group:

• group management
• liability

2. A registered corporate group:

a) Advantages and risks:

• the group companies are guided by the corporate group’s interest
• the parent company is entitled to issue binding instructions to the subsidiary’s management board
• the members of the subsidiary’s bodies are not liable for damage caused as a result of a binding instruction being implemented
• the parent company is given full access to information on subsidiaries and the subsidiary’s management board cannot refuse to provide information
• a parent company directly holding at least 90% of the shares is entitled to buy out minority shareholders holding up to 10% of shares (squeeze-out)
• minority shareholders of the subsidiary are granted special protection measures
• the parent company’s liability for damage resulting from binding instructions being followed

b) Entities eligible to participate in a registered corporate group as a parent company:

• company / a partnership based in or outside Poland
• which holds directly or indirectly a majority of votes in a subsidiary (i.e. either a direct shareholder or other entity located “above” in the group structure)

c) Entities eligible to participate in a registered corporate group as a subsidiary:

• Only (incorporated) companies based in Poland
• Not partnerships
• Not listed companies
• Not companies supervised by the Polish Financial Supervision Authority

3. Operation in a corporate group without registration. Legal doubts:

a) Is it permissible to follow corporate group interest?

b) Does the parent company have the right to issue binding instructions?

c) Is there a higher risk of liability of the parent company?

d) Is there a higher risk of liability of the subsidiaries’ management boards?

4. How we can help:

a) Support in deciding on the right form of cooperation within corporate group (registered or unregistered group of companies)

b) Development of rules for cooperation within the group that will allow for the streamlining of operations and minimisation of legal risks in a registered group of companies

c) Development of group cooperation rules to reduce legal risks of operating as an unregistered group of companies