Analysis

Amendments to be introduced into the Code of Commercial Companies and Partnerships 

Convenience for entrepreneurs, protection for creditors

Legal alert (5/2014)

On 20 May 2014 the Council of Ministers approved the draft assumptions underlying the Act amending the Code of Commercial Companies and Partnerships and certain other Acts.

On 20 May 2014 the Council of Ministers approved the draft assumptions underlying the Act amending the Code of Commercial Companies and Partnerships and certain other Acts.

The most important assumptions that underpin the amendments to the Code of Commercial Companies and Partnerships concerning limited liability companies include:

  • cancellation of the duty to create share capital in a limited liability company, and in case the shareholders’ decide to set up the share capital - establishing the minimum share capital value as PLN 1.00;
  • possibility to acquire up to 25% of its own shares where the limited liability company earned profit during the previous financial year;
  • introduction of a new measure to protect limited liability companies and their creditors - the so-called solvency test which requires that the company’s management board submit a declaration to the effect that disbursement of funds to members made on a corporate basis will not cause the company to lose its capacity to meet liabilities during the next year of operations;
  • the duty to establish a supplementary capital equal to 5 percent of the limited liability company’s liabilities, where such capital cannot be lower than PLN 50,000.00, as a reserve for future losses;
  • introduction of a loss coverage priority system whereby the so-called unallocated cash (including profit from the previous financial year and undistributed profit from past years) is transferred to cover the loss first, and the funds derived from the share capital decrease are assigned for that purpose last in order.

Additionally, in line with the amended law, it will be possible to incorporate registered partnerships and limited partnerships, make amendments to the instruments of incorporation of registered partnerships, limited partnerships and limited liability companies, and terminate such partnerships/ companies through the ICT system. The above is associated with a decrease of court charges on the motion for first register entry of the partnership/ company concerned, providing the relevant instrument of incorporation is based on the template, as well as the charges on the change request made through the ICT system.

The amendments above are to take effect on two dates:

  • As from 01 January 2015 – the amendments concerning changes in respect of limited liability companies and the solutions allowing electronic incorporation and registration of registered and limited partnerships;
  • As from 01 April 2016 – the amendments concerning amendments to and termination of registered partnerships, limited partnerships and limited liability companies with the use of the template available through the ICT system.

In practical terms, the suggested changes will make the capital structure of limited liability companies more flexible and will increase the focus on the economic aspects of capital management in such companies. At the same time, they should also help safeguard the interests of creditors. Furthermore, entrepreneurs will certainly find the extended functionalities of the ICT system (i.e. the possibility to incorporate registered partnerships and limited partnerships and to amend the instruments of incorporation - also in limited liability companies - through the ICT system) very convenient.

Did you find this useful?

Related topics