What should be known about a simple stock company and what are its disadvantages and advantages?

From 1 July 2021 The Polish legislature introduced a new entity, Prosta Spółka Akcyjna (hereinafter PSA), into the Commercial Companies Code. The essence of this amendment was primarily to create appropriate tools for start-ups, and the newly introduced solutions are to largely refer to US companies. This new legal entity is characterised by flexibility, digitised character, a low financial threshold for its creation and a lack of share capital.

The most important assumptions of the Simple Equity Company are:

1. no share capital — instead the introduction of share capital, where its minimum value may be 1 PLN.

The amount of share capital shall not be entered in the articles of association. Its amount on the company’s notification to the register shall be determined on the basis of the total value of the contributions made to share capital. PSA’s capital is neither legal nor organisational nor guarantee. Moreover, PSA shares are not a fraction of the share capital and therefore do not amount to a given nominal value.

2) The nature of the contribution in kind

Contributions to the share capital of PSA may not be non-negotiable rights, but the provision of labour or services may be intended to cover shares if they are of property value. The above means that persons who are the originators of projects and do not have assets before the establishment of PSA will be able to cover shares of the company in return for the work done.

3) no nominal value of the company’s shares

Unlike shares of public limited-liability companies and limited-activity shares of PSA, they are in no way linked to the share capital of PSA. However, PSA shares have an issue value which is defined as the value of the shareholder's acquisition of shares. The shares entitle the dividend to be paid and to part of the assets in the event of the division of the company.

1. the shares of the company shall not be admitted or marketed within the meaning of the rules on trading in financial instruments. However, PSA may raise capital through crowdfunding.
2. introducing the possibility of establishing a Board of Directors as a management and supervisory body instead of the Management Board and Supervisory Board

The body of the Board of Directors was introduced as the Anglo-Saxon Board of Directors. In the articles of association, the rules of procedure of the Board of Directors or the resolution of the Board of Directors may be divided into Executive Directors, i.e. the heads of the company's affairs and non-executive Directors, who carry out permanent supervision of the company's affairs.

1. introducing the possibility of taking over the company's assets by the acquiring shareholder.

The disadvantage of choosing PSA as a form of business activity is, at the moment, the inability to apply the so-called Estonian CIT

The termination of the company can be accomplished in addition to the traditional way of liquidation, by taking over all the assets of the company together with the obligation to satisfy creditors and other shareholders by the acquiring shareholder. This solution stems, among other things, from the high risk of failure of start-ups, for which the provisions on PSA have mainly been introduced. Such a solution gives an opportunity to terminate the entity quickly.

One of the advantages of the Simple Equity Company is the possibility of selling shares only in document form, and it is possible to vote on resolutions of the general meeting by means of electronic communication.

The PSA regulation flaws may include an increased risk associated with the activities of such entities. Low amount of the required share capital, possibility of limiting the bodies to the Board of Directors, possibility of ending the business of the entity without liquidation, lack of liability of shareholders for the company's obligations. On the one hand, these solutions are advantages, and with second may give rise to certain risks on the part of investors and creditors of such entities.

The disadvantage of choosing PSA as a form of business activity is, for the moment, the inability to apply the so-called Estonian CIT, as the Corporate Income Tax Act allows its application only to the limited liability company and the public limited liability company. However, the Ministry of Finance ensures that the entity scope of the Estonian CIT is extended from 2022

Nor did the legislator make any changes in the tax on civil acts.

The definition of the company in the Civil Law Act has not been amended from 9 September 2000 The capital company should continue to be understood as a limited liability company, a joint stock company and a European company, and as a civil, public, partnership, limited partnership and limited partnership.

This means that the PSA has not been included in the provisions of the Civil Law Act and that the civil law act in the form of the conclusion of the PSA agreement is not currently subject to PCC taxation.

The newly introduced rules on the Simple Equity Company represent clear progress in facilitating businesses to operate more digitised and flexiblely. The ability to quickly establish a company, deciding on the matters of the company in electronic form certainly provides more dynamic business activity.

All these facilities can make Simple Joint Stock Company a favorite form of business activity for entrepreneurs creating new ventures.