The amendment of the Commercial Companies Code introduces the so-called " holding rights". The project focuses on regulating the relationship between the parent company and subsidiaries.
These relations are intended to take into account the interests of creditors, members of bodies and shareholders of a minority subsidiary.
Group of Companies
The Polish definition of holding company, i.e. “group of companies” (in the new division IV) is introduced in the Commercial Companies Code.
According to the reasons for the draft law: the group of companies is a ‘qualified’ ratio of dominance and dependence between certain companies forming a group of companies, as these companies are guided by a common economic strategy which allows the parent company to exercise uniform management over the company or subsidiaries.
This makes it possible to distinguish the new legal category in practice of Polish and foreign groups of companies, which is “interest of the group of companies”. Hence, it was necessary to define the ‘group of companies’ as a legal category separate from the relationship of dominance and dependence.
Holding companies will not automatically be considered as a group of companies within the meaning of the Act. In order to be considered as a group of companies, it is necessary to comply with the formal requirements:
- the common interest should be derived from the contract or the statutes of each company. It will be necessary to amend the articles of association or statutes in this respect
- it is necessary to disclose participation in a group of companies in the National Court Register.
Binding Commands
The introduction of a "binding recommendation" institution is crucial for the management of a group of companies. The parent companies will be entitled to issue binding orders to subsidiaries concerning the conduct of company affairs. They may only be issued where this is justified by the specific interest of the group of companies.
The execution or refusal of a binding order of the parent company by the subsidiary will require a prior resolution of the management (or board of directors) of the subsidiary and inform the parent company of the execution or refusal of such an order.
Refusal to execute a binding command is possible in specific cases. A subsidiary shall refuse to execute such an order if:
- its execution would lead to the insolvency of the subsidiary or would jeopardise its insolvency;
- there is a legitimate concern that it is contrary to the interests of the company and will harm it, which will not be corrected by the parent company or subsidiary of the group of companies in the next two years;
- the specific provisions do not permit the execution of a binding order (e.g. when a company provides services in the field of regulated activities or whose law requires an independent board of directors);
A single-member subsidiary of a group of companies will not be entitled to refuse to execute such an order issued by the parent company.
Liability of the parent and subsidiary
The liability of the parent company was introduced for the effects of a binding order, which was subsequently executed by the subsidiary.
This is the liability of both the subsidiary and its shareholders (shareholders) of the minority and the creditors of the subsidiary for the damage subsequently incurred by the subsidiary to execute a binding order issued to it by the parent company.
This liability is constructed on the basis of subsidiary responsibility and activates when execution against the subsidiary proves unsuccessful.
Consequently, the responsibility of the management staff for carrying out the binding order of the parent company for the principles laid down in the Act was excluded.
Liability of the members of the Management Board and the Supervisory Board
The responsibility of the members of the board and supervisory board will be based on the business judgment rule. In accordance with this principle, the correctness of decision-making is to be assessed, not their results.
This means that members of the board of directors and supervisory boards will not be held liable even for wrong decisions if they have exercised their duties with due care, loyal to the company and within the limits of legitimate economic risks.
The activities of board members and supervisory boards will be assessed by the principle of the regularity of the decision-making process rather than the outcome of the action.
Squeeze-out and sell-out institutions
The draft amendment provides for the possibility of changing the ownership structure of subsidiaries participating in a group of companies:
the right to the compulsory redemption of shares belonging to the shareholders of a minority subsidiary (so-called squeeze out) if the parent company has at least 90% the share capital of the subsidiary (in certain cases less than 90% share capital). The parent company may then request the purchase of shares belonging to the shareholder of the subsidiary.
Right to re-buy shares belonging to shareholders of a minority subsidiary (so-called sell-out) if the parent company has at least 90% the share capital of the subsidiary. A minority shareholder has the right to demand that his shares be redeemed by the parent company, he may exercise this right within three months of the disclosure in the National Court Register of that company's participation in a group of companies.
Powers of Supervisory Boards
The revised rules are intended to increase the powers of review of supervisory boards. In accordance with the powers conferred in the draft, the Supervisory Board will be empowered to examine all documents of the company, information on the company's assets and to request information or explanations concerning the company's activities.
The proposed provisions also impose new responsibilities on the Supervisory Board, such as the evaluation of the financial statements for the previous financial year, the management reports on the company's activities, the evaluation of the board's proposals on the distribution of profits and dividend payments, and the preparation and submission of a report on the results of that assessment to the shareholders' meeting.
The powers of the supervisory boards are also to be extended by the possibility of setting up committees to carry out certain supervisory tasks and the right to elect a supervisory board adviser without the participation of the board and the possibility of concluding a contract by the supervisory board with such adviser.
Summary
The amendment introduces a number of changes to the existing regulations of the Commercial Companies Code. Apart from the above mentioned, in order to protect minority shareholders and creditors of the company, the Act is to grant them compensation rights and the right to information.
Furthermore, a duty of loyalty to members of the board of directors and supervisory boards will be introduced, which should be understood not only as compliance with legal provisions, but also as a fair and fair manner for the members of the bodies to the shareholders and the company and to conduct the company's affairs in accordance with its interests.
Written by Konstancja Sawecka
Legal advisor, included on the list of legal advisors at the District Chamber of Legal Advisors in Warsaw, a graduate of the Postgraduate Study of the Law of Companies at the Faculty of Law and Administration of the University of Warsaw, completed a British law course organized by the British Law Centre.
He specializes in economic law, legal handling of transactions and restructuring processes. He has experience in handling capital companies in the field of commercial and corporate law, including comprehensive legal services for automotive, IT and insurance entities.
During her professional practice, she also gained extensive experience in civil law, with particular emphasis on drawing up, concluding and executing economic contracts. Its area of interest includes copyright, IT and new technologies and the capital market.