The Ministry of State Acts has set itself the task of preparing an amendment including the introduction of regulations in the Code of Commercial Companies concerning the so-called holding right relating to the relationship between the parent company and the company or subsidiaries.
As a result of the work, a draft No UD was presented 113 to amend the Commercial Companies Code Act and some other laws which are currently in the consultation phase and, as appears necessary, amendments and additions.
first After reading the project, it seems that it was created by the functioning of the State Treasury companies and entities associated with them. The project appears to be more universal and adapted to the activities of small and medium-sized companies, in particular start-ups and investment companies.
Unclear definition of group of companies
Surely, the task that has been put forward was no longer easy just because, in economic, tax or accounting terms, it is quite easy to identify and identify a group of companies as, for example, a capital group or associated entities in accounting terms, the legal treatment is causing some difficulties, as is already shown by the definition of a "group of companies" presented in the project:
a group of companies, a parent company and a subsidiary company or companies, which, in accordance with the agreement or the statutes of each subsidiary, has a common economic strategy (interest of the group of companies), allows the parent company to exercise uniform management over the company or subsidiaries (Article 4(151))
It would therefore be reasonable to consider whether a subsidiary’s obligation to follow the group’s interests should be introduced. First, and in the performance of the orders of the parent company, and not in all its activities at all, as indicated above, the subsidiary has no information on current decisions/actions of the parent company or other subsidiaries
In the above definition, it is not clear what a single management is intended to mean and, at the same time, since, according to the definition of a ‘group of companies’, subsidiaries should have a common economic strategy provision in their agreements or statutes allowing the parent company to exercise that single management, then under Article 211(1)`It should be pointed out that the subsidiaries should be guided primarily by this common economic strategy (the interest of the group), which would be the point of the assumption.
However, the decision itself raises a number of doubts Article 211(1) ed. k.s.h. at:
The parent company and the subsidiary participating in the group of companies shall, in addition to the interest of the group of companies, be guided by the interest of the group of companies, provided that this does not prejudice the legitimate interest of creditors and minority shareholders or shareholders of the subsidiary.
After first The definition shows that, at all times in the course of the business of a subsidiary, it should conduct it in every aspect of its business, taking into account the interest of the group, which may in practice prove impossible, due, inter alia, to the lack of knowledge of the management of the subsidiary of the current plans/strategies/decisions of the management of the parent company, as well as the boards of other subsidiaries.
Furthermore, the capital company carries out business in its own name and on its own account.
Furthermore, from the point of view of the parent, it is justified to direct itself alongside its own interests, including the interests of its subsidiaries, in particular to the extent to which it will give instructions, and from the perspective of its subsidiary, it should be required to follow First, It's the group's business, if that's the point of the amendment.
Unlike the parent company, the subsidiary does not have such a decision-making and information transfer to other subsidiaries.
Therefore, directing a subsidiary with the interest of the group alongside its own interests, in addition to taking into account the legitimate interests of creditors and minority shareholders, may lead to the dysfunction of such regulation when such interests are not reconciled.
It would therefore be reasonable to consider whether a subsidiary’s obligation to follow the group’s interests should be introduced. First, and in the performance of the orders of the parent company, and not in all its activities at all, as indicated above, the subsidiary has no information about current decisions/actions of either the parent company or other subsidiaries and no instruments to obtain such information in the ongoing conduct of business.
One can imagine that a subsidiary will be obliged to follow First, the interest of the group, and in the scope of the obligation to comply with a binding order from the parent company, and not at all in all its activities.
Consequently, it would not be justified to indicate that the management of a subsidiary must be guided by the legitimate interest of creditors and minority shareholders’ primacy would be directed by the parent company. Leaving the obligation to follow the legitimate interest of the creditors of the subsidiary and its minority shareholders would lead to an obligation to take account of such interest on the board of the parent company issuing the order, which would in practice be an additional, difficult obligation for the parent company to implement it
Since the designers have already decided on the solutions presented, there should be no primacy or even a mark of equality between the interests of the group of companies and the protection of the interests of creditors and shareholders or shareholders of the subsidiary concerned. Since certain priorities have been chosen, which seems to be the interests of the group, the provision should consistently give primacy to these interests.
Impunity plus?
Designers in the recipe Article 215(1) Ksh indicated that:
For performance, on a specified basis under Article 213, the binding order of the parent company and in the case in question under Article 214(2-4), Member of the board, supervisory board, audit committee and board of directors of the subsidiary shall not be liable for civil liability under the rules Article 293, Article 300125, Article 483, or criminal liability based on Article 296 Penal Code.
section 2. Provision section 1 it shall apply mutatis mutandis to the members of the board of directors, the supervisory board, the review committee and the board of directors of the parent company acting in the interests of the group of companies.
This provision means that, in practice, neither for the performance of the order nor for the failure to comply with the order of the parent company – either the board, the supervisory board, nor the review committee and the board of directors will be held liable if they invoke action in the interests of the group.
At the same time, no responsibility will also be borne by the members of the parent company's organs, which must raise reservations, since the parent company issues such orders.
It cannot be excluded that a command institution in a group of companies may be abused to benefit from protection for risky investments.
Given that the project was being prepared in the Ministry of State Acts and was certainly accompanied by the thought of State Treasury companies, the dissolution of the designers is not so surprising, but it should raise reasonable questions, e.g.
why no one would be held responsible in the event that the performance of the order by the subsidiary was expected to cause damage to it, which, however, would not be corrected within the expected time. 2 years after the occurrence of a harmful event (Article 213(2) (projekt. zm. k.s.h.)
Moreover, the whole design of the regulations Article 213(214) There are other technical doubts, such as the lack of consideration of deadlines during which resolutions on instructions and other situations which may arise in connection with decisions on execution or not.
It must also raise doubts about the content of the provision Article 214(2) k.s.h. proj. zm. k.s.h., in which it was decided that a subsidiary in which the parent owns or jointly owns min. 75% the share capital may refuse to comply with an order only if its execution leads to insolvency or a threat of insolvency.
Such a solution means that the subsidiary in which it will be 25% the fragmented capital, e.g. external investors, employees – the board will be obliged to take decisions that may adversely affect the situation of the subsidiary, although it will not lead to a risk of insolvency.
This situation of shareholders and minority shareholders in a subsidiary should not be accepted. Furthermore, according to the project, the partners and minority shareholders in the subsidiaries in the group seem to be marginalised, ultimately with the possibility to squeeze them out so-called squeeze out.
In the light of the possibility of a fairly easy squeeze out, the more surprising it must be the content in the version of k.s.h.
Article 211(1), where it is appropriate that the interest of the company should also be taken into account in the interests of the group, provided that this does not prejudice the legitimate interest of minority shareholders.
The full reading of these provisions gives a legitimate view that the legislator assumes as though there was an obligation to protect the interests of minority shareholders and shareholders, but if so, they can be squeezed out of the company quite easily.
The obligation to disclose in the report the links of orders issued in the group, while at the same time it is quite easy to examine the statutes/contracts of companies in relation to, inter alia, the mandatory economic strategy indicated therein (Article 5(1)(51) k.s.h.) may provide competition with relevant information on the group's business activities
In the context of responsibility, it should be noted that the draft provides that disclosure of participation in a group is made by entering a reference in the register (Article 211(4) (k.s.h.) At the same time, the definition of a group of companies with Article 4(1)(51) The amendments to the K.s.h.
seem to indicate that the information on participation in a group of companies and the resulting rights and obligations should result from the company's agreement or statutes.
In view of the above, the content of the articles of association or statutes should determine the possibility of including in the National Court Register the mention of participation in a group. The Management Board should not decide to enter such information itself.
Therefore, if it were to be assumed that the deletion of the reference would also require the amendment of the company's agreement or statutes (although the cancellation of the project of silence), the amendment would have been effective until the entry into the KRS.
As a result, there could also be abuse in the event of a desire to benefit from the benefit of impunity in the context of ‘action in the interest of the group’ in the period from the adoption of a resolution on the amendment of the company's agreement or the statutes to register amendments, which would subsequently entail the possibility of erasure of information on participation in the group.
Associates and minority shareholders – are they really protected?
The approval should be granted to shareholders and minority shareholders the right to request the registration court to appoint an expert in order to examine the accounts and activities of the group of companies (Article 219(1) ).
It would also appear that the definition itself already In the first new recipe Division IV Groups of Companies Article 211(1) Ksh, ordering the group to take into account the interests of shareholders and minority shareholders, actually takes due account of the interests of minority shareholders.
However, as already indicated above, shareholders or minority shareholders may be squeezed out of the company.
It's a recipe. Article 2111(2) The change in Ksh allows for such a change in the statutes of the parent and subsidiary which will enable the squeeze of shareholders and minority shareholders when the parent company directly or indirectly has min. 75% the capital of the subsidiary.
So-called squeeze out of shareholders or minority shareholders holding in the company 25% capital is a real instrument for disposing of shareholders or shareholders of a subsidiary of smaller investors or employees.
In addition, it is not known for what reasons in the group of companies the right to squeeze by the majority owner with mines would be accepted. 75% capital, while even under Article 82(1) The Public Offering Act requires that a shareholder of a public company, either alone or jointly with its subsidiaries or its dominant shareholders and entities party to the agreement in question under Article 87(1)(5), reached or exceeded 95% the total number of votes in that company so that it can make a squeeze out.
Transparency of business activities and economic strategy of the group of companies
Designed provision Article 218(1)(2) ksh assumes that the management board or the board of directors of the subsidiary shall draw up a report on its relationship with the parent company and that report shall be part of the management board's business report. The report shall show the binding instructions of the parent company to the company or subsidiaries belonging to the group of companies.
As it is known, the activity report of the entity is public and in the context of competitive business activity, it does not describe the business strategies, implementation stages or decisions that have been taken. Rather, rather cost-effective form and informational, albeit laconic, content about business activities prevail.
Unfortunately, the obligation to disclose in the report the links of the orders issued in the group, while at the same time it is quite easy to analyse the statutes/contracts of companies in terms of, inter alia, the mandatory economic strategy (Article 5(1)(51)) k.s.h.) may provide competition with relevant information on the group's business activities.
It seems entirely unnecessary to indicate in the report the links of information on orders, and even the same report seems unnecessary, as its subject matter could be successfully part of the activity report, and this would indeed be information about the link in the group without publicly presenting information even leading to disclosure of business secrets, i.e.
business decisions included in the recommendations.
Increasing the powers and powers of the Supervisory Board
The draft amendment of the Commercial Companies Code extended the powers of the Supervisory Board and gave it powers to carry out real control of the company's activities, including its board of directors. In addition, the Supervisory Board was required to draw up an annual report on the activities of the Supervisory Board, which, in the light of the powers conferred on the Board, is absolutely justified.
The Supervisory Board or non-executive directors shall have a broad right to request information and documents. Projectors have identified a wide range of persons from whom the Supervisory Board may request clarification and information:
In order to carry out its duties, the Supervisory Board may require the management, prosecutors, employees of a company or persons employed in a company on the basis of a contract for a work, contract of order or other contract of a similar nature, to produce or transmit any information, documents, reports or explanations needed for the supervision of the company, in particular regarding the company's activities or the company's assets.
Request as defined in the sentence first may be subject to information, reports or explanations concerning subsidiaries and related companies if the addressee has the necessary knowledge. new design section 4 under Article 219 ksh)
The content of this provision raises practical doubts as to the number of persons to whom the Supervisory Board has the right to address and the obligation arising from the provision to, for example, produce any information.
For example, whether the Supervisory Board has the right to ask the law firm advising the company on the basis of an agreement already implemented for the preparation of additional information, which generates additional time and costs for the developer, and it has no new contract for such work.
A similar situation concerns the request for information from other advisors.
The right to request information by the Supervisory Board does not coincide with the right to appoint an advisor to the Supervisory Board at the expense of the company. The right to appoint a Council adviser has been regulated separately, i.e.
The Supervisory Board was granted the right to appoint an advisor to examine at the company's expense a specific issue concerning the company's activities or its assets.
In principle, the solution is correct, but some details need to be clarified, for example, if the advisor has the right to choose a supervisory board and to enter into an agreement with it on behalf of the company, it seems unnecessary to involve the management board in the matter of actual activities related to obtaining information from e.g.
banks or legal advisers. On the basis of an agreement with the Supervisory Board, it appears that its adviser should have the right to request information directly from the entity concerned while informing the Management Board of this fact, but not necessarily waiting for its authorisation.
Furthermore, the project promoters have decided to regulate the activities of the Supervisory Advisor in a very detailed manner, which seems unnecessary in the Polish limited liability company., as does the obligation to convene the Council meetings once a quarter.
The drafters also made a requirement to record meetings of the boards of companies, which seems unnecessary in the case of single-member composition, then the written resolution will be sufficient.
The project also includes other changes, which we will analyse in detail in subsequent publications, as well as following up on further work on the bill.
Author: Aleksandra Księżyk – Legal advisor, Director of the Legal Department in Warsaw Chancellery Russell Bedford Dmowski and Partners Law Firm sp. k.