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12 September 2019

An innovative solution for start-ups - Poland

Simple joint-stock company

From 1 March 2020, there will be a new type of capital company in Poland: a simple joint-stock company ("SJC"). The SJC is said to be a combination of capital companies (i.e. limited liability company and joint-stock company) in the form of an advanced mechanism of capital raising, and partnerships - it will be the only type of capital company to allow the "personal" aspect of partnerships in the form of the possibility to contribute work or services instead of cash/assets. The SJC will also provide more flexibility in the daily operation of the company both from the managers' and owners' perspectives. It is a response to market needs and difficulties that start-ups face with incorporation, capital raising and liquidation.

The main advantages of the SJC are:

  1. Incorporation via the internet: The SJC can be incorporated in a traditional way (before a notary) or via the internet. The latter is quicker and cheaper, as shareholders simply use the articles of association in the standard form available on the relevant website. In case of a more complex structure the traditional way may be preferable.
  2. No-value shares and separate share capital: The minimum amount of share capital is PLN 1 (less than 25 eurocents). Shares in the SJC do not have nominal value and are detached from the share capital, as they represent shareholders' rights and not a portion of the share capital. Shares are dematerialised and may be covered with cash or in-kind contributions, including work, know-how or services. The amount of the share capital is not set in the articles of association and its change does not trigger the necessity of changing the articles. It is a huge simplification for shareholders, as they can increase the capital without issuing new shares and involving a notary (lower cost). Additionally, there are no statutory restrictions on preference of shares in regard to voting rights, dividend or liquidation assets (subject to general rules of social conduct).
  3. New management structure: Shareholders are free to choose how to manage the SJC – either in a classical way, i.e. management board (supported by the voluntary supervisory board) or in the form of a board of directors composed of executive and non-executive directors (more familiar to foreign investors and based on the Anglo-Saxon legal system).
  4. Shareholders' meetings made easier: The necessity of holding the shareholders' meeting before a notary has been minimised to changing the articles of association. All other shareholders' meetings can be held outside of Poland and by means of electronic communication (e.g. videoconference).
  5. Simple disposal of shares: Shares in the SJC can be transferred in document form, including by the use of electronic communication. Even though shares of the SJC cannot be admitted to public trading, this does not exclude the possibility of online subscription without a prospectus requirement. The transfer is effective upon the entry of the new shareholder in the share ledger kept by a notary or investment firm (probably banks will provide this as an additional service). The SJC may be transformed into a joint-stock or limited liability company if needed in the future (here the provisions have not been relaxed).
  6. ESOP and anti-dilution: Employee incentive programmes, such as subscription warrants, convertible bonds, conditional share issue and ESOP (i.e. employee stock ownership plan) may easily be introduced, which is not the case in limited liability companies. Newly introduced founders' shares are a new type of preferred share, including an anti-dilution mechanism. Thus, if new shares are issued, those holding founders' shares receive extra voting rights to keep the original voting rights ratio.
  7. Simple liquidation: If a project or investment fails, the SJC may be liquidated in a simplified form; namely, all the SJC's assets will be transferred to one of the shareholders (subject to the court's approval), who will later be obliged to satisfy the claims of creditors and other shareholders. Additionally, if shareholders decide to transfer the registered seat to another EU Member State, the SJC will not be subject to obligatory liquidation (this change has not been introduced to other types of companies despite the ECJ's judgment in the Polbud case).

Other important changes in the corporate world

From 3 September it is finally possible for limited liability companies to hold a shareholders' meeting via electronic means of communication. To enable this option, shareholders must introduce it into the company's articles of association. This small change will undoubtedly simplify how business is conducted in the most common type of company in Poland (402,168 companies as of 31 December 2018).


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Further reading:
Crowdfunding und Crowdinvesting