- enhanced control tools – available for shareholders and supervisory boards of Polish commercial companies. For instance, the reporting obligations of management boards towards supervisory boards are now more extensive;
- holding law regulations – provisions enabling companies to take decisions based not only on the interest of the company itself but also on the interest of the entire capital group to which the company belongs. To take the interest of the group into account a formal "group of companies" should be created, following which so-called binding instruction are issued by the controlling entity. That set of provisions is deemed to constitute a Polish version of corporate holding law or the German Konzernrecht;
- corporate governance provisions – regulating the decision-making process and recording obligations in management and supervisory boards in more detail. The term of office of corporate body members is defined more precisely. There are also new provisions clarifying the duties of governing body members. In particular, the business judgement rule is clearly recognised as being applicable to board members when managing the company.
To whom does it apply?
The new provisions of the CCC apply to all commercial companies, such as limited liability companies (Polish abbreviation: sp. z o.o.), simplified joint stock companies (PSA) and joint stock companies (S.A.).
The holding law regulation is not compulsory, i.e. a formal group of companies must first be created, and it does not apply to public companies and certain other regulated entities.
Why it matters?
The new provisions allow the corporate governance rules of Polish subsidiaries to be adjusted to ensure that the shareholders, through the supervisory boards, have better insight into the company's operation.
Creating a group of companies may ease tensions between the shareholders and the management of local companies when assessing whether a given action expected by the shareholder is in the interest of the subsidiary or not. It may also give more comfort to the local management of multinational capital groups.
If a formal group of companies is created, the minority shareholders may be bought out even in a limited liability company (forced buyout was not possible in such entities so far).
What to do?
We recommend that majority shareholders of Polish companies:
- consider implementing the enhanced control tools – it may be particularly important if the representatives of the shareholder/investor are not members of the management board of the Polish subsidiary;
- consider establishing a formal group of companies, especially if the interests of the Polish entities are not aligned with those of the capital group;
- verify the bylaws (articles of association) of the Polish subsidiaries to ensure compliance with the new corporate governance rules.
We are happy to answer any questions you may have in connection with the new corporate law regulation and to assist you in any related corporate restructurings.