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Doing Business in Poland - Legal Aspects

January 2005

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Peter Nielsen & Partners Law Office is a modern Danish-Polish law firm having its seat in

Warsaw, Poland; since its establishment in 1990 it has gained a market recognition as the

reliable and efficient advisor. For more information, please, visit our website www.pnplaw.pl

We find for our clients practical solutions within many areas of legal practice. During the last

14 years we have introduced a significant amount of foreign companies on the Polish market

and many of them we still service. Our team is helpful, each of us speaks English and enjoys

working in the multicultural environment.

An English solicitor - Euan Temple is our firm's UK based Of Counsel, but he can work out of

our Warsaw office as needed. His role is to smooth the path for UK clients doing business in

Poland. Visit www.templesols.com

Our Company is a member of several highly esteemed organisations, i.a. British-Polish

Chamber of Commerce, Scandinavian-Polish Chamber of Commerce, the European legal

network “Eurolegal”. Moreover, the company actively participates in the Young Lawyers'

Exchange Programme (YLEP).

Legal practice areas we specialize in:

• Business Law

• Corporate Law

• Labour Law

• Civil Law

• Administrative Law

• Debt Collection

• Commercial Litigation

• Property Law

• Mergers & Acquisitions

• Tax Law

• Competition Law

• Public Law

• Intellectual Property Law

• International Investments

• European Law

1.

INTRODUCTION

This brief presentation is aimed at providing investors with information on central

elements of the Polish legal system and shall not be understood as legal advice.

It takes into consideration legal regulations as per January 1, 2005.

2.

LEGAL SYSTEM

Poland has a long and remarkable legal history. It is enough to mention that the first

constitution in continental Europe was the Polish constitution of May 3, 1791.

The Polish legal system, alike many other continental European legal systems is

based on the Roman law, opposed to the common law.

Although after the Second World War the Soviet legal and economic systems were

implemented in Poland and it was not until 1989 that Poland started to change its

law, now our country follows most European and the US examples. This process

has been intensified after Poland made its decision to enter the EU, which obviously

implied the harmonization with the EU economic system and “Acquis

Communautaire”.

Poland joined the European Union on May 1, 2004, which will naturally result in

further harmonization of the Polish law with the EU standards.

Although nowadays the Polish law does provide instruments necessary to do

business, there is still a number of fields that require substantial changes and

improvements. What strikes a foreign investor most is very time-consuming civil

court proceedings and inefficient debt collection system.

3.

ESTABLISHMENT OF ECONOMIC ACTIVITY IN POLAND

3.1

Forms of Conducting Economic Activity in Poland

3.1.1

Introduction

The Polish law provides the following commercial forms of conducting economic

activity which are not reserved for the State only:

(i)

capital company

­

limited

liability

company

(spółka

z

ograniczoną

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odpowiedzialnością - sp. z o.o.),

­

joint-stock company (spółka akcyjna - S.A.),

(ii)

partnership

­

registered partnership (spółka jawna - sp. j.),

­

professional partnership (spółka partnerska - sp.p.),

­

limited partnership (spółka komandytowa - sp.k.),

­

limited joint-stock partnership (spółka komandytowo-akcyjna -

S.K.A.),

(iii)

cooperative (spółdzielnia),

(iv)

sole tradership (indywidualna działalność gospodarcza),

(v)

branch of a foreign entrepreneur (oddział przedsiębiorcy zagranicznego)

(vi)

representative office of a foreign entrepreneur (przedstawicielstwo

przedsiębiorcy zagranicznego),

Generally, pursuant to the Polish rules on freedom of economic activity, foreign

persons as entrepreneurs in Poland can be divided into two groups.

The first group includes foreign persons who may conduct economic activity in any

commercial form available to the Polish persons specfied in items i-vi and on the

same terms as Polish entrepreneurs.

This first group covers the following persons:

(i)

foreign persons from the EU Member States,

(ii)

foreign persons from the Member States of the EFTA- parties to the

Agreement on the European Economic Area (Iceland, Liechtenstein,

Norway)

(iii)

citizens of states other than those referred to in item (i) and (ii) who

obtained a permit to settle in Poland, a tolerated stay permit, a refugee

status granted them in Poland or who enjoy temporary protection in

Poland,

(iv)

foreign persons from other states than those referred to in item (i) or (ii)

who may carry on economic activity on the same terms as Polish

entrepreneurs on the basis of other international agreements.

The second group covers all foreign persons other than those described in the first

group. The commercial forms of conducting economic activity in Poland available to

persons of the second group are limited. This group of foreign persons may conduct

economic activity in Poland in a form of a capital company, a limited partnership or

a limited joint-stock partnership only.

Apart from the forms of conducting economic activity available for the Polish

persons a foreign person conducting economic activity abroad may create a branch

or a representative office on the territory of Poland provided that the Polish

entrepreneurs may create a branch or a representative office in the state where the

foreign person has its permanent residence or seat (the rule of reciprocity), unless

international agreements provide otherwise.

In case of foreign entrepreneurs from the European Economic Area (EU Member

States, Iceland, Liechtenstein, Norway) the rule of reciprocity is excluded.

Consequently, such foreign entrepreneurs may create a branch or a representative

office without limitation connected with the rule of reciprocity.

The general rules of formation and operation of capital companies and commercial

partnerships in Poland are regulated by the act of September 15, 2000 the Code of

Commercial Companies and Partnerships.

The general rules of formation and operation of sole traderships are regulated by

the act of November 19, 1999 the Economic Activity Law and by the Act of July 2,

2004 on Freedom of Economic Activity .

The general rules of formation and operation of foreign branches and representative

offices are regulated by the Act of July 2, 2004 on Freedom of Economic Activity .

The general regulations on cooperatives are stipulated in the act of September 16,

1982 Cooperative Law.

3.1.2

Limited Liability Company

Introduction

A limited liability company is a kind of a capital company which is conducted by limited number of the shareholders. It is the most common legal form of economic activity intended to conduct small and medium size commercial enterprises. Some large companies also prefer to conduct economic activity in a form of a limited liability company because corporate operations in a limited liability company are simplified in comparison with a joint-stock company.

The shareholders in a limited liability company are not liable for the company`s

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liability with their private property with the exception of one case. In accordance with

the Polish law the shareholder may be responsible for obligations of the company in

organization.

Formation of the Company

According to the provisions of the Code of Commercial Companies and

Partnerships one or more persons called founders can establish a limited liability

company. The solely owned limited liability company cannot be a founder of another

solely owned limited liability company.

The establishment of a limited liability company requires the form of a notarial act.

The company is established by entry in the National Court Register. A decision on

entry is made by the Commercial Court relevant for the seat of the company.

Pursuant to the Polish Code of Commercial Companies and Partnerships the

following actions are required to form a limited liability company:

(i)

execution of a deed of company formation (articles of association),

(ii)

contribution of the entire initial capital,

(iii)

appointment of the company bodies,

(iv)

registration in the National Court Register.

The articles of association of the company and provisions of the Code of

Commercial Companies and Partnerships are the legal basis for companies`

existence and activity in Poland.

The articles of association should specify at least:

(i)

business name and seat of the company,

(ii)

object of the company`s economic activity,

(iii)

duration of the company if the duration is limited,

(iv)

value of the initial capital,

(v)

whether the shareholder may hold one or more shares,

(vi)

number and value of shares held by an individual shareholder.

If the shareholder makes in-kind contributions towards the company, the articles of

association must state the shareholder, the nature (kind) of this contribution and the

number of shares which have been taken over this way.

The articles of association have to be executed in the form of a notarial deed,

otherwise they are null and void.

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From the date of signing the articles of association the company may start its

activity as a company in organisation. The company in organisation has the same

rights as a registered company. However, the liability for the obligations of the

company in organization is borne by the company and the persons who act in its

name.

It is worth knowing that to become fully operational the Company should first notify

its formation to the Voivodship Statistical Office in order to receive the Statistical

Number (REGON) and open a bank account. The company should also make a

notification to the relevant Tax Office in order to receive the taxpayer number (NIP).

Initial Capital and Shares

The minimal initial capital amounts to PLN 50,000.00. The initial capital of the

company is divided into shares of an equal or non-equal nominal value. If pursuant

to the Articles of Association of the Company the shareholder may have more than

one share all the shares shall be equal and indivisible. The minimal nominal value

of one share amounts to PLN 50.00.

Contributions of the company`s shareholder to the capital of the company can be

made either in cash or in-kind.

Governing Bodies

The authorities of a limited liability company, pursuant to the Code of Commercial

Companies and Partnerships are:

(i)

shareholders' meeting,

(ii)

supervisory board or audit commission,

(iii)

management board.

A supervisory board or audit commission has to be created in companies which

initial capital exceeds PLN 500,000.00 and there are more than twenty-five

shareholders. In other situations the creation of a supervisory board or audit

commission is not necessary.

Shareholders' Meeting

The shareholders' meeting is the superior body of a limited liability company.

Shareholders' meetings are held at the seat of the company or in another place in

the Republic of Poland if all the shareholders agree to it in writing.

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The decisions of the Shareholders' meeting are adopted as resolutions of the

shareholders.

The resolutions of the shareholders are required among others in the following

matters:

(i)

amending the company's articles of association,

(ii)

consideration and approval of the management board report, the

financial report for the previous financial year and acknowledging the

members of the company governing bodies for fulfilment of their duties,

(iii)

disposal or tenancy of the enterprise or its organised part and creation

of a limited right in rem over them,

(iv)

acquisition and disposal of a real estate, a perpetual usufruct or a share

in a real estate, unless the articles of association provide otherwise,

(v)

disposal of a right or contracting an obligation to provide performance of

a value exceeding twice the amount of the initial capital unless the

articles of association provide otherwise,

(vi)

decisions on allocating profit or covering losses,

(vii)

increasing or decreasing the company's initial capital.

The shareholders' meeting may be ordinary and extraordinary.

An ordinary shareholders' meeting shall be convened each year by the

management board, not later than within six months after the end of the financial

year.

An ordinary shareholders' meeting shall decide on:

(i)

consideration and approval of the report of the management board for

company's activity for the given financial year,

(ii)

approval of the financial statement for the given financial year,

(iii)

distribution of the profit or coverage of losses of the given financial year

unless the articles of association provide otherwise,

(iv)

acknowledgement of the fulfilment of duties entrusted to the authorities

of the company.

The management board shall convene an extraordinary shareholders' meeting:

(i)

on its own initiative,

(ii)

at the written request of the shareholders possessing 1/10 of the initial

capital in order to review matters which require the immediate

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examination by the shareholders,

(iii)

at the request of the supervisory board or the audit commission.

Each share of an equal nominal value carries one vote unless the articles of

association provide otherwise.

Resolutions of the shareholders' meeting shall be taken by an absolute majority of

votes unless the provisions of law or the articles of association provide otherwise.

The absolute majority of votes means more than half of the votes cast.

The qualified majority of two thirds of the votes is required to adopt the resolutions

on:

(i)

amendments to the articles of association,

(ii)

dissolution of the company,

(iii)

transfer of the enterprise or its organised part,

(iv)

transformation of the company into a partnership.

The qualified majority of three fourths of the votes is required to adopt the

resolutions on:

(i)

substantial change in the scope of the company's activity,

(ii)

merger of companies,

(iii)

division of a company,

(iv)

transformation of the company into another capital company.

In some specific matters a resolution should be adopted unanimously by all the

shareholders whom the resolution concerns e.g. resolution either increasing the

rights of the shareholders or reducing their rights.

The shareholders' meeting shall be convened by registered mail or by a courier,

upon the acknowledgement of a receipt, sent to each shareholder at least two

weeks before the date of the meeting; the notification should contain a detailed

agenda of such a meeting. Instead of the notification sent by registered mail or by

courier, the shareholder may be notified of the shareholders' meeting via e-mail

provided that the shareholder has expressed his/her consent in writing and has

given his/her e-mail address for the notification via e-mail.

Shareholders may participate in the shareholders' meeting and exercise the voting

right through proxies pursuant to an appropriate power of attorney issued under

pain of invalidity in writing. The power of attorney referred to in the previous

sentence shall be attached to the minutes' book.

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Members of the management board and employees of the company cannot be

proxies at the shareholders' meeting.

Voting at the shareholders' meeting is open. Secret ballot is ordered for motions on

appointment or recalling of a member of the company governing bodies or

liquidators or to hold them liable, as well as for personal matters. Secret ballot is

ordered also at the request of at least one of the shareholders present or

represented at the shareholders' meeting.

Supervisory Board and Audit Commission

The members of the supervisory board or the audit commission are appointed and

dismissed by a resolution of the shareholders unless the articles of association

provide otherwise.

The Polish law prescribes that the power of the supervisory board in Polish limited

liability companies is limited to a broadly described control and supervision. The

supervisory board does not have the right to give the management board any

binding instructions with respect to the management of the affairs of the company.

The powers of the audit commission are even more limited than powers of the

supervisory board. Pursuant to the provisions of law the duties of the audit

commission include an evaluation of the management board reports and financial

reports for the previous financial year, proposals of the management board

concerning the distribution of profits or financing losses as well as the submission of

an annual written reports on the results of such evaluation to the shareholders'

meeting. However, the articles of association may expand the duties of the audit

commission in the company which does not have the supervisory board up to the

powers of the supervisory board.

Consequently, the supreme executive body - and the only body holding the right to

represent and sign for the company - is the management board. Unless the articles

of association provide otherwise, the shareholders' meeting and not the supervisory

board is the body electing and dismissing the management board.

Management Board

The management board of a limited liability company consists of one person or

more persons. Members of the management board are appointed and dismissed by

a resolution of the shareholders unless the articles of association provide otherwise.

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The management board manages the company's matters and represents it. The

management board shall be authorised to manage the company's matters which

are not reserved pursuant to the shareholders' resolution, the articles of association

or provisions of the law as the exclusive powers of the shareholders' meeting or

supervisory board or audit commission.

Representation of the company concerns actions external in relation to the

company's activity, e.g. conclusion of agreements with contractors, disposals of

rights of the company, whereas actions of management of the company mean

actions internal for the company, first of all consisting in managing the current

activity of the company, including giving business orders to employees, supervising

company's activity.

Generally, there are two ways of representation of the company, i.e. sole

representation and joint representation. In case of a sole representation, each

member of the management board has the right to represent the company solely,

i.e. to perform legal actions solely, e.g. to conclude agreements. Joint

representation consists in joint action of at least two persons while performing a

legal action.

According to the Code of Commercial Companies and Partnerships, if the

management board consists of more than one person, the way of representation is

defined in the articles of association of the company. If the articles of association do

not include provisions concerning this matter, joint action of two members of the

management board or one member of the management board and a proxy is

required to make statements on behalf of the company.

Violation of joint representation rules results in serious legal consequences. In

accordance with the doctrine and jurisdiction, performance of a legal action by one

person when joint representation is required causes that a legal action is null and

void.

Responsibility

The members of the management board in the limited liability company may be

personally responsible for the obligations of the company e.g. in accordance with

the Code of Commercial Companies and Partnerships members of the

management board are liable jointly and severally for the company's obligations if

the execution against the company proves to be ineffective. A member of the

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management board may release himself/herself from the liability referred to above if

he/she demonstrates that in appropriate time a petition for bankruptcy was filed or

that composition proceedings were commenced, or that it is not due to his/her fault

that the petition for bankruptcy was not filed or that composition proceedings were

not commenced, or that the creditor did not sustain any damage despite the fact

that the petition for bankruptcy was not filed or that composition proceedings were

not commenced. The rules of responsibility of the management board for tax

obligations of the Company are similar to the rules described above.

The shareholders of the limited liability company are not personally responsible for

the obligations of the company except for one case. In accordance with the Polish

law the shareholder is responsible for obligations of the company in organization up

to the value of the contribution financing the subscribed shares which has not been

made.

The Code of Commercial Companies and Partnerships also provides the civil and

criminal liability of the founders of the company and the members of the govering

bodies for certain acts undertaken in violation of the law.

Dissolution

The following may be the reason for dissolving the company:

(i)

the reasons stipulated in the articles of association,

(ii)

a resolution of the shareholders on dissolution of the company or on

transfer of the seat of the company abroad,

(iii)

a declaration of bankruptcy of the company,

(iv)

other reasons provided by the law.

3.1.3

Joint-Stock Company

A joint-stock company resembles in some aspects a limited liability company. Both

of them are capital companies. The joint-stock company is regarded as more

formalistic kind of company than the limited liability company. There are many

particular provisions providing the duties, obligations and procedures which have to

be performed by the management board or the supervisory board.

The main legal differences between the joint-stock company and the limited liability

company are that in the joint-stock company:

(i)

all minutes of the general assembly have to be recorded by a notary,

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(ii)

the founders' report must be checked by the auditor, if it concerns:

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in kind contribution contributed to the company to cover the share

capital,

­

rights and objects purchased to the company before the company

was set up,

­

payments for the services supplied at setting up the company,

(iii)

terms of office of the management and supervisory boards are strictly

defined by the Code of Commercial Companies and Partnerships. A

member of the management board or the supervisory board may not

serve for more than five years. Reappointments of the same person is

allowed for terms of office not longer than five years each,

(iv)

the minimum capital of a joint-stock company is PLN 500,000.00

whereas the minimum capital of a limited liability company equals PLN

50,000.00,

(v)

part of the net profit, according to the regulation, must be annually

transferred to the supplementary capital until it reaches 1/3 of the share

capital,

(vi)

the supervisory board is obligatory in a joint-stock company,

(vii)

financial reports of the joint stock company have to be examined by the

auditor,

(viii)

share certificates shall be printed by the company and shares may be

issued as registered shares or bearer shares.

Moreover, the shareholder in the joint-stock company has definitely fewer rights

than the shareholder in the limited liability company. His rights to control the

company's activity and its personal composition are limited.

Formation of the Company

A joint-stock company can be established by one or more persons. However, a

joint-stock company may not be established by a single-shareholder limited liability

company.

Pursuant to the Polish Code of Commercial Companies and Partnerships the

following actions are required to form a joint-stock company:

(i)

formation of the company including signing of the statutes by the

founders,

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(ii)

making the contributions to the share capital in accordance with the

provisions of law,

(iii)

appointment of the company bodies,

(iv)

registration in the National Court Register.

The statutes have to be made in a form of a notarial deed.

Share Capital and Shares

The minimum share capital of a joint-stock company is PLN 500.000. The minimum

value of one share amounts to PLN 0.01.

Shares are equal and indivisible. Shares can be taken up for contribution in cash or

in-kind.

In case shares are taken up for in-kind contribution they have to be covered in

whole no later than one year after registration of the company. Shares taken up for

cash contributions have to be paid for in at least one fourth of the nominal value

prior to the registration of the company.

According to the Code of Commercial Companies and Partnerships shares may be

registered or bearer shares. The bearer shares certificates may not be issued

before full payment has been made.

Governing Bodies

The authorities of a joint-stock company are:

(i)

general assembly,

(ii)

supervisory board,

(iii)

management board.

General Assembly

The general assembly of a joint-stock company is a counterpart of the shareholders'

meeting in a limited liability company. The general assembly is the superior body of

the company like the shareholders' meeting in a limited liability company.

The general assemblies are held at the seat of the company, in any other place

within territory of Poland (if the Statutes allow) or in the place of the seat of the

stock exchange at which the shares of the company are traded in case it is a public

company.

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The decisions of the general assembly are adopted as resolutions of the

shareholders. All resolutions of the general assembly have to be recorded in the

minutes made by a notary.

Resolutions of the general assembly shall be taken by an absolute majority of votes

unless the provisions of law or the articles of association provide otherwise.

The general assembly may be ordinary and extraordinary. The ordinary general

assembly shall be convened each year by the management board, not later than

within six months after the end of the financial year. The obligatory agenda of an

ordinary general assembly is similar to the obligatory agenda of an ordinary

shareholders' meeting in a limited liability company. The extraordinary general

assembly is convened in cases stipulated in the Code of Commercial Companies

and Partnerships or the statutes.

The general assembly shall be convened by an announcement in the „Monitor

Sadowy i Gospodarczy” made not later than three weeks before the date of the

general assembly. If all shares are registered shares the general assembly may be

convened by a registered mail or by a courier, upon the acknowledgement of a

receipt, sent to each shareholder at least two weeks before the date of the meeting.

Instead of the notification sent by registered mail or by courier, the shareholder may

be notified of the shareholders' meeting via e-mail provided that the shareholder

has expressed his/her consent in writing and has given his/her e-mail address for

the notification via e-mail.

Voting at the general assembly is open. Secret ballot is ordered for motions on

appointment or recalling of a member of the company governing bodies or

liquidators or to hold them liable, as well as for personal matters. Secret ballot is

ordered also at the request of at least one of the shareholders present or

represented at the general assembly.

Supervisory Board

Contrary to a limited liability company creation of the supervisory board is obligatory

in all joint-stock companies.

The powers of the supervisory board in a joint-stock company are similar to the

powers of the supervisory board in a limited liability company. The supervisory

board in a joint-stock company exercises day-to-day supervision over the

performance of the company in all areas of the company's business.

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The supervisory board has to be composed of not less than three members (in

public companies it has to be composed of not less than five members) appointed

for the term of office not longer than five years.

Management Board

The management board of a joint-stock company consists of one person or more

persons. Members of the management board are appointed and dismissed by the

supervisory board unless the statutes provide otherwise. A member of the

management board may also be recalled or suspended by the general assembly.

The powers of the management board in a joint-stock company are similar to the

powers of the management board in a limited liability company The management

board manages the company's matters and represents it. The management board

shall be authorised to represent the Company in matters which are not reserved

pursuant to the resolution of the general assembly, the statutes or provisions of law

as the exclusive powers of the general assembly or supervisory board.

A member of the management board like a member of the supervisory board is

appointed for the term of office not longer than five years.

Responsibility

The rules of responsibility are similar to those applicable to a limited liability

company.

Dissolution

The reasons of dissolution of a joint-stock company are similar to the reasons of

dissolution of a limited liability company.

3.1.4

Partnerships

According to the Polish law there are four types of commercial partnership:

(i)

registered partnership (spółka jawna - sp. j.),

(ii)

professional partnership (spółka partnerska - sp.p.),

(iii)

limited partnership (spółka komandytowa - sp.k.),

(iv)

limited joint-stock partnership (spółka komandytowo-akcyjna - S.K.A.).

The partnerships do not have a legal personality, although they may acquire rights

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in its own name, including the right of ownership of real estate, incur obligations and

they may sue and be sued.

The most important feature of the commercial partnership is a liability of the

partners for the partnership's obligations. With some exceptions the partners are

personally and without limitation liable for the partnership's obligations.

Transfer of all rights and obligations of a partner in a partnership to another person

is possible if the articles of association so provide.

With the exception of a registered partnership the articles of association of a

commercial partnership have to be made in the form of a notarial deed. The articles

of association of a registered partnership have to be made in writing.

A commercial partnership comes into existence upon entry into the National Court

Register.

Registered Partnership

According to a legal definition a registered partnership is “a partnership which

conducts an enterprise under its own name and is not any other commercial

partnership or commercial company”.

Each partner is liable for the obligations of a registered partnership without

limitation. However, a creditor of the partnership may conduct enforcement from the

partner's assets if the enforcement from the partnership's assets proves to be

ineffective (subsidiary liability of a partner). The provisions on the subsidiary liability

of a partner shall not apply in case of an obligation undertaken by a partner before

registration of the company.

Every partner has the right to represent the partnership and manage its affairs.

A partner may be deprived of the right to represent the company in the articles of

association or by the virtue of a final court decision only.

Third parties cannot be entrusted with managing the partnership's affairs to the

exclusion of partners.

Professional Partnership

A professional partnership is a partnership formed by partners with the purpose of

practising a liberal profession in a partnership conducting an enterprise under its

own name.

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The partners of a professional partnership and rules of their liability for the

partnership's obligations are the main features which distinguish a professional

partnership among other partnerships.

In this partnership partners may be exclusively natural persons authorised to

practise the following professions: advocate, pharmacist, architect, civil engineer,

expert auditor, insurance broker, tax consultant, accountant, physician, dental

surgeon, veterinary surgeon, notary, nurse, midwife, legal adviser, patent agent,

property expert and sworn translator.

According to the Code of Commercial Companies and Partnerships the liability of a

partner for the professional partnership's obligations is limited. A partner of a

professional partnership does not bear liability for:

(i)

the partnership's obligations arisen in relation to the practising of liberal

profession by the remaining partners within the partnership,

(ii)

the partnership's obligations resulting from the actions or default of the

persons employed by the partnership and being subordinate to another

partner when performing services connected with the object of activity of

the partnership.

However, the articles of association of the partnership may envisage that one or

more partners agree to bear such liability as a partner of registered partnership.

Each partner has the right to represent the partnership individually unless the

articles of association provide otherwise.

The articles of association may provide that the representation of the partnership

and managing its affairs is entrusted to the management board. The provisions on

the management board of a limited liability company apply to the management

board of a professional partnership.

Limited Partnership

There are two groups of partners in a limited partnership which differ from each

other in the range of liability for the partnership's obligations.

The general partners are liable to the creditors for the obligations of the partnership

without limitation. The liability of the second group of partners called “limited

partners” are limited up to the amount stipulated in the articles of association of the

partnership (commandite sum).

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A limited partnership is represented by the general partners who are not deprived of

the right to represent it on the basis of articles of association or by valid court

decision.

A limited partner may represent the partnership only on the basis of the power of

attorney granted by the general partners.

Limited Joint-Stock Partnership

This partnership is a hybrid of a limited partnership and a joint-stock company.

There are two groups of partners in a limited joint-stock partnership which differ

from each other in liability for the partnership's obligations like in a limited

partnership.

The first group consists of general partners who are liable to the creditors of the

partnership for all the partnership's obligations without limitation.

The second group includes shareholders who are not liable for the partnership's

obligations. The legal status of the shareholders is similar to the situation of a

shareholder in a joint-stock company.

The general partners represent a limited joint-stock partnership and manage its

affairs. The shareholder may represent the partnership only as a proxy on the basis

of the power of attorney granted by the general partners.

The only obligatory body in a limited joint-stock partnership is the shareholders'

meeting. If there are more than twenty-five shareholders the creation of the

supervisory board shall be obligatory.

The minimum initial capital of a limited joint-stock partnership amounts to PLN

50,000. Contributions to the capital of this partnership can be made either in cash or

in-kind.

3.1.5

Cooperative

Introduction

According to a legal definition a cooperative is "a voluntary association of unlimited

number of persons with changeable personal composition and changeable share

fund". A cooperative conducts for the benefit of its members common economic

activity, it may also conduct the welfare activity and the activity connected with

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culture and education for the benefit of its members.

A cooperative conducts the activity on the basis of the Cooperative Law and other

acts as well as registered statutes.

Formation of a Cooperative

A cooperative is established by founders. With some exceptions, the number of

founders cannot be lower than 10 in case founders are physical persons, and 3 in

case founders are legal entities. The founders of a cooperative pass the statutes of

the cooperative and appoint the authorities of the cooperative. The management of

the cooperative shall submit to the registration court relevant for the seat of the

cooperative a motion on registration of the cooperative in the National Court

Register. From the moment of entry into this register, a cooperative becomes the

legal entity and the founders become the members of the cooperative.

Members of a Cooperative

The main rule is that a physical person meeting the requirements of the statutes

can be a member of the cooperative. Legal entities may also, unless otherwise

stated in the statutes, become members of cooperatives.

A cooperative member has the right to enjoy the services of the cooperative in the

scope defined in the statutes. The member is obliged to contribute the registration

fee and a declared contribution according to the provisions of the statutes. The

cooperative member participates in coverage of losses up to the amount of the

declared contribution and is not liable towards the creditors for cooperative's

obligations. The management board of the cooperative conducts the register of

members including all data concerning the cooperative members required by the

regulations of the Act "Cooperative Law" and the statutes of the cooperative.

Governing Bodies

The Cooperative Law and the statutes of the given cooperative define in details the

competencies and the scope of activity of the cooperative's authorities.

There are the following obligatory cooperative's authorities:

(i)

general assembly or assembly of representatives,

(ii)

supervisory board,

(iii)

management board,

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(iv)

assemblies of membership groups (in case the general assembly is

replaced by the assembly of representatives).

The statutes of the given cooperative may provide the appointment of also other

authorities than the ones mentioned above and consisting of the cooperative's

members. In such a case the statutes defines the scope of competence of these

authorities as well as the rules of appointing and dismissing their members.

General Assembly/Assembly of Representatives

The general assembly of a cooperative is the main authority of the cooperative and

it passes resolutions on the most important matters concerning the cooperative,

including:

(i)

approval of economic guidelines,

(ii)

examination of the reports of the supervisory board,

(iii)

approval of the financial statement of the cooperative,

(iv)

deciding on distribution of profit and covering of losses,

(v)

adopting resolution on transfer of the property, a plant or other separate

organizational unit,

(vi)

defining an upper amount limit for liabilities which the cooperative may

assume,

(vii)

amending the statutes.

The statutes of the given cooperative may provide that if the number of members

exceeds a number fixed therein, the general assembly shall be replaced by the

assembly of representatives. The representatives are elected and recalled by the

assemblies of membership groups. The scope of powers of the assembly of

representatives is similar to the powers of the general assembly.

Supervisory Board

The supervisory board controls and supervises the cooperative's activity. It consists

of at least three members appointed in accordance with the regulations of the

cooperative's statutes by the general assembly, the assembly of representatives or

assemblies of membership groups. Only members of the cooperative may be

elected to the board. However, if the legal entity is a member of the cooperative a

person indicated by this entity may be elected to the board.

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Management Board

The management board governs the cooperative's activity and represents it outside.

The composition and the number of members of the management board is defined

in the cooperative's statutes. The statutes may decide on a one-person board, i.e.

the president. The members of the board are appointed and dismissed in

accordance with the regulations of the statutes by the supervisory board or the

general assembly.

Assemblies of Membership Groups

Assemblies of membership groups are the authorities of these cooperatives in

which the general assembly is replaced by the assembly of representatives. The

statutes defines the rules of division into the membership groups and the rules of

their activity. The main power of the assemblies is:

(i)

to elect and recall delegates for general assembly of representative,

(ii)

to consider issues which are to be subject of the general assembly and

to make motions related to them.

3.1.6

Sole Tradership

A sole tradership is a popular form of conducting economic activity by small

entrepreneurs. Conducting economic activity in a form of a sole tradership is

reserved for a natural person only.

A sole trader operates under the business name which is a forename and a

surname of a natural person. Apart from a forename and a surname of a natural

person a business name may include a pseudonym or expressions indicating an

object of the entrepreneur's activity or other expressions chosen optionally.

The natural person may undertake economic activity as a sole trader after

notification in the economic activity records kept by the municipal offices.

A person conducting economic activity in a form of a sole tradership is liable for all

obligations arising from it with all her/his assets.

3.1.7

Branch and Representative Office

Apart from the mentioned above forms of conducting economic activity a foreign

person conducting economic activity abroad may create a branch or a

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representative office on the territory of Poland provided that the Polish

entrepreneurs may create a branch or a representative office in the state where the

foreign person has its permanent residence or seat (the rule of reciprocity), unless

international agreements provide otherwise.

In case of foreign entrepreneurs from European Economic Area (EU Member

States, Iceland, Liechtenstein, Norway) the rule of reciprocity is excluded.

Consequently, such foreign entrepreneurs may create a branch or a representative

office without limitation connected with the rule of reciprocity.

Branch

A branch of a foreign entrepreneur may conduct economic activity after registration

in the Polish National Court Register. The branch may conduct economic activity on

the territory of Poland exclusively in the scope of the entrepreneur's activity.

Each branch of a foreign entrepreneur among others is obliged to:

(i)

use the name of the foreign entrepreneur with a Polish translation of a

legal status of the entrepreneur and the words “oddzial w Polsce”

(branch in Poland),

(ii)

keep separate account books in the Polish language, in accordance

with the accounting provisions,

(iii)

have a person in Poland authorised in the branch to represent the

foreign entrepreneur.

The Minister competent for economy may prohibit conducting economic activity by a

branch in some situations specified by law.

Representative Office

A representative office may conduct economic activity exclusively in the scope of

advertising and promotion of the foreign entrepreneur.

A representative office has to be entered in the records of foreign representative

offices. The records are kept by the minister competent for economy. The entry into

records is made by the mentioned above minister upon inviting the opinion of the

minister competent for the scope of the foreign entrepreneur. The minister in some

situations stipulated by law may refuse the registration.

A representative office among others is obliged to:

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(i)

use the name of the foreign entrepreneur with a Polish translation of a

legal status of the entrepreneur and the words “przedstawicielstwo w

Polsce” (representative office in Poland),

(ii)

keep separate account books in the Polish language, in accordance

with the accounting provisions,

(iii)

have a person in Poland authorised

to represent the foreign

entrepreneur in the representative office.

3.2

Permits

Generally the establishment of economic activity in Poland does not require any

previous permits from the Polish authorities.

Nevertheless, in case an entrepreneur is going to start performance of some

indicated activities, it is obligatory to obtain the concession or permission of the

relevant authority.

In accordance with the act of July 2, 2004 on freedom of economic activity the

concession should be obtained before starting the following activities:

(i)

prospecting or recognition of useful material deposits, extracting

minerals from deposits, tank-less storage of substances and storing

waste in rock formations, including in underground mining excavations,

(ii)

manufacturing and trading in explosives, arms and ammunition, and

products and technology serving military or police purposes,

(iii)

manufacturing, processing, storage, transmission, distribution and

trading in fuel and energy,

(iv)

protection of persons and property,

(v)

air carriage,

(vi)

broadcasting of radio and TV programmes.

The fields of economic activity where a permit is necessary are determined in the

provisions of separate acts relevant for the scope of economic activity.

Moreover, the intention of establishment of a new entrepreneur by two or more

entrepreneurs may be the subject to the examination by the President of the Office

for Competition and Consumer Protection. If, according to the provisions, the

intention of establishment of an entrepreneur is the subject to the examination by

the President it may not be established without a prior consent of the President of

the Office.

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The procedure of concentration's control is described in the chapter 13.

3.3

Registration Procedures

An entrepreneur who is going to start economic activity in Poland is obliged to

perform the following registration procedures:

(i)

registration of the economic activity in the National Court Register or

Other Relevant Register,

(ii)

registration of the entrepreneur in the Voivodship Statistical Office,

(iii)

opening a Bank Account,

(iv)

registration in the Local Tax Office,

(v)

registration of employees in the Social Security Agency („ZUS”).

The registration procedures should be performed in the order described below.

However, the entrepreneurs starting economic activity in Poland are entitled to

submit the motion on registration of their economic activity in the National Court

Register or in the municipal office together with the motion concerning registration

of their activity in the Voivodship Statistical Office and in the Local Tax Office. In

such a case the National Court Register or the municipal office after completion of

their procedures are obliged to send their decisions together with the proper

motions to the Voivodship Statistical Office and the Local Tax Office.

3.3.1

Registration of Economic Activity in the National Court Register or Other

Relevant Register

With the exceptions of sole traderships and foreign representative offices all legal

forms of economic activity should be registered in the National Court Register.

The National Court Register is composed of three parts:

(i)

register of entrepreneurs,

(ii)

register of associations, other social and professional organizations,

foundations, and public health care institutions,

(iii)

register of the insolvent debtors.

Twenty one district economic courts hold the National Court Register (KRS).

Each entity is registered in the National Court Register under a separate position

marked with a number, referred to as KRS number. The register is open and every

person has a right of access the data from the register. The register is conducted in

the information system and data from the National Court Register are accessible in

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the fifty one organizational units of the Central Information of the National Court

Register on the territory of Poland.

An application for entering into the register is submitted on an official form. While

submitting the application an applicant, without summons, pays the court fee.

In accordance with the current provisions economic activity in a form of a sole

tradership has to be notified to the economic activity register kept by the municipal

offices whereas a foreign representative office has to be entered in the register of

foreign representations kept by the Ministry competent for matters of the economy.

3.3.2

Registration of the Company in the Voivodship Statistical Office

After registration in the National Court Register or other register each form of

economic activity established in Poland has to be registered in the Voivodship

Statistical Office and entered to the REGON system. The presentation of the

REGON code number is required by the Tax Office, the Social Security Institution

and by banks when a bank account is being opened.

3.3.3

Opening a Bank Account

Once the entity has gained the REGON registration it should open a bank account

in a freely chosen bank in Poland.

3.3.4

Registration at the Local Tax Office

Once the entity has been officially registered in the Court and the Statistical Office,

the next step is registration of the company in the Local Tax Office. Such

registration may cover:

(i)

a declaration of the corporate income tax and VAT obligation,

(ii)

an application requesting the assignment of the tax identification

number („NIP”).

The specialised tax offices are designed for so called “large taxpayers”. The

following entities should file the notification to the specialised tax offices:

(i)

tax capital groups,

(ii)

banks,

(iii)

insurance companies,

(iv)

branches and representatives of foreign entrepreneurs,

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(v)

entities acting on the basis of the provisions related to the public stock

and securities exchanges and related to investment funds, entities

acting on the basis of the provisions related to the organisation and

functioning of pension funds,

(vi)

other entities.

It must be stressed that the specialised tax offices are also appriopriate in case of

entities which are managed directly or indirectly by a non-resident or in case a non-

resident administers at least 5% of the votes. However, registration of such entities

should take place in the standard tax office. From Janury 1 of the next year they are

obliged to register in the specialised tax offices.

Entities having a NIP nubmer are required to update the data included in the

opening application.

3.3.5

Registration of Employees with the Social Security Institution („ZUS”)

After employing new personnel it is necessary to inform the local branch of the ZUS

about the employment within 7 days from concluding an employment contract. The

application forms are available at the ZUS branches.

3.4

Timing and Costs

It is worth knowing that:

(i)

the registration in the National Court Register usually takes between 2

and 4 weeks

(ii)

the procedure of obtaining required permits takes between 4 and 10

weeks,

(iii)

the procedure of obtaining the REGON number takes 1 to 3 days,

(iv)

the procedure of registration in the Local Tax Office takes about 3

weeks; before obtaining the NIP number the company is entitled to use

its REGON number.

The costs related to the establishment of economic activity depend on the legal

form chosen for conducting economic activity in Poland.

As an example below, we present the official costs related to the establishment of a

limited liability company in Poland:

(i)

the tax on acts in civil law

According to the act on tax on acts in civil law the amount of the tax depends on the

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amount of the initial capital of the company. The rate of the tax amounts to 0.5% of

the initial capital.

(ii)

the notarial fee

The notarial fee for drawing up the notarial articles of association of a limited liability

company also depends on the amount of the initial capital. According to the current

provisions the maximum net notarial fee cannot exceed six-times the amount of the

average monthly remuneration in Poland and is calculated according to the

following maximal rates:

Amount of the initial capital

Fee

from PLN 50,000 up to PLN 60,000

710 + 1% above PLN 30,000

from PLN 60,000 up to PLN 1,000,000

PLN 1,010 + 0.5% above PLN 60,000

Above PLN 1,000,000

PLN 5,710 + 0.25% above PLN

1,000,000

(iii)

the stamp duty connected with obtaining required permits on

concessions (depending on permit or concession),

(iv)

costs of issuing powers of attorney (the stamp duty amounts to PLN 15

or the notarial fee amounts to maximally PLN 30 in case of the notarial

power of attorney),

(v)

the stamp duty amounts to PLN 152 connected with registration of the

company as a VAT taxpayer,

(vi)

the court registration fee amounts to PLN 1,000 for the entry of the

company into the National Court Register,

(vii)

the fee for the publication of the obligatory announcement in „Monitor

Sadowy i Gospodarczy” regarding the entry registration of the company

amounts to PLN 500.00,

(viii)

the lawyer`s fee (the amount of the fee depends on the particular

agreement between the client and the lawyer).

4.

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