SIMPLE JOINT-STOCK COMPANY
Recently, the President of Poland signed a law According to law recently signed by the President, a new legal form will be introduced into Polish law – a “simple joint-stock company” “Prosta Spółka Akcyjna – “P.S.A.”).
Work on the project lasted long – and for our office it is particularly important that he participated (as a member of a team of several members) JWMS, a legal adviser to Marcin Mazgaj, PhD, attorney-at-law and partner at JWMS was one of the members of the team that drafted the new regulation. The Act enters into force next year – on March 1st, 2021, but it is worth to get to know the opportunities related to P.S.A. even now.
Currently most Polish start-ups choose spółka z ograniczoną odpowiedzialnością (Polish private limited liability company) as legal form. However, after March 1st, 2021, it would be wrong not to the P.S.A. into consideration when incorporating your business.
P.S.A. will have a bring a lot of advantages for new companies, however it will be necessary to make quite a lot of decisions to adjust the company to the business idea of the founders.
The current popularity of Spółka z o.o. among new businesses is mainly result of lack of other options. However, Spółka z o.o. is not designed for swift raising capital for a new venture from outside sources. While joint stock company (Spółka Akcyjna)_provides such possibilities, Spółka z o.o. is chosen because it is much cheaper and simpler. P.S.A. aims to combine the advantages of these two types of companies, creating the ideal legal form for innovative projects with the possibility of dynamic development through new technologies or finding an undiscovered niche market.
Currently, establishing of a company* in Poland requires investment of share capital of at least 5.000 zł (for Spółka z o.o.) or 100.000 zł (for Spółka Akcyjna, before the registration it is enough to pay 1/4 of the amount of share capital, but the rest must be paid in the end). Of course, share capital can be made as contribution in kind, but it is more risky. Moreover, not everything can be the subject of contributions (in particular, it is not allowed to cover share capital in a company by work or services).
1) The minimum share capital will be only 1 zł,
2) a non-monetary contribution will also be able to take the form of work or services.
This will make it easier for companies to acquire services that are valuable, but cannot be transferred as contribution in kid to current Polish companies (e.g. currently, a programmer could possibly cover his or her own copyrighted software, but the marketer or business developer could not cover the contribution to SP. z o.o. or S.A. the promise to provide the service).
P.S.A. will be able to be created over the Internet, with the same as in the case of the Ltd company currently, this version of the registration will only be available if the shareholders are only able to make cash contributions to the company at the creation stage of the company.
Greater flexibility in regulating the relationship between shareholders
For both company and Public limited companies, there are many restrictions on the regulation of the relationship between the partners and the company’s functioning. For example, in the company z o.o. there are restrictions on the preference of shares, and the shares have a minimum nominal value of 50 zł (which limits to a certain extent crowdfunding, and so difficult due to the required legal form of entry or purchase of shares, Requiring the participation of a notary).
Shares of P.S.A. will not have nominal value. For this reason, more flexible solutions will be possible, in particular regarding dividing rights to vote and to participate in company’s profit. For example, founders of the company may maintain control over the company (to avoid risk of being dismissed from the management) at the same time giving away significant part of the right to dividend.
Thus, P.S.A. will give certain possibilities similar to those of the joint stock company (silent shares, founding shares, etc.), combined with a much lower cost of founding of the company (no need to declare up to 100.000 zł capital and much less other formalities).
Governing bodies of the company may be based on both “dualistic” model (management board + possible, but not required supervisory board – such as now in Poland) and so-called “monistic” model (popular in particular English speaking countries), in which the “Board of directors” is a single body and its members have different powers.
Among others, the new law includes regulations regarding drag-along procedure (forcing other shareholders to sell shares in the case of e.g. investor’s exit). While this is a frequently used solution, currently it is based solely on contractual structures, which always reduces the certainty of effectiveness.
Of course, the vast choice of possibilities also means that it will be necessary to properly consider provisions of the articles of association so they are adjusted to the business idea of founders situation.
Differently thatn in Spółka Akcyjna minutes from the shareholders meeting will not have be made by a notary each time (only in specific situations). Shareholder will be allowed to make their resolutions by e-mail, video-conferences (which is currently possible for both Spółka Akcyjna and spółka z o.o.).
P.S.A. will have simplified electronic shareholder register and the stock will only exist in digital form (it was supposed to be a distinctive feature of P.S.A., however currently obligatory dematerialisation of stock of Spółka Akcyjna is also being introduced). For this reason transfer of stocks would be simpler and quicker (in particular comparing to spółka z o.o.).
P.S.A. will not have “frozen” share capital. Shareholders will be able to contribute and pay out money. Although there will be limitations to that, there will be no requirement for cumbersome procedure of decreasing of share capital (except for paying out assets equal to 5% of the amount of the liabilities featured in the last accepted annual financial statement).
Shareholder will not be liable for debts of the company.
Simplified winding up of the company
It is not secret that start-up may not “go off” and their survivability rate is relatively low. P.S.A. regulations address this issue by allowing for simplified winding up of the company. Shareholders will be allowed to choose not to pursue long liquidation procedure and decide that assets and debts will be taken over by one of the shareholders.
To summarise, establishing P.S.A. may be an useful option for businesses in Poland – maybe not for every entrepreneur, however adding and additional legal form to Polish system should be appreciated.
* To avoid confusion – by “company” in this post we mean corporations with legal personality that in Polish are knowns as “spółki kapitałowe”, and not partnerships or “sole proprietorship” businesses.
dr Marcin Mazgaj, radca prawny
Jan Marczyński, radca prawny
Kamil Blicharski, aplikant radcowski