New holding law in Poland

A major amendment to Polish commercial law entered into force on 13 October 2022. The amendment introduces the definition of a group of companies along with the rules concerning their management and liability both within the group and towards creditors.

Before the amendment, subsidiaries had a difficult time acting for the benefit of the whole corporate group if such actions were not in the interest of the subsidiaries. Now it will be possible for subsidiaries to follow the interests of the group.

The new holding law provisions apply only to the companies which are listed in the Commercial Register as participating in the corporate group. The decision on participation is taken by the shareholders.

Binding instructions

Once the subsidiary becomes the formal group member, it can receive binding instructions from the parent company. These instructions should meet requirements set out in the new law, including information on how the parent company plans to compensate potential damages to the subsidiary. The subsidiary's management will not be liable for damages caused to the company by performing binding instructions. However, the management should refuse to follow instructions that could lead to the subsidiary's insolvency.

The amendment also introduces new rules concerning the operations of supervisory and management boards, squeeze-outs and protection of minority shareholders.

Outlook

The requirement of registering participation in the group might affect the universality of the new provisions. It remains to be seen how often companies will decide to formalise the group membership. In any case, it is recommended that each capital group with subsidiaries in Poland at least considers whether registering such membership might be beneficial for the group.

author: Krzysztof Leśniak