12 February 2025
roadmap
SAFE agreements in Poland: neither simple nor particularly safe
A Simple Agreement for Future Equity (SAFE) allows an investor to fund a start-up in exchange for the promise of future equity, but only if specific events occur. What sets SAFEs apart is that they do not require the company to be valued at the time of investment. Instead, the parties agree on a future trigger event for when shares will be issued, often with a discount as a reward for early backing.
While this flexibility is ideal for fast-paced, early-stage fundraising, SAFEs have not gained much traction in Poland. But why?
Under Polish law, SAFEs are not specifically regulated but are allowed under the freedom of contracts principle. However, legal and tax classifications pose challenges.
Firstly, SAFEs do not require a maturity date; however, without one, they risk being viewed as donations or undue benefits. This could trigger tax liabilities for the start-up based on hypothetical interest accrued on the financing received.
Secondly, Polish law does not secure the conversion of SAFE investments into equity, aside from compensation claims, which may not suffice if complications arise. Moreover, the conversion itself requires a notarial deed form statements to be signed by the investor only after the trigger event occurs. Therefore, careful contractual safeguards are necessary to prevent the investor from backing out.
Finally, Polish law does not offer protections for breaches of representations, warranties or MAC clauses, which are common in other jurisdictions. Without careful drafting, investors could be forced to convert their investment into equity, even if adverse conditions or breach of warranties emerge between the funding and the conversion.
In the end, SAFEs, while designed to simplify investment, often turn out to be far from simple in Poland.
authors: Katarzyna Solarz-Włodarska, Szymon Czerwiński
Katarzyna
Solarz-Włodarska
Partner
poland