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06/22/2021

Groups of companies in the Commercial Companies Code

One of the key last proposals of changes to the Commercial Companies Code is the introduction of the holding law (groups of companies). What will the parent company be now entitled to?

The existing regulations of the Commercial Companies Code referred only to contractual holdings – when the parent company and the subsidiary entered into a management or profit transfer agreement. The regulations, however, do not have a wide application in practice, as the vast majority of holdings operating in Poland did not sign such agreement. The purpose of the amendment is therefore to adjust the law to the existing, complex corporate structures.

Pursuant to the draft of the amendment to the act – a group of companies should follow a common economic strategy in order to pursue a common interest that enables the exercise of uniform management and must not harm creditors or minority shareholders / minority shareholders of the subsidiary. To participate in a group, a resolution of the shareholders' meeting / general meeting that indicates the parent company, adopted by a 3/4 majority of votes, is required. If at least half of the share capital is represented at the meeting, then an absolute majority of votes is sufficient.

According to the proposed changes, the parent company is entitled to issue a binding instruction. It must be in writing and should contain: the interest of the group of companies that justifies the performance of the parent company's instruction by the subsidiary, the expected benefits or damage of the subsidiary, and the manner and time of remedying any damage caused due to compliance with the instruction. On the other hand, a refusal (of subsidiary’s management board) to execute a binding instruction may occur if the execution would lead to the insolvency of a subsidiary or a threat of insolvency, and if there is a justified fear that the instruction is contrary to the interests of the company and will cause damage to it, which will not be repaired by other companies in the group within next two years from the event causing the damage. The refusal requires a resolution of the management board with a justification.

The parent company will also be able to view the subsidiary's books and documents and to request demanded information. On the other hand, the management board of the subsidiary will be obliged to prepare a report on the relationship with the parent company for the previous financial year, which should include, inter alia, the above-mentioned binding instructions.