Automotive

Simple joint-stock company - a new type of commercial law company

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On 1 July 2021, an amendment to the Commercial Companies Code came into force, introducing a new type of capital company into the Polish legal system – the simple joint-stock company (hereinafter: "P.S.A."). By assumption, it is supposed to be a simple, innovative and less formalised form of conducting business, intended mainly for start-ups. Nevertheless, its universal character is also highlighted – it will be available to investors who intend to start activity in any industry, with exemptions resulting from special acts.

Furthermore, the new type of company may also be of interest to entrepreneurs aiming to raise capital in non-public trading (e.g. from venture capital funds). However, P.S.A. is not dedicated to investors intending to raise capital on the organised capital market. That is because P.S.A. shares cannot be traded on a stock exchange.

A simple joint-stock company is distinguished from other commercial law companies by the following features.

SIMPLIFIED REGISTRATION PROCEDURE

If the shareholders only bring in cash con-tributions, it is possible to set up the company in the S-24 IT system without the need to visit a notary. However, the conclusion of articles of association where the shareholders will contribute not in cash (the so-called 'in-kind contributions') or contributions in the form of work or services will require the form of a notarial deed.

THE MINIMUM AMOUNT OF BASIC CAPITAL AND INTRODUCTION OF THE SHARES WITHOUT NOMINAL VALUE

In the case of P.S.A., the legislator abandoned the share capital [kapitał zakładowy] typical of capital companies in favour of the basic capital [kapitał akcyjny], which should be at least PLN 1.00. A change in the basic capital will not require an amendment to the articles of association.

Along with introducing a new category of capital, a new type of shares has also been added – shares without nominal value, detached from the basic capital, yet granting membership rights in the company. In practice, it means that a shareholder who has contributed PLN 0.00 will be able to take up the same number of shares as a shareholder who has contributed PLN 100.000. The company founders will be free to decide on the distribution of shares and the contributions paid in to cover them. Shares in P.S.A. will not have the form of a document and will have to be registered in the shareholders' register. The register may be kept, as in the case of a traditional joint-stock company, by entities that are authorised to keep securities accounts (e.g. brokerage houses) under the provisions of the Act on Trading in Financial Instruments, but also, which is only typical for P.S.A., by notaries. The form of disposal or encumbrance of shares is also a convenience for entrepreneurs. It will only require a documentary form on pain of being null and void. Thus, shares may be transferred by means of electronic communication, e.g. by e-mail. It should also be noted that, upon the company consent, it will be possible to dispose of shares that are not fully covered.

A NEW TYPE OF SHARE PREFERENCE – FOUNDER'S SHARES

This new type of share preference is supposed to protect shareholders who are the founders and originators of innovative solutions within P.S.A. Their primary function is to guarantee a specific share in the total number of votes to the founders at each new share issue. It is well illustrated by the example provided in the explanatory memorandum to the Act: "For example, 100 founders' shares (out of a total of 1,000 shares issued by the company) represent 10% in the total number of votes at the shareholders' meeting. Issuing 100 new shares and their acquisition by an entity other than the shareholder entitled from the founders' shares will increase the number of votes per each founders' share to 1.(1) vote. Thus the percentage share of the founder's shares in the total number of votes will remain at 10%."

A RICH OPTION OF CONTRIBUTIONS TO P.S.A.

A complete novelty introduced under P.S.A. is making any contributions having a property value to the company. That includes contributions in the form of rendering work or services and non-transferable rights, which has been typical of partnerships so far. It should be emphasised that contributions of labour, services, non-transferable rights, and others not of in-kind nature will not be counted towards the basic capital.

OPTION TO CHOOSE THE SYSTEM OF AUTHORITIES

The legislator has provided for P.S.A. choosing the model of the company's management and representative bodies. The monistic model assumes the appointment of the board of directors, which will be a company body combining the competencies of the management board and the supervisory board. This solution comes directly from the Anglo-Saxon system. The board of directors will consist of executive directors (managing the company) and, optionally, non-executive (supervising) directors. The dualistic model involves the appointment of bodies already known to Polish law, i.e. the management board and the supervisory board. In contrast, the appointment of the supervisory board, unlike in the case of a traditional joint-stock company, is not mandatory. The advantages of the monistic system over the dualistic one include a faster flow of information in the company.

A SIMPLIFIED COMPANY LIQUIDATION PROCEDURE

The regulations governing the new type of company also provide for a simplified procedure of its liquidation by one shareholder taking over all the company assets. Such a solution will require the shareholders' meeting to adopt a relevant resolution by a majority of 3/4 votes cast in the presence of shareholders who hold at least half of the shares. Additionally, such a takeover will require the approval of the registry court, which must take into account the interests of other company shareholders and creditors. At the same time, as part of the traditional liquidation procedure, the statutory period for filing creditors' claims was reduced to three months. Also, the distribution of the company's assets was permitted without waiting for the lapse of a specific period. The liquidation of P.S.A. will therefore be possible in a much shorter period than in the case of a traditional joint-stock company.

TAXATION IN A SIMPLE JOINT-STOCK COMPANY

The taxation of a simple joint-stock company will generally not differ from the taxation rules applicable to other limited liability companies. A simple jointstock company will therefore be taxed twice. Firstly, the company's income is taxed, where C.I.T. rates already known to entrepreneurs can be applied, i.e. 19% and 9% (if certain statutory conditions are met). In the case of a simple joint-stock company, the so-called Innovation Box (I.P. Box) may also be used. In such a case, the tax on the eligible income earned by the taxpayer from eligible intellectual property rights created as a result of research and development works may amount to 5% of the tax base.

In the next step, according to the same rules as in the case of other capital companies (spółki akcyjne [limited liability companies] or spółki akcyjne [joint stock companies]), profits distributed to the company's shareholders will be taxed. Thus, the income tax rate on dividends and other gains from participation in legal person profits is 19%.

The issues of shareholders' taxation at the stage of making non-monetary contributions should be highlighted. As a rule, making a non-monetary contribution will constitute a shareholder's income under income tax laws, just as in the case of a limited liability company or joint-stock company. However, this applies only to contributions of disposable rights or assets. That, in turn, means that no taxable revenue arises in the case of contributions of work or services. Contributions in-kind will also be exempt from income tax if the subject of such a contribution is an enterprise or its organised part.

PARTNERS' SOCIAL INSURANCE

From a practical point of view, the matter of social insurance is also crucial for entrepreneurs. As a rule, P.S.A. shareholders will not be subject to mandatory social insurance. An exception, however, concerns shareholders making contributions to the company in the form of provision of work or services. Such shareholders are deemed to be persons conducting a non-agricultural business. Therefore, from the date of commencement of rendering work or services until the date of their termination, they will be subject to compulsory retirement pension, disability pension, sickness, and accident insurance.

SUMMARY

A simple joint-stock company is a controversial combination of regulations of previously known capital companies, i.e., a limited liability company and a joint-stock company. However, during its creation, it was decided to introduce many innovative solutions previously unknown in the Polish legal system. Getting accustomed to new institutions will probably take some time. Nevertheless, a simple joint stock company will undoubtedly find its supporters among entrepreneurs who will decide to run their business in this particular form.

[Translation note: until 2000, jointstock companies in Poland had kapitał akcyjny. In 2000, the Code of Commercial Companies came into force which introduced the term kapitał zakładowy in the place of kapitał akcyjny. Both terms translate into English as "share capital". However, as the reinstatement of the term kapitał akcyjny involves the change of its original meaning and to differentiate the existing nomenclature, the applied translation for "kapitał akcyjny' is "basic capital" which approximates the meaning of the new term.]

Author: Agnieszka Krzyżaniak, Attorney at Law in the Law Firm “Chudzik i Wspólnicy Radcowie Prawni” sp.p. www.chudzik.pl

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