Holding Law legislation related to corporate groups in Poland is picking up speed. A draft law has now been submitted which reorganises the powers of parent companies over subsidiaries. This includes, for example, that parent companies can issue legally binding instructions or request inspection of the subsidiary’s books.
As reported several months ago (see box), legislative work related to groups of companies (holdings) has accelerated in Poland in 2021. The government recently sent an official draft to parliament. The draft indicates a “vacatio legis” of six months, which means that depending on the pace of the legislative process, it can be expected that a holding regulation will come into force in the first half of 2022.
Piotr Pruś, Attorney-at-law, Partner, ECOVIS Legal Poland, Warszawa, PolandWe can advise you on which measures you can consider if you are affected by the changes in the new holding law.
The Cornerstones of the New Holding Law
The new law provides for some new solutions, such as the parent company’s power to issue legally binding instructions to subsidiaries that have elected to participate in a group of companies.
In addition, the supervisory and management bodies of the parent company will have the right to inspect the books and documents of the subsidiary, which is not currently the case. However, this solution will merely confirm the already existing practice in many companies.
What the New Holding Law Means for Shareholders
A shareholder representing no more than 10% of the share capital of a subsidiary will have the right to request that the parent company purchase its shares (a sell out right). On the other hand, the parent company will have the right to squeeze out minority shareholders of the subsidiary holding no more than 10% of the share capital of the subsidiary.
Balancing out the newly introduced right to issue legally binding instructions to subsidiaries, the parent company will bear material liability towards creditors of the subsidiary. This means that the creditors of the subsidiary will have the right, under certain conditions, to claim compensation from the parent company for any damage to creditors caused by such binding instructions being issued, say the Ecovis advisers.
The holding law will affect the operations of all capital groups with subsidiaries in Poland. In the coming months, shareholders and managers of such groups will have to consider and prepare the appropriate actions. This is important, as a decision on whether to participate in a group of companies will have a material influence on the operations of not only the subsidiary, but also the parent company, explain the Ecovis experts. The draft also contains numerous other new provisions, especially concerning the organisation and conduct of the supervisory board.
Do you want to know more about the holding regulations in Poland?
Poland is reforming its company law and wants to introduce more robust rules for holding companies. The proposed changes will be essentially important for all companies in a group of companies registered in Poland. More:
For further information please contact:
Piotr Pruś, Attorney-at-law, Partner, ECOVIS Legal Poland, Warszawa, Poland