The legal bases for the business activity in Poland are provided for in the Civil Code, Commercial Companies Code and in the Act of 2 July 2004 on the freedom of business activity which replaced the Act of 1999 – the Business Activity Law.
The Civil Code regulates property relations between natural persons, legal persons, and natural and legal persons as well as provides protection of personal rights. The Act of 28 July 1990 adjusted the Code to the requirements of the system and economy transformation taking place in Poland. The provisions of the Civil Code respect the principle of the equality of entities – participants in a given legal relation, irrespective of their form of ownership, the equivalence of benefits (the benefit of one party corresponds to the benefit of the other party), and of the independence and freedom of contracts. It defines property rights of an absolute character (effective erga omnes), execution and expiration of obligations, types of contracts (e.g. sale contract, contract to supply, contract for performance of a specific task, assignment, commission sale contract, contracts of transport, forwarding, rent, lease, loan, or bank account deliveries), rights effective only between parties of a given inter-party relation under civil law, and statutory and testamentary succession (last will and legacy). The Civil Code was amended by the Act of 26 July 2000 to regulate the contract of lease, and the amendment of 14 February 2003 set forth explicitly that concessions, licenses and permits are components of an enterprise and in case of its sale are transferred to the buyer.
Another amendment to the Civil Code, made in 2004, introduced new principles governing the State Treasury responsibility (Journal of Laws No 162, item 1692). These solutions apply to acts of law and legal positions occurring after 1 September 2004. Any previous acts or positions are subject to the provisions previously in effect. Apart from the Civil Code, legal regulations pertaining to business activity are laid down in the Commercial Companies Code, copyright law, industrial property law, etc. The application of miscellaneous legal acts is governed by the Roman principle: a specific regulation has priority over a general rule.
The new principles for commercial companies’ activity have been binding since 1 January 2001, pursuant to the Act of 15 September 2000 – the Commercial Companies Code. This Act amended the provisions of the Commercial Code of 1934 (as amended). The new Code provides for the establishment, organization, operations, dissolution, division and transformation of commercial companies. The following types of commercial companies have been defined: general partnership, professional partnership, limited partnership, limited joint-stock partnership, limited liability company and joint-stock company. The Commercial Companies Code defines a commercial company’s articles of association, whereby the partners or shareholders undertake to pursue a common goal by making contributions and, where so provided in the articles or statutes of the company, by other joint action.
The Act also revises other laws to harmonize them with the Code, including amendments to the Bankruptcy Law, Code of Civil Procedure, Notary Public Services Law, the Accounting Act, the Act on tax regulations, Banking Law, etc. However, special regulations concerning the following continue to be in force:
- national Investment Funds
- companies conducting banking activities
- companies operating stock exchanges or conducting over-the-coun
- companies operating brokerage houses
- National Depository for Securities (KDPW S.A.)
- companies conducting insurance activities
- investment fund companies
- pension funds,
- public radio and TV companies,
- companies established as a result of commercialization and privatization of state owned enterprises,
- other commercial companies regulated by separate laws.
On 20 June 2008 amendment to the Commercial Companies Code (Act of 25 April 2008 amending the Commercial Companies Code; Journal of Laws No 86, item 524) came into effect, whereby new regulations concerning cross-border merger of companies were introduced. Procedures were laid down to enable merger of Polish companies with certain companies incorporated under the law of an EU Member State or a state which is a party to the agreement on the European Economic Area and has its registered office, seat of the main governing body or the principal establishment on the territory of the EU or of the state-party to the EEA agreement. Another amendment to the Commercial Companies Code, dated 23 June 2008, abolished the obligation to transform private partnerships into general partnerships.
At present, it is required only when the net revenue generated by a private partnership in each of the last two years reach the ceiling which results in an obligation for the company to keep accounting records (800,000 per year). The new regulations also provide for a reduced minimum required share capital in limited liability companies from PLN 50,000 to 5,000, and in joint-stock companies from PLN 500,000 to 100,000.
Furthermore, these provisions reduce the amount of penalty imposed on members of management boards of commercial companies for placing of an incomplete commercial order (from PLN 10,000 to 5,000). Currently, other processes related to further amendments to the Commercial Companies Code are taking place in the Sejm with a view to introducing regulations increasing the maximum limit for the acquisition of own shares from 5% to 20%. The Act of 2 July 2004 on the freedom of business activity (Journal of Laws No 173, item 1807, as amended) regulates issues related to the commencement, conduct and termination of business activity, and the responsibilities of public administration authorities in this respect. The Act defines the term “entrepreneur” as a natural person, a legal person or an organizational unit without the status of a legal person, which conducts business activity on its own behalf. Furthermore, the Act also classifies as entrepreneurs partners in a private partnership within the scope of their business activity.
The Act strictly specifies the criteria to be met by an entrepreneur in order to be classified as a micro, small or medium-sized one. These are as follows: the average annual maximum employment level and the maximum annual net sales on goods, products, services and financial transactions or the maximum amount of assets as revealed in the balance sheet drawn up as at the end of one of the last two financial years.
Both the foregoing criteria and definitions of small and medium-sized companies are common throughout the European Union.
An entity is classified as a micro-entrepreneur if it: (i) employs, on an average annual basis, less than 10 persons, and (ii) records the annual net sales not exceeding the PLN equivalent of _ 2 million or whose total assets did not exceed the PLN equivalent of 2 million.
A entity is classified as a small entrepreneur if it: (i) employs, on an average annual basis, less than 50 pers
ons, and (ii) records the annual net sales not exceeding the PLN equivalent of _ 10 million, or whose total assets, as shown in the balance sheet, did not exceed the PLN equivalent of 10 million.
A entity is classified as a medium-sized entrepreneur if it: (i) employs, on an average annual basis, less than 250 persons, and (ii) records the annual net sales not exceeding the PLN equivalent of 50 million, or whose total assets, as shown in the balance sheet, did not exceed the PLN equivalent of 43 million.
Moreover, the Act lays down the rules for the operation of branches and representative offices of foreign entrepreneurs on the territory of the Republic of Poland. Foreign entrepreneurs may conduct business activity either in the form of branches or representative offices. The scope of activity of a branch must not be different from the scope of activity of the respective foreign entrepreneur. The scope of activity of a representative office may include only advertising and promotion of the respective foreign entrepreneur.
An entrepreneur must comply with the principles of fair competition, respect for traditional customs and justified interest of consumers. An entrepreneur must also comply with operating requirements stipulated by law (e.g. in the field of protection against threats to human life or public morals, health care, environmental protection, professional qualifications). In addition, all entrepreneurs must provide Polish labeling on the goods or their packaging concerning identification of the producer of the goods, including his address, the name of the product, and other information if separate provisions so require. Failure to fulfill these formal conditions of conducting business activity may result in a fine.
The Act on the freedom of business activity requires that all public administration bodies support entrepreneurial activity. Particularly they are to initiate amendments to the law with a view to promoting development of entrepreneurship, support institutions which provide funding to business activity, conduct informational and educational activities, organize training courses in the area of enterprise development, and promote co-operation between entrepreneurs.
In April 2008 the Sejm commenced work on a change of the definition of business activity for the purposes of personal income tax. Business activity is to cover also activity conducted for and on behalf of a third party.
In order to further facilitate conduct of business activity, the government of Prime Minister Donald Tusk proposes introduction of a “one-stop-shop” system for the establishment of new business entities, enhancement of commercial courts’ operation and real reduction of the period of collection of receivables. The Ministry of Economy plans to introduce prior to the end of 2008 several major amendments to the Act on the freedom of business activity, for example to allow temporary suspension of business activity.
State aid to enterprises, defined as generation of financial profits to the benefit of a particular entrepreneur in the area of the business activity conducted by him, is – as in the EU law – considered to be incompatible with the idea of economic freedom and common market rules since it favors some entities at the expense of others. The prohibition of such aid is to some extent eased as it excludes the “minute aid”, the value of which may not exceed the equivalent of _ 200,000 in the current calendar year and two previous calendar years (the de minimis principle) and which is intended for entrepreneurs who operate on local markets only, pro
vided, however, that the aid does not support exports. The relevant regulations in line with the European Union standards were introduced in Poland by way of the Act on the criteria of admissibility and supervision of public aid to entrepreneurs (Journal of Laws No 60 of 27 July 2000, item 704). Regulations contained therein, along with several amendments, remained in force until May 2004, which is until Poland’s accession to the European Union. They were repealed as at the date when the Act on proceeding in matters related to public aid (Journal of Laws No 123 of 30 April 2004, item 1291, as amended) entered into force.
At present, the rules for and criteria of provision of public aid in Poland are provided for, in addition to the aforementioned Act, directly in the Community law and the Treaty of Accession.
Poland’s accession to the EU implies direct application of Community rules regarding admissibility of public aid and, in particular, application of Articles 88 and 89 of the EC Treaty and Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of the provisions of the EC Treaty concerning state aid. The authority responsible for the supervision of the granting of aid to entrepreneurs is no longer the President of the Office for Competition and Consumer Protection, but the European Commission. It is obliged to supervise the system of aid granted to entrepreneurs by the Member States and verify that such aid is compatible with the EC Treaty and with other community rules. Pursuant to the Act of 2004 on proceeding in matters related to public aid, the task of OCCP is to act as an intermediary between entities which provide the aid and the Commission, and to assist in the preparation of notification of applications (both under aid programmes and for individual aid).
Changes in the state aid system included also the existing rules for the notification of aid and consisted in the replacement of optional notification of the European Commission with mandatory notification. According to the Community law, prior to putting of any state aid into effect (whether in the form of aid programmes or individual aid) the relevant aid scheme has to be submitted for approval to the European Commission. This applies to new cases of aid provided to business entities.
The notification obligation does not apply to the existing aid within the meaning of Article 88.1. of the EC Treaty (Annex IV to the Treaty of Accession, Chapter 3(1))1. The following types of aid are regarded as existing aid:
(a) all aid measures put into effect before 10 December 1994,
(b) aid measures listed in the Appendix to Annex IV, i.e. notified to the Commission before the work on the Treaty of Accession was completed (7 measures),
(c) aid measures which were assessed twice; they were found by the OCCP President to be compatible with the acquis and the European Commission did not raise any objection in respect thereof. In such a case the aid will be in effect for a certain period of time following the accession.
These regulations do not apply to financial aid to small and medium-sized entrepreneurs (until the end of 2011 and until the end of 2010, respectively).
The nature of financial relations between public authorities and public undertakings is regulated by the Act of 22 September 2006 on the transparency of financial relations between public authorities and on financial transparency of some enterprises (Journal of Laws No 191, item 1411). The Act lays down the rules and methods to ensure transparency of such rela
tions, specifying the obligations of a public undertaking as regards bookkeeping and documentation of its legal and economic standing, to present the use of public funds in a reliable manner.