Revolutionary solution for start-ups - a simple joint-stock company

« News 19 september 2019

In less than 6 months, the entrepreneurs will be able to start their business activity in a previously unknown formula, i.e. in the form of a simple joint-stock company. A simple joint-stock company is a hybrid solution combining elements specific to limited liability companies, joint-stock companies and elements previously unknown to Polish companies. The assumptions behind the introduction of a simple joint-stock company are to strengthen the development of start-ups and increase their competitiveness by enabling them to start operation under the new, more flexible formula.

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On August 2, 2019 the President of the Republic of Poland signed an act amending the Commercial Companies Code and some other acts, under which a new legal form of conducting business activity - a simple joint-stock company - was introduced to legal trading[1]. The first simple joint-stock company may be established on 1st March 2020, but today it is worth considering whether it is an optimal solution for newly established entities that do not have large financial resources.

Below we will try to familiarize you with the structure of a simple joint-stock company and provide you with the most important information concerning the rules of its functioning.

Who can set up a simple joint-stock company?

A simple joint-stock company may, as a rule, be established by anyone, but not by sole proprietorship limited liability companies. Significantly, the establishment of a company requires a symbolic contribution of share capital in the amount of PLN 1. On the other hand, the shares may be purchased for cash or in-kind contributions. Such a solution will be attractive in particular for start-ups' founders, who at the beginning of their activity do not have significant monetary resources. What is important, such in-kind contribution may be know-how, provision of work or services (which is characteristic for partnerships). The contributions should be made in full within three years from the date of registration of the company in the register, which is also a beneficial solution. In the case of a limited liability company, in order to establish the company, it is necessary for the shareholders to make contributions to cover the entire share capital. However, in the case of a joint-stock company, the shares taken up for non-cash contributions should be covered in full not later than within a year after the registration of the company. The shares taken up for cash contributions should be paid before the registration of the company at least in one fourth of their nominal value.

How to set up a simple joint-stock company?

A simple joint-stock company can be registered in a traditional form, as well as with the use of the ICT system of the Ministry of Justice - S24, which enables much faster registration of the company. However, it should be remembered that in the case of registration of a company through the S24 system, only cash contributions may be made to cover the shares of the first issue.

The following is necessary to establish a simple joint-stock company:

1) conclusion of an articles of association in the form of a notarial deed or by the use of a contractual template within the S24 system;

2) establishment of company bodies – a management board or a board of directors and supervisory board optionally (more information on company bodies will be provided below);

3) shareholders’ contribution to cover the share capital at least in the amount of PLN 1;

4) entry of the company into the National Court Register (KRS).

Share capital in the amount of PLN 1

As it was indicated above, the minimum amount of share capital is even symbolic, as it is 1 zloty. Such a solution is a great facilitation for the company at the beginning of its activity, because there is no "freezing" of cash in the form of share capital. It is worth noting that in the case of a limited liability company the minimum share capital is PLN 5,000, and in the case of a joint-stock company it is as much as PLN 100,000.

Another facilitation for entrepreneurs is the fact that the amount of share capital is not specified in the articles of association, it may be variable (and this does not amend the articles of association). At the same time - which should be considered a major novelty – the share capital may be used to make payments to the shareholders (besides the profit distributions). However, the right to payments from the capital is not unlimited and cannot lead to the insolvency of the company. The amendment of the Commercial Companies Code provides that a payment to shareholders from the share capital may not lead to a reduction in the amount of such capital below PLN 1, and a payment to shareholders may not lead to a loss of the company's ability, under normal circumstances, to perform its due financial obligations within six months from the payment date. What is more, the share capital should be increased to cover losses by allocating for this purpose at least 8% of the profit for a given financial year, if this capital did not reach 5% of the company's total liabilities resulting from the approved financial statements for the last financial year.

Shares and preference shares

The shares in a simple joint-stock company do not have a nominal value, do not form part of the share capital and are indivisible. The shares do not have the form of a document and are subject to registration for the benefit of a given shareholder in the register of shareholders. The register of shareholders may be kept only by a notary public running a notary's office in the territory of the Republic of Poland, brokerage houses, banks and other entities which, pursuant to the Act on Trading in Financial Instruments of 29 July 2005, are authorized to keep securities accounts. A person entered in the register of shareholders is considered a shareholder of the company.

The company may issue shares with special rights (the so-called preference shares), which should be specified in the articles of association. The preference may concern in particular the voting right, the right to dividend or division of property in the event of liquidation of the company. Importantly, the regulations do not introduce any restrictions as to the preference of the shares of a simple joint-stock company. In other capital companies, such limitation exists and in the case of a limited liability company, the voting preference may not grant the entitled party more than three votes per one share, and in the case of a joint-stock company, one share may not be granted more than two votes.

The right to vote may be waived in the case of a preference share with respect to dividend (the so-called silent share). The articles of association may specify the circumstances in which the holder of a silent share is entitled to vote.

The shares are transferable, and the sale of shares should be made in a documentary form under pain of nullity. This solution makes it possible to avoid the costs of a notary public, because as in the case of a limited liability company, the shares should be sold in writing with signatures authenticated by a notary public.

The purchase of shares takes place at the moment of an entry in the register of shareholders indicating the purchaser and the number, type, series and numbers of the purchased shares. The above solution will allow to secure trading in shares - until now, there have been situations where paper bearer shares were purchased from an unauthorized person who illegally came into possession of a share document.

Which bodies should be set up in a simple joint-stock company?

The structure of a simple joint-stock company is flexible and can be adapted to the needs of its founders. In accordance with the law, a simple joint-stock company must have a management board or a board of directors. However, the founders of the company may also appoint a supervisory board in the articles of association. The board of directors is a new body in the Polish legal system but is used in countries under the common law system.

The management board and the board of directors are the bodies governing of the company which are responsible for managing the affairs of the company and represent the company (one of these bodies should be appointed). These bodies consist of one or more members. The supervisory board exercises permanent supervision over the company's activities and consists of at least three members.

Resolutions of the bodies in electronic form

Another major novelty facilitating the day-to-day management of affairs in a simple joint-stock company is the introduction of the possibility of adopting resolutions by each of the company's governing bodies by voting via means of direct remote communication (e.g. e-mail or videoconference).

It is worth noting that, as a rule, the general meetings of shareholders in a simple joint-stock company will not be recorded in the form of a notarial deed, unlike the general meetings of a joint-stock company.

To sum up, the biggest advantages of a simple joint-stock company are as follows:

1) a symbolic share capital of PLN 1;

2) know-how, provision of work or services can be an in-kind contribution to the company;

3) a change in share capital does not require an amendment of the articles of association by a notary public;

4) the sale of shares also does not require a visit to a notary public, as it may take place in a documentary form;

5) no obligation to appoint a supervisory board (it is an optional body);

6) the resolutions of the bodies may be adopted by means of direct remote communication (e.g. e-mail or videoconference).

If you are considering setting up a simple joint-stock company and you need additional information on this subject or a practical explanation, please contact us (our contact details can be found at: https://www.esb-legal.pl/en/contact) - we'll be happy to help you.

19/09/2019 r., attorney-at-law Magdalena Michalska-Niewiadomska

 


[1] Full text of the act you can find here (Polish version): http://prawo.sejm.gov.pl/isap.nsf/download.xsp/WDU20190001655/O/D20191655.pdf

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