Draft changes to holding law.

Liability of company bodies members

The Civil Law Codification Commission has adopted a draft amendment to the Commercial Companies Code. The new provisions apply to groups of companies and are intended to replace the existing regulations, in force under the Act of 2022 amending the Commercial Companies Code and certain other acts. 

Changes to holding law – why are they needed? 

The justification for the draft amendment presented arguments that the current regulations were flawed and did not meet real needs. The current system has also been criticized for overly rigid procedures for issuing orders and unclear rules for operating in the group’s interest, which, given the lack of real benefits, discourages official registration. So how will the new regulations address this? 

Legitimizing the interests of a group of companies and the safety of managers 

The key goal of the reform is to introduce principles based on the so-called “Rozenblum doctrine,” which allows a subsidiary to pursue the interests of the group, even if this entails temporary negative consequences for the company itself. This addresses business realities and introduces the concept of enabling law in regulations governing groups of companies. 

This solution, however, requires the introduction of provisions protecting members of the bodies of group companies, and in particular subsidiaries, against civil and criminal liability for rational actions undertaken in the interest of the group. 

Actions in the group’s interest will be legally legitimate as long as they serve the implementation of a common strategy, and the subsidiary’s balance of benefits and “sacrifices” is balanced within a reasonable timeframe. This is an important change for members of subsidiary company boards, which will help ensure greater security and reconcile the conflicting goals of group members through compromise. This also represents a move toward the concept of group regulations as so-called protecting law. Also read: Insolvency – principles of liability for members of a limited liability company’s management board. 

Precise definition of a group of companies 

To avoid abuse, the draft establishes restrictive criteria for recognizing capital ties as a group of companies within the meaning of the Code. These criteria must be met cumulatively: 

• conducting business based on a common, long-term strategy; 

• the existence of lasting economic cooperation between companies; 

• covering companies with coherent, integrated management. 

Importantly, the project does not require formal approval of the strategy through resolutions, instead emphasizing flexibility and a genuine framework for business cooperation. However, entrepreneurs must remember that in the event of a dispute, the parent company and the subsidiary will bear the burden of proof that they have met these rigorous criteria. 

New philosophy of corporate group law – moving away from the “opt-in” model 

The most important change is the departure from the current, ineffective “opt-in” model, which required special resolutions to be passed by the meetings of subsidiaries to benefit from the provisions on corporate groups. The drafters considered this regulation flawed and overly formalized, resulting in its limited practical application. 

The new project adopts the principle of “universality.” This means that the provisions on corporate groups will apply automatically (ex lege) as soon as the statutory requirements for the existence of a group are met. Entrepreneurs will not be required to undertake legal actions or make entries in registers to operate as a corporate group. At the same time, the project provides for an “exit right,” meaning companies will be able to opt out of these provisions by amending their articles of association. 

New mechanisms for protecting creditors and shareholders 

The draft also introduces instruments for stakeholder protection. The most significant change is the parent company’s liability to the creditors of a subsidiary for damages caused by its insolvency, if this was the result of excessive influence by the parent company exceeding the limits of the group’s interests. 

The project also introduces changes to general provisions, granting partners of limited liability companies and shareholders of non-public companies the right to request withdrawal from the company, similarly to the solutions known from a simple joint-stock company. 

Elimination of the reference to the so-called “corporate agreement” 

The bill removes references to so-called “corporate agreements” from the Commercial Companies Code, which would allow for the transfer of profits or the management of a subsidiary. The authors of the reform point out that such agreements constitute an unacceptable infringement of authority under Polish law, and are invalid, as they infringe upon the authority of management boards and shareholders’ meetings to decide on profits. Instead of dead-end provisions on agreements, the legislator is focusing on a framework for the regulation of actual groups of companies. 

New regulations also for international groups 

The proposed regulations will also apply to groups of companies with an international reach, not just to groups of companies governed by Polish law. The draft regulations will therefore apply to subsidiaries governed by Polish law, regardless of whether their parent companies are foreign entities. At the same time, this regulation will not apply to foreign subsidiaries (as defined in Art. 4 § 1 item 51 of the Commercial Companies Code), even if Polish parent companies control them. Also read: Amendment to the Commercial Companies Code – new obligations regarding maintaining the stock register. 

New regulations – when will they come into force? 

The draft law establishes a one-year transition period, counted from the date of entry into force of the law, during which the existing regulations on groups of companies will continue to apply to companies that, pursuant to Article 21¹ § 3 of the Commercial Companies Code, have disclosed their participation in a group of companies. However, due to the flaws in the regulation on groups of companies contained in Articles 21¹–21¹⁶ of the Commercial Companies Code (see General Comments, point I.1), it is not justified to maintain it in the long term. 

Failure to submit an application to the registry court to remove the mention of participation in a group of companies within the deadline specified in Article 14, paragraph 2 of the draft act will not result in the application of the current provisions being extended. They will cease to apply one year after the draft act enters into force, and the registry court will remove the mention ex officio. 

Ensure your company’s legal security. TGC Corporate Lawyers advisers assist domestic and international companies in all matters related to the formation and operation of commercial companies and their governing bodies. 

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