You have just made the decision that you want to run a business in the gamedev industry in the form of a limited liability company that will be incorporated in Poland? Or maybe you one step further – you already have such a company based in Poland and your are its owner (partner) and/or board member? It’s just that you are not a lawyer, but a game developer.
And while you’re quite familiar with business and people management, you don’t necessarily have the head or inclination to remember all those legal requirements that come with operating in a company’s structure, its bodies, resolutions and other formalities – which apply under Polish commercial company law.
Is it all about you?
And would you like someone to guide you by the hand in this legal world so that you can focus on what you know best and what you are paid to do? That is o creating games, bringing them to market and proving the assumed results to your investor, yourself and your team.
If we have 3x yes, that means you’ve come to the right place!
As it happens, I like to „lead by the hand” my clients so that they can get on with what they like and what they can do best. So, we are happy to take care of the whole legal subject for you so that you can spread your wings. But but…, we won’t do it WITHOUT you.
Since you are responsible for and manage this business, you too must know what a Polish limited liability company is all about and what basic topics you have to take care of.
So, what do you need to keep in mind when running a gamedev studio in the form of a limited liability company that is based and incorporated in Poland?
There is many topics, and we have been successively bringing them closer in this Gamedev Lawyer serwis, as well as on our sister blog EK LEGAL, and from this material you will learn:
- What are the most important features of Polish limited liability company and when it is the right legal form for your business
- What and how you should report to the National Court Register (KRS) in connection with the establishment, changes, suspension or liquidation of a limited liability company that is incorporated in Poland
- What are the organs of a Polish limited liability company and which of them are mandatory
- What does the shareholders’ meeting of a Polish limited liability company do and what formalities are involved
- What does the board of directors of a Polish limited liability company do and when should it adopt resolutions?
Each of these issues is elaborated on below to give you a helicopter view.
I don’t expect you should now start studying legal regulations, because that’s a job for a Gamedev Lawyer. However I believe you should have a map to help you settle wisely with your business within the legal framework of a Polish limited liability company.
Key features of a Polish limited liability company and when it is the right legal form for a business
We will start with the legal basics, which I will try to cover with practical comments. Polish limited liability company is a capital commercial company and has legal personality.
This means that it is a legal entity independent of its partners, or other persons who participate in „its life”. The way this company operates is regulated by the Polish Commercial Companies Code.
I recommend that you buy such a code in paper form and keep an up-to-date version of it somewhere handy, or alternatively to access the text of this law online – for example, on the website of the Parliament.
Who can be a partner in a limited liability company
According to the Polish Commercial Companies Code, a limited liability company may be incorporated by one or more persons for any legally permissible purpose (unless otherwise provided by law). Its founders may be either natural persons or legal entities, regardless of citizenship or place of residence.
However, it cannot be established solely by another single-member limited liability company. Unlike partnerships (and even more so than it looks like with a sole proprietorship), the shareholders of a Polish limited liability company are only obliged to provide the services specified in the articles of association and are not liable for the company’s obligations.
Elsewhere, we will write about what are the rules of liability for the members of the board of directors of a Polish limited liability company.
Share capital of a Polish limited liability company
The share capital of a Polish limited liability company should be at least 5,000 zlotys. And despite the fact that formally there are no such requirements, and the share capital in the case of a limited liability company doesn’t quite have a guarantee function, I don’t recommend staying with it at this minimum level. Someday we will write a separate post about this.
In the meantime, remember that the nominal value of a share cannot be less than 50 zlotys, and, above all, that shares cannot be subscribed for below their nominal value, as this will cause problems.
On the other hand, there are no obstacles, and you can subscribe shares in the share capital of a Polish limited liability company at a price higher than the nominal value – this is often the case when an investor enters or when there is a need to recapitalize the company. Then the balance (called agio) shall be transferred to the supplementary capital and is subject to different rules than those applicable to the share capital.
The creation of a Polish limited liability company
The following is required for the creation of a Polish limited liability company:
– the conclusion of the articles of association,
– the making by the shareholders of contributions to finance the entire share capital,
– the appointment of the management board
– the constitution of the supervisory board or an audit committee (if required by law or if you wish to have such a body
– as will be discussed below)
– and the registration in the register (so called KRS).
It seems relatively simple, and in fact it is.
We can do all this fully online, even without visiting a notary and without being in the same place at the same time. But about that in a separate entry. More complex issues begin later.
How to enter a limited liability company and how to exit it
In the case of a Polish limited liability company, it is relatively easy to exit the business, its sale and in general changing the composition of the shareholders, including the introduction of an investor, are matters that, as a rule, should not cause difficulties.
At the ownership level, all this is usually done by selling shares. Formally, a simple share sale agreement drawn up in writing with notarized signatures is then sufficient.
In practice, however, especially if it is combined with the entry of an investor and the recapitalization of the company, the sale is preceded by a legal and financial examination of the company (due diligence), the documentation of such a transaction is extensive, and its signing is preceded by negotiations. So, it is good for you to have the support of an experienced lawyer in such projects.
I would also add that the lawyer serving the investor or the other party to such a transaction will not be tasked with representing your interests, but only those of his client.
For whom a limited liability company will be suitable
We assume that this legal form of doing business is suitable for partners who wish to retain direct oversight over the conduct of the company’s affairs, while limiting the risk to their contribution only.
Importantly, such a shareholder may or may not also be a member of the management board in a Polish limited liability company. If he is not a member of the board himself, he ensures that there is a person he trusts on the board.
Preferably one who is competent and experienced in management and running a business in a particular industry. These issues can be regulated more precisely at the level of the articles of association, as well as in the shareholders’ agreement, including the investment agreement.
A limited liability company will also be an appropriate legal form if you are planning a larger business, and especially while considering investments in it, as well as inviting other people, including an investor, to cooperate with you.
It helps reduce business risk and liability for those involved at the ownership level and at the management board level. We will write more about this in a separate material.
On the other hand, a Polish limited liability company also means higher costs and much more paperwork than, for example, with a sole proprietorship – but we will devote separate material to this issue.
In separate posts, I will also share my experience in handling such projects as investor entry (both from the investor’s perspective and from the perspective of the company as a target) or preparing an exit from the company – yours (as a shareholder and probably also a member of the management board) or one of your partners with whom you no longer see a common business future.
What and how is reported to the Polish KRS register in connection with the incorporation, changes, suspension or liquidation of a Polish limited liability company
As of July 1, 2021, the incorporation, suspension, liquidation and all other formalities related to reporting and entering into the PolishNational Court Register (KRS) the changes taking place, as well as the disclosure of information about your Polish limited liability company, can only be carried out electronically.
What is the Court Register Portal
All registration duties provided for a Polish limited liability company are carried out through the Court Registry Portal (PRS), which is the Ministry of Justice’s ICT system.
Entering this linked PRS address, we are directed to the module on the National Court Register (KRS), which allows, among other the following:
- to carry out matters of filing applications and letters to the company registration courts (not only to the registration court of your company, but also to the court for other Polish companies),
- filing of financial statements,
- downloading copies from the Register of Entrepreneurs of the National Court Register (KRS),
- viewing financial documents (both of your company and other Polish companies),
- or even access to the Browser of the registration files (both of your company and of other Polish companies that are registered in the KRS – because currently it is no longer possible to consult the company’s registration files physically in the reading rooms of the registration courts).
What can be done in the electronic KRS?
Everything. And since there is really a lot of it, in separate posts we will discuss what and how we report to the KRS for Polish limited liability companies and generally we will write about how we do it in order to efficiently use the available tools and functionalities of the PRS system, which, unfortunately, is still not perfect (as of today).
In particular, we will share our experiences in:
- establishment and registration of a Polish limited liability company
- changes in the company’s articles of association – including changes in the manner of representation, change of the company’s name or registered office, or increase in the share capital of a Polish limited liability company
- increasing the share capital without amending the limited liability company’s articles of association
- disclosure of changes in the composition of the company’s management board, or proxy in the company
- disclosure of changes in the address of the registered office of a Polish limited liability company
- suspension of the activities of a Polish limited liability company
- liquidation of a Polish limited liability company and deletion of such company from the National Court Register (KRS).
What you should remember about Polish limited liability company registration matters
To summarize this aspect on registration matters, the following is worth your attention:
- first of all, that all applications and letters to the court of registration (KRS) of your Polish limited liability company are filed only electronically, since as of July 2021, limited liability companies no longer fill out paper forms or send letters to the KRS by mail – we will talk about some nuances and exceptions in this regard in a separate post;
- secondly, that in order to submit an application or a letter to the KRS court you must have your account in the Court Registry Portal and it must be an account of an individual (not a limited liability company) authorized to represent the company – the alternative is to entrust a professional attorney to handle these matters, because in such a situation it is us who handle all these formalities, acting on the basis of the power of attorney granted by the company.
What are the organs of a Polish limited liability company and which of them are mandatory
Every Polish limited liability company must have at least two types of bodies:
- the general meeting (shareholders’ meeting) (zgromadzenie wspólników) – a body of a legislative nature, which is the supreme authority of that company; and
- the management board (zarząd) – a body of an executive nature;
in addition, some of the Polish limited liability companies may also have a third type of body:
- supervisory board or audit committee (rada nadzorcza / komisja rewizyjna) – a body performing supervisory functions, the establishment of which in your Polish limited liability company is, as a rule, left to the decision of the shareholders, however the obligation to establish one of them arises when the share capital of your limited liability company exceeds the amount of PLN 500,000, and at the same time there are more than 25 shareholders in the company. In other cases, a supervisory board/auditing committee can be established in a Polish limited liability company, but there is no obligation to do so.
You can read more about each of these bodies and how they function below and in separate posts.
What does the shareholders’ meeting of a Polish limited liability company do and what formalities are involved?
The shareholders’ meeting (general meeting) in Polish limited liability company (GM) is the body of a limited liability company that consist of all shareholders. They conduct deliberations and make strategic decisions for the company in the form of resolutions.
Shareholders may participate in the shareholders’ meeting and exercise their voting rights in person or, if the law or the company’s articles of association do not impose restrictions, through their proxies.
Such a shareholder’s proxy at the GM is often a professional attorney (advocate or legal counsel) especially because the Commercial Companies Code places a restriction that neither a member of the company’s management board nor an employee of the company can be a proxy at the GM.
Ordinary (annual) shareholders’ meeting
During the ordinary course of business of a Polish limited liability company, its shareholders meet once a year, at the end of the fiscal year.
Such a mandatory annual meeting of shareholders is known as an ordinary shareholders’ meeting (ordinary/ annual general meeting), and its primary purpose is to:
- to consider and approve the management board’s report on the company’s activities and financial statements for the previous fiscal year;
- adoption of a resolution on the distribution of profit or coverage of loss (if these matters are not excluded from the jurisdiction of the GM);
- granting discharge to members of the company’s bodies (management board and supervisory board or audit committee, if appointed) for the performance of their duties in the past fiscal year.
Of course, other matters can be added to the agenda of such annual shareholders’ meeting, but the adoption of resolutions in the above-mentioned scope after each completed fiscal year of your Polish limited liability company is absolutely mandatory.
Extraordinary shareholders’ meeting
Notwithstanding the above, a shareholders’ meeting may also be convened at any other time – as long as the situation or the interests of the company require it. Such an additional meeting is a so-called extraordinary shareholders’ meeting, and it has an agenda tailored to the current needs.
In particular, it may be related to the need to approve some agreement or action, to make changes in the company’s management board, or to oblige shareholders to make additional contributions (dopłaty).
It is worth remembering that the Polish Commercial Companies Code requires the adoption of GM resolutions on the following matters, among others:
1. decisions on claims for compensation for damage caused in the formation of the company or in the exercise of management or supervision
2. sale and lease of an enterprise or an organized part thereof, and the establishment of a limited right in rem tover them
3. acquisition and disposal of real estate, perpetual usufruct or participation in real estate
4. repayment od additional contributions
5. conclusion of an agreement between the parent company and a subsidiary providing for the management of the subsidiary or the transfer of profits by such company.
In addition, if the balance sheet prepared by the management board shows a loss exceeding the sum of the reserve and supplementary capitals and half of the share capital, the management board is obliged to immediately convene a shareholders’ meeting to adopt a resolution regarding the continued existence of the company.
Here it is important that your CFO keep his eye over it, and if you do not have one, be sure to arrange with your accountant that you expect them to inform you immediately if such parameters are exceeded.
Shareholders’ meeting formalities
Shareholders’ meetings are convened, conducted and minuted in a quite formalized manner.
Although in the case of limited liability companies there is no general statutory obligation as to the taking of minutes of the proceedings and resolutions adopted by a notary public (this is only required in certain situations – such as when adopting a resolution to amend the articles of association or a resolution to dissolve the limited liability company), these minutes are often taken anyway, either by a notary public or by professional attorneys (advocate or legal counsel).
We do this to ensure that the conduct of the meetings and the resolutions adopted comply with the requirements of the law.
We will devote many separate articles to these issues, but already here I would like to draw attention to the manner shareholder meetings can be held – that is, we hold them either on-site or remotely (online).
We have already written about what a remote shareholders’ meeting is in another post.
However, it is worth remembering that in order to hold remote shareholders’ meetings – which are very convenient, especially if the shareholders are not at the same place every day, and are also busy with other matters – it is necessary to create and pass appropriate bylaws in advance.
In a separate post, we wrote about what the rules of procedure for a remote shareholders’ meeting should contain.
What does the management board of a Polish limited liability company do and when should it pass resolutions
The management board is the executive body of a Polish limited liability company, authorized to represent the company and manage its affairs. The management board may include shareholders and third parties.
The management board can be one person or many, depending on which model you choose at the level of the company’s articles of association.
Representation of a Polish limited liability company
We will write more about appointment to the management board, dismissal and resignation elsewhere. Now I would like to highlight a few issues regarding the representation of a Polish limited liability company.
As everyone is probably well aware, the task of the management board in a Polish limited liability company is to take all actions in the external sphere of the company. We call this representation.
The general principles of representation are defined by the provisions of the Polish Commercial Companies Code. Basically, we have a choice of one-person or joint representation; which is also related to whether the board of directors of a given company is one or more persons. We will write more about this in separate posts.
It is important to know that for a particular limited liability company, the choice of the management model and the applicable rules of representation is regulated at the level of the company’s articles of association, which is then subject to mandatory disclosure in the National Court Register (KRS) and should additionally be updated on an ongoing basis.
The regulations require that any application to disclose or register changes made to the company be filed with the KRS within 7 days of the event.
So always keep your company’s data updated in the KRS, and it is mandatory for you to check what data appears in the KRS of each of your contractors. By doing so, you take care of the security and validity of your company’s contracts.
And you can do it free of charge and in less than five minutes, using the tools provided by the government KRS system, which I already wrote about above – just enter the KRS number of the entity you are interested in into the search. We wrote about how to check a contractor before signing a contract in a post on EK LEGAL’s sister blog, be sure to take a look there, as we provide some practical tips and tools there.
Two more important points about representation in a Polish limited liability company:
- the possibility for the management board to represent the company is excluded in all contracts entered into by the company with its members of the management board (as well as in disputes between the members of the management board and the company) – in such cases the company is represented by the supervisory board or by an attorney appointed by a resolution of the shareholders’ meeting;
- the right to represent a limited liability company is not vested directly in the shareholders of the company, which does not mean that a person who is a shareholder cannot represent a limited liability company on another legal basis – for example, by being a member of the management board or a proxy, or on the basis of a power of attorney granted by the management board.
Conducting the affairs of a limited liability company
Before the „representation of the company” happens (i.e., manifesting to the outside the decisions made earlier about the company) one more thing should happen, which in legal terms is called „conducting the affairs of the company” and which also falls into the competence of the management board.
This is because a provision of the Polish Commercial Companies Code states that „the management board conducts the affairs of the company and represents the company.”
As a rule, if there is any doubt as to which body of a Polish limited liability company has the authority to conduct the affairs and represent the company (because the given situation is not regulated by either this code or the company’s articles of association), it should be assumed that the management board has these powers.
What, then, is the conduct of a company’s affairs by its management board?
The conduct of affairs consists of adopting resolutions, issuing decisions and opinions, as well as organizing the company’s activities – and this is supposed to be done in a manner consistent with the company’s objects and to carry out its tasks.
It is important to know that the competence of the management board of a Polish limited liability company to conduct its affairs is subject to the influence of the shareholders – as I wrote above, in certain matters the provisions of the Polish Commercial Companies Code, as well as the articles of association, require the shareholders’ meeting to pass a relevant resolution in advance, in particular, to approve certain activities.
We plan to devote several separate posts to this topic – for example, about concluding loan agreements that are granted to a limited liability company by shareholders, including those who are members of the management board. We know that these are very common situations.
Unfortunately, with basically every case that comes to us after the client has taken care of it himself, it turns out that there were some irregularities there.
CHECK OUT THE TEMPLATE OF A LOAN AGREEMENT GRANTED BY A SHAREHOLDER WHO IS A MEMBER OF THE MANAGEMENT BOARD TO A LIMITED LIABILITY COMPANY TOGETHER WITH THE NECESSARY RESOLUTIONS PREPARED BY A LAWYER FROM EK LEGAL FOR THE GAMEDEV INDUSTRY
[Product soon to be available in our Store>>]
When the management board of a Polish limited liability company passes resolutions
Finally, I would like to write a few words about board resolutions in a Polish limited liability company. The topic is much more extensive and will certainly have a continuation in future, but at this point the absolute basic information that every board member (and shareholder) in a Polish limited liability company needs to map out is as follows:
- we talk about resolutions of the management board in a limited liability company in the context of the „conduct of affairs” and generally in a situation where we have a multi-member board – the adoption of resolutions by a single-member board of directors of a limited liability company is quite a specific issue and perhaps we will deal with it another time;
- a lot on this topic depends on what are regulations in your articles of association – if there are no provisions to the contrary there, then we rely on the code rules, which I summarize below;
- first, the adoption of a resolution by the management board of a limited liability company will be necessary if in the „conduct of the company’s affairs” a so-called „matter exceeding the scope of ordinary activities of the company” happens – the Polish Code of Commercial Companies does not contain a definition of what these matters are, in practice this may be regulated by the articles of association, but if there are no provisions there either, there are other methods of decoding what these matters will be, and perhaps we will write about this in a separate post;
- secondly, a resolution by the management board of a limited liability company will also be necessary if, before „dealing with a matter not exceeding the scope of the company’s ordinary activities” – which, according to the Code, any board member can do „without a prior resolution of the board of directors” – even one of the other members of the management board objects to its conduct;
- third – formalities: management board’s resolutions may be adopted if all board members have been duly notified of the board meeting; and, in addition, board resolutions are adopted by an absolute majority of votes;
- lastly, it is worth knowing that a limited liability company’s management board meetings can be attended remotely (unless your articles of association provide otherwise); similarly, the Code provides for the scenario that the management board can adopt resolutions in writing or using remote facilities, and it is even possible for a board member to participate in the adoption of board resolutions by casting his vote in writing through another board member – as you can see, the options are many, the only thing is to use them wisely.
We will write about the details, including how to convene, conduct and record the proceedings of the board meeting along with the resolutions in separate posts.
CHECK THE TEMPLATE OF THE MINUTES OF THE MANAGEMENT BOARD MEETING OF A POLISH LIMITED LIABILITY COMPANY CONTAINING A RESOLUTION ON THE APPOINTMENT OF A PROXY PREPARED BY A LAWYER FROM EK LEGAL FOR THE GAMEDEV INDUSTRY
[Product soon to be available in our Store>>]
You can read more about the issues involved in running a gamedev studio as a Polish limited liability company, the relationship between the shareholders and with the investor, what contracts to sign with the team and many other topics important to you elsewhere on this site, as well as in our book: Poradnik prawny dla gamedvu.
If you need an individual legal consultation with a specialist in the gamedev industry, we can do it through an online consultation with a Gamedev Lawyer available in our store.
Alternatively, contact me and together we will agree to what extent and under what conditions we can help you.
Gamedev studio in the form of a Polish limited liability company – how can a lawyer help you?
- Will help to establish and register a Polish limited liability company.
- Will advise and help you prepare the articles of association that suits your needs, and not according to the template available in s-24 or on the Internet – in particular with regard to the „rules of cooperation and relations” between the bodies of the limited liability company, the rules of representation, appointment and removal of members of the management board, as well as the conditions and rules governing entering into and exiting you’re your company.
- Will advise and help prepare a shareholder’s agreement (including investment agreement), if in your situation it is advisable to conclude such an additional agreement.
- Can be a shareholder’s proxy at shareholders’ meetings – both at ordinary shareholders’ meetings and extraordinary shareholders’ meetings.
- Will handle all formalities related to meetings, minutes and resolutions – both shareholder meetings and meetings of the limited liability company’s management board.
- Will help prepare useful regulations related to the operation of the bodies of the limited liability company – in particular, the regulations of the management board, the regulations of the remote shareholders’ meeting.
- Will prepare the documentation necessary to suspend the activities of the company, or even to liquidate it – if for some reason you are already interested in the liquidation of your limited liability company, I invite you to read the entry on our sister block EK LEGAL entitled. „Liquidation of a limited liability company in a nutshell”.
- Will prepare the necessary corporate documentation – a list of shareholders, a book of shares, a book of minutes, sample notices for shareholders’ meetings or board meetings – and provide ongoing advice and support on corporate matters.
- Will advise on and prepare the documentation necessary to provide the company with recapitalization – whether through share capital increases, shareholder loans, or additional contributions.
- Will advise and prepare the documentation necessary to carry out the process of entry of a new shareholder (including an investor) into the company, as well as the exit of you as a shareholder or other shareholders who no longer have the space to realize the common vision of the company – in particular, this includes the preparation of documentation and negotiation of transactions for the acquisition or sale of shares in the limited liability company, together with all related issues and documents.
Ps. Stay tuned! Especially that in the next posts I plan to write about, among other things:
- How to recapitalize a Polish limited liability company, and
- How to profitably withdraw money from a Polish limited liability company.
Article image source: Unsplash