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 lim