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Greater rights for larger companies

A Polish group of companies is formed by a parent company and one or more subsidiaries guided by a common strategy and the interest of the group. The new tool for realizing this strategy are to be “binding orders” issued by the parent company in relation to the daughter company.

The amendments to the Polish Commercial Code regulate the relationship between a parent company and its subsidiaries, which critics of the changes perceive as 

violation of balance between different interest groups, including reduced protection of minority owners. The most extreme example described by the opponents of the changes is the risk of draining the assets of subsidiaries by using the new law of conglomerates. 

This is to be achieved through the construction of a “binding order,” which a subsidiary will be able to refuse to carry out only if it would put the company at risk of insolvency.

Increased importance of supervisory boards

Amendments to Polish commercial law will enable the supervisory board to establish an ad hoc or permanent committee to perform specific supervisory activities. The changes will enable the supervisory board to adopt a resolution to have a certain matter concerning the company’s operations or its assets examined, at the company’s expense, by a so-called advisor to the supervisory board.

Criticism: the amendment will weaken minority shareholders

Critics emphasize that introduction of Polish holding law will weaken the position of minority shareholders, who will not be able to oppose the management board’s objectives if they are justified by the interest of the group. The assessment of whether the solution proposed by the parent company meets this criterion will rest with the management board of the subsidiary, which will have to assess whether the instruction to run the company’s affairs is reasonable and meets the criterion of due diligence.

The amendments to the regulations will also allow compulsory buyout of shareholders holding 25 percent of shares in closed companies and shareholders holding no more than 5 percent of votes in a public company.

Supporters of the amendment point out that big business abroad operates according to the principle that big guys can do more, and the change of regulations is a realization in Poland of the demands made by business circles. Opponents point out that the changes are justified by the existing disputes between minority shareholders and companies with Polish State Treasury shareholding, and that the introduced regulations do not serve the fundamental principles of private law and may lead to far-reaching abuses due to practically unlimited possibilities of applying “binding instructions” by management boards of parent companies.