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The Warsaw Voice » Law » February 23, 2012
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What should foreign investors considering launching a business in Poland take into account?
February 23, 2012   
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As it continues to sail relatively smoothly through the turbulent seas of the global economy, Poland remains an attractive place for new investment. With a range of unique strengths and solid economic fundamentals, the country has seen an influx of foreign investors in recent years. They are looking to take advantage of its relatively young, well-educated work force and the fact that the market here is not yet as saturated as in the West. Poland’s location in the heart of Europe is another draw. But what should foreign investors considering launching a business in Poland take into account in their investment plans?

Firstly, since Poland joined the European Union in 2004, the process of launching a business here has grown simpler, and many of the risks to potential investors have been eliminated. Foreign investors can choose between launching a sole proprietorship, a subsidiary company, a branch or a representative office. This article sets out general information concerning foreign investors launching of subsidiary companies, which, in principle, can be established without any restrictions.

When launching subsidiaries in Poland, it is crucial to choose the right corporate form, as transformations later can be time-consuming and costly. The basic law is the Polish Commercial Companies Code dated Sept. 15, 2000. It provides for four types of partnerships (registered partnership, professional partnership, limited partnership and limited joint-stock partnership) and two types of companies: limited liability company (LLC) and joint-stock company (JSC).

The most important factors to consider are the following:
- The scope of liability
Partnerships are transparent, with the partners liable to their creditors for the obligations assumed by the partnership. Generally each of the partners bears joint and several liability together with the other partners and with the partnership itself, though in some cases, the extent of this personal liability may be limited.

The shareholders of a company cannot be held liable for the obligations and liabilities of the company, though any shareholders who sit on the management board can incur civil, tax and criminal liability in certain cases.
- The main characteristics and the initial capital
Partnerships do not require any minimal initial capital except for the limited joint-stock partnership, which requires a minimum contribution of zl.50,000.

The most common form of business organization for investors in Poland is the LLC, for which the minimum share capital required is zl.5,000. This form is relatively simple and flexible enough to meet the investor’s needs.

The JSC is most often used for more significant investments and is mandatory for certain types of business activity, e.g. banking and insurance, and for companies wanting to float their shares on the stock exchange. The minimum share capital is zl.100,000. The structure and operations of this company are quite complex (the presence of a public notary is required at all meetings of shareholders and specific due diligence procedures must be followed).

- The formalities and incorporation
Both individuals and corporate entities can found subsidiaries. Partnerships have to have at least two partners, whereas companies can be launched by a single founder. The only exception is that a sole-shareholder LLC cannot incorporate another sole-shareholder LLC or a JSC.

The formalities include drawing up documents of incorporation which in most case has to be in the form of a notarial deed. Then the partnership or company has to open a bank account, ensure the legal title to the premises of the registered office and make contributions to the partnership or share capital. Finally, the partnership or company must be registered with the National Court Register, the Statistical Office and the Tax Office (which is now done in a one-stop-shop procedure through the National Court Register), and for VAT purposes (which is done by the investor). The cost of these formalities is about zl.1,000 for each type of partnership and company.

The procedure is relatively simple. The statutory period for the National Court Register to register a company is seven days, but in practice registration takes two to three weeks on average. In addition, since Jan. 1, 2012, it has been introduced possibility to incorporate an LLC using a standard form of articles of association, upon filing an online application bearing an electronic signature. In practice, the electronic system which will enable this is still in construction.

Apart from launching subsidiaries, there may still be some additional requirements before It can start doing business. This may involve collecting any necessary permits or licenses, for example depending on the type of business activity, and there may be other requirements as well, for example those relating to employment. However, launching a business in Poland has become a largely hassle-free process, and a growing number of companies are taking advantage of the country’s economic potential.

Zuzanna Machowska, Avocat a` la Cour at Gide Loyrette Nouel law firm

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