Changes to rules on participation of foreign undertakings in trade in Poland
A new law that comes into force on 30 April 2018 combines two acts regulating the operations of foreign businesses in Poland into one, and at the same time makes certain changes.
On 30 April 2018 the Act on the Rules for Participation by Foreign Undertakings and Other Foreign Persons in Trade in the Republic of Poland of 6 March 2018 takes effect. The new provisions are intended to combine into one act the rules on activity of foreign businesses in Poland currently regulated in two acts:
- Business Freedom Act of 2 July 2004
- Act on Provision of Services in the Republic of Poland of 4 March 2010.
At the same time, incidentally, the new act repeals the Act on the Rules for Small-Scale Production Business Activity in the Polish People’s Republic by Foreign Legal and Natural Persons of 6 July 1982, which has generally become a dead letter.
This is intended to ensure cohesion and integrity, and thus also intelligibility of individual provisions.
The new act covers a list of foreign entities that may commence and conduct business activity in Poland, and provides for rules on:
- Provision of cross-border services by foreign undertakings in Poland
- Setting up branches and representative offices of foreign undertakings in Poland
- Recognition of certificates, guarantees and insurance granted and issued in EU member states.
Changes of minor or major importance are also made to current laws at the same time.
List of foreign persons able to conduct business activity in Poland
The provision in the new act specifying the entities able to take up business activity in Poland reiterates Art. 13 of the Business Freedom Act and contains editorial changes making it more reader-friendly. In any case, for example, there is no change to the rule that foreign persons not listed in Art. 4(1)–(2) of the new act that are able to conduct business activity in Poland according to the same rules as Polish citizens are entitled to take up and conduct business activity solely in the form of a limited partnership, a joint-stock limited partnership, a limited-liability company and a joint-stock company, and to accede to those types of companies and take up or acquire shares in those companies, unless international law provides otherwise.
Where there are permitted restrictions on business activity conducted by foreign undertakings in Poland, due to factors such as public order, public safety, public health, or obligatory requirements concerning the greater good, the legal definition of overriding public interest, which gives examples of the interests it protects, is expanded to include the notion of national security.
Cross-border services can still be provided without registration in Poland
With respect to cross-border services, in general the new act reiterates the previous provisions. As a result, the rule on temporary provision of services without a registration requirement and the rule prohibiting imposition of obligations restricting use of services remain unchanged. At the same time, disclosure obligations of foreign undertakings concerning information about the conducted activity remain in effect. There are also no changes to obligations towards customers prior to concluding an agreement or customers’ rights to request disclosure of information. The new act also updates the catalogue of professions to which the act does not apply.
Setting up branches of foreign undertakings
The new act does not substantially change the rules for setting up and operating branches in Poland, and essentially corresponds to the provisions in the existing Business Freedom Act.
There is no change to the restriction on the scope of activity of foreign undertakings in a branch, i.e. the scope of activities conducted by that undertaking outside of Poland.
As under current law, in order to set up a branch:
- A person has to be appointed at the branch to represent the foreign undertaking.
- Entry in the National Court Register is required beforehand.
There are however major changes:
- There is no requirement to register specimen signatures of persons with authorisation to represent undertakings at the branch.
- There is no requirement to submit a separate declaration giving the details of the person with authorisation to represent undertakings at the branch. It will be sufficient to state the person’s name on the form.
Major concern regarding personal data of representatives at the branch
Currently, Art. 89(1) of the Business Freedom Act states that “a foreign undertaking is required to state the first name, surname, and address in the Republic of Poland of the person with authorisation at the branch to represent the foreign undertaking.”
This requirement is not present in the new act. Legislators have said that the reason for this is that the subject is regulated in Art. 39 of the National Court Register Act of 20 August 1997. Under that act, “A person with authorisation to represent the foreign undertaking at the branch is identified in section 2 of the commercial register.” In that section of the commercial register, however, only the names of representatives at the branch are given, and addresses for service of correspondence are not given in the register.
The recently amended, Art. 19a(5) of the National Court Register Act also raised concerns, as it says that “declarations made by the persons representing the entity listed in the register, and liquidators and commercial proxies, giving consent to their appointment and addresses for service of correspondence … must be enclosed with the application for registration of those persons.”
According to the statement of reasons for amendment of the National Court Register Act, this obligation does not apply to members of managing bodies of foreign entities that have branches of foreign undertakings in Poland or central branches of foreign insurance or reinsurance companies, because under the current provisions these entities are required to appoint a representative in Poland, who must provide his or her address.
There could be grounds for this reasoning applied by legislators under the Business Freedom Act, while there are no grounds in the new act. The new act does not require the addresses of representatives at the branch to be given.
From the moment the new act comes into force, each time a new representative of a foreign undertaking at the branch is registered, the consent of that person to the appointment and address for service of correspondence will have to be submitted, and the declaration containing that information will have to be signed by that person. Unlike now, however, there will be no obligation to file declarations giving consent and the address for service of correspondence of members of the body representing the foreign undertaking.
Changes regarding liquidation of a branch of a foreign undertaking
The obligation to conduct liquidation proceedings under provisions in the Commercial Companies Code on liquidation of limited-liability companies is restricted to situations where liquidation of a branch of a foreign undertaking results from a decision issued by the competent minister prohibiting the undertaking from conducting business activity in the form of a branch. In cases of voluntary liquidation of a branch, a decision of the foreign undertaking to discontinue the branch’s operations and an application for removal of the branch from the business register should be sufficient to end the legal existence of the branch.
More information can be found in this article on the changes.
Changes concerning representative offices of foreign undertakings
As in the current laws, representative offices can only conduct advertising and promotion of a foreign undertaking. Meanwhile, foreign undertakings and foreign persons appointed to promote the economy of the country where they have their seat may set up representative offices.
The two-year period of validity of entry of representative offices in the relevant register is a major change. Registration is extended for a further two years only if the foreign undertaking applies for an extension during the last 90 days of the registration validity period.
Another change is that the address of a person with authorisation at a representative office to represent a foreign undertaking does not have to be given, but documents confirming that person’s authorisation to represent the foreign undertaking in the representative office, with confirmation that the authorisation has been accepted, have to be enclosed with applications.
Under the new act the applicant will not be required to register documents enabling them to use premises or real estate for the representative office’s headquarters. It will be sufficient to hold that title.
The new act expressly provides for an apostille requirement for the document confirming registration of a foreign undertaking, on the basis of which the undertaking conducts business activity, filed with the application to register the representative office. Interestingly, the act does not require this for an excerpt from the register for a foreign undertaking filed with the application for registration of a branch of the foreign undertaking.
Under the new legislation, a decision issued by the minister for economy prohibiting business activity in the form of a representative office is replaced with a deregistration decision. The grounds for issuing a decision of that kind essentially remain the same.
Łukasz Śliwiński, legal adviser, M&A and Corporate Practice, Wardyński & Partners