NEWSLETTER - October 2012 www.wbwlegal.pl

Dear readers,

we are happy to present you the October issue of our newsletter. The articles we publish may particularly be interesting to people managing companies or operating their own business. In this edition we have prepared a few interesting court rulings.

They include information about the recent resolution of the Supreme Court regarding a details which a limited liability company (LLC) is obliged to disclose in the register of entrepreneurs of the National Court Register (NCR).

In the current issue we describe the judgment of the Constitutional Tribunal from 2 October 2012, declaring the regulation canceling the employers’ entitlement to an additional day off for a statutory holiday falling on Sunday unconstitutional.

The October issue of our newsletter also discusses the interesting issue of the cost of a business lunch which may constitute an eligible tax deductible expense of an entrepreneur based on its relation to income.

This month we also discuss the amendment to the act on occupational and social rehabilitation of people with disabilities and certain other acts came into effect and changes the rules of granting monthly remuneration subsidy for employing a disabled employee.

We wish you a pleasant read.
WBW team


A list of shareholders may not suffice

A limited liability company (LLC) is obliged to disclose in the register of entrepreneurs of the National Court Register (NCR) details regarding: i) a sole shareholder of the company, or – if there is more than one shareholder in the company – ii) shareholders holding at least 10 % of the share capital. Any changes to these details have to be reported to the registry court by the management board.

Interestingly, in the court practice there are discrepancies regarding documents required as the basis for registration of the mentioned changes. Sometimes courts register new details of  shareholders only on the basis of a list of shareholders drawn up by the management board. But in some cases courts find such document insufficient and require a share transfer agreement (e.g. share purchase agreement, share donation agreement) to be filed in the registration file of LLC. However,  applicants used to submit the latter document quite reluctantly. Suffice it to mention that such submission could result in breach of the confidentiality clause which is often claimed in contracts being discussed. Moreover, there is no explicit statutory requirement to evidence the transfer of shares by presenting the relative agreement to the registry court.

However, according to the recent resolution of the Supreme Court (dated June 6, 2012; III CZP 22/12), in the proceedings for entry into the NCR details concerning shareholders who hold at least 10% of the share capital of LLC, the registry court may request the applicant to submit an agreement being the basis for transfer of shares of the company. In case of failure to present the mentioned document – the court may refuse the requested entry into the NCR.

According to the Supreme Court, the right to demand submission of share transfer contracts results for registry courts from their obligation to ensure the compliance of the reported (and then disclosed in the NCR)  data with the factual  state of affairs. The Court held that  it is just the need for the accuracy of entries into the NCR what entitles registry courts to take any evidence activities intended to verify the reported information.

Nastazja Lisek, lawyer

 

The regulation canceling the employers' entitelment to an additional day off for a statutory holiday falling on Sunday has been declared unconstitutional

In its judgment of 2 October 2012 (file no. K 27/11), the Constitutional Tribunal declared the regulation canceling the employers’ entitlement to an additional day off for a statutory holiday falling on Sunday (art. 130 section 21 of the Labour Code) unconstitutional. According to the said regulation, an employee is not entitled to the reduced working time for a holiday falling on a day off in the work schedule for this particular employee. This provision was included in the Labour Code along with an additional statutory holiday on 6 January (Epiphany). As the Constitutional Tribunal did not provide for an additional deadline to incorporate the judgment into the legal system, the amendment came into effect and the said article was repealed upon the publication in the Journal of Laws on 8 October 2012.

Already during the parliamentary work on the draft amendment of the Labour Code introducing the regulation in 2010, there were doubts as to its conformity to the Constitution, especially in the scope of potential infringement of the constitutional principle of equality under the law. This way, people working on different positions have different work schedule and it might turn out that in a given week one employee will work for 5 days and the other for 4 days, if a statutory holiday falls on the date where only one of them has a day off according to his or her work schedule. The application to assess the conformity to the Constitution was filed by the trade union NSZZ „Solidarność” which also pointed out that the regulation violates the constitutional right to a day off on a statutory holiday because in the situation described above an employee has to “make up” for a holiday which falls on the day which is his or her day off under a legal regulation other that the act.    

To some extent, the Constitutional Tribunal shared the view of the applicants. It was acknowledged that the regulation violates art 23 section 1 and art 66 section 2 of the Constitution of the Republic of Poland and thus does not adhere to the principle of equality under the law and the entitlement to statutory holiday. The parliament’s justification stating that the regulation is justifiable as it does not infringe the right to a five-day working week was rejected. The social arrangement in which some employees, depending the work schedule they have negotiated with the employer, are not entitled to statutory holiday was criticized by the judges of the Tribunal and declared unacceptable in a democratic state under the rule of law.  

The practical application of this judgment is very wide. In the situation where a statutory holiday falls on the day which, upon an employment contract or collective labour agreement, is supposed to be a day off for a particular employee, the employer will again (as was the case prior to the amendment of 24 September 2010) be required to grant him or her an additional day off on this account.

Rafal Salata, lawyer

 

The costs of a business lunch may constitute an eligible tax deductible expense of an entrepreneur based on it's relation to income

On 27 September 2012, the Supreme Administrative Court („NSA”) delivered a judgment regarding the issue of the so-called entertainment costs (II FSK 392/11). Although the judgment does not resolve the issue in question once and for all (The NSA referred the case to the Provincial Administrative Court in Warsaw for rehearing), it serves as a valuable guideline for determining whether business lunch expenses constitute a tax deductible cost.  

The facts of the case were the following: the company operating in the sector of legal and tax advisory services, as part of its cooperation with current and potential clients, would invite such clients to meetings. The meetings in question took place either at the company’s seat and in the clients’ offices where catering (food and beverages) was ordered or in restaurants and dining places. At the meetings, the parties would discuss various business matters such as rules of cooperation, proposals, offers, projects (both completed and in the process of realization) transactions, discussing current matters etc. It was customary for the company to bear the costs of a meal in a restaurant where they invited the client. The expenditures connected with the meetings were evidenced by receipts or invoices issued for the company and annotated by its representatives with the details of a given client. Based on this, the company applied for a company-specific tax interpretation regarding the possibility to categorized the said expenditures as its tax deductible costs since in the company’s opinion these do not constitute the so-called entertainment costs.

In the interpretation of the Minister of Finance, the company’s stance was deemed incorrect owing to the fact that the nature of the expenses suggested that the company aimed at creating a positive image. This fact cannot be denied based on the taxpayer’s subjective conviction that the aim of the meeting was not to present lavishness and build the company’s image. Therefore, the expenses in question should be categorized as entertainment costs which are non-deductible. The Provincial Administrative Court in Warsaw was of the same opinion.            

The NSA, acting as the cassation court, found that one should take into consideration the relation between expenditures and income income, when determining whether a given expenditure constitutes a tax-deductible cost. The NSA did not share the opinion that categorization of such an expense as a non-deductible cost of entertainment depends in the place of the meal or its lavishness.
The court observed that the tax law does not define the term „entertainment” and therefore the final classification of the disputable expenses should be based on individual circumstances. The place of meeting, time and lavishness of the meal will only influence the decision whether a given expenditure was related to income. The possibility to categories such expenditures as tax deductible costs cannot be excluded completely based on the conviction that the aim of such expenses is entertainment only.

While rehearing the case of the above-mentioned company, the Provincial Administrative Court in Warsaw will have to assess whether expenses of business meetings with clients were related to the company’s income.
File no.: II FSK 392/11

Julia Furmanowicz, lawyer

 

The amendment to the act on occupational and social rehabilitation of people with disabilities and certain other acts came into effect

On 15 September 2012, the act amending the act on occupational and social rehabilitation of people with disabilities and certain other acts came into effect. The amendment, among others, grants new control rights to the President of the State Fund for Rehabilitation of Handicapped People, introduces criminal responsibility for violation of the provisions of the act and changes the rules of granting monthly remuneration subsidy for employing a disabled employee, which is of pivotal importance from the point of view of an employer hiring the disabled.    

According to the former, only people with moderate or mild level of disability and who, at the same time, have the right to a pension were excluded from the group of subsidized employees. However, due to recurring cases, publicized every now and again in the media, of breach of disabled employees’ rights and misusing the subsidies granted on this account, the law makers decided to tighten the rules of granting the subsidies by introducing another premise on account of which an entrepreneur may lose the right to the subsidy. Effective as of 1 December 2012, an amendment of article 26a of the act comes into effect, according to which the subsidy does not apply to an employee which has not been paid any remuneration yet. Also the form of payment of remuneration has been specified, i.e. a transfer to a bank account or an account with SKOK [Cooperative Savings and Credit Union] or a delivery through an entrepreneur conducting business activity in the scope of money delivery. Moreover, in order for the employer to receive the right to a benefit from the Fund he or she will also have to, within 14 days from dates described in other regulations, cover any costs connected with payment of remuneration, such as e.g. social security contributions. The consequence of the amendment is that an employer will be entitled to the subsidy post factum, when the employee’s claim for payment of remuneration has been met.

This amendment will hardly influence a fair and honest employer who hires disabled people, but one should have it in mind and prepare for the new rules of dealing with subsidies from the State Fund for Rehabilitation of Handicapped People (PFRON) as making a formal mistake may result in losing the subsidy, which would be to the detriment for both employers and employees.  

Finally, we should also mention the remaining changes introduced with this amendment. The control rights of the President of the State Fund for Rehabilitation of Handicapped People will be extended, i.e. he or she will be authorized to verify the facts stated by an employer applying for remuneration subsidies, on the basis of the documentation regarding the handicapped employees and the employer’s financial situation. Should the information turn out to be false, the President has the right, under the new regulation, to issue a decision on the obligation to return the subsidy within the scope of the irregularities discovered this way and the decision to withdraw remuneration subsidy. Apart from that, the act will be extended by art 50a which provides for a fine for violating its provisions in the amount form PLN 500 up to PLN 5,000 depending in the type of violation.

Rafal Salata, lawyer



This Newsletter is for general informational purposes only. It is not intended and shall not be treated as professional advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

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