Dear Readers

 

We are happy to present you the January issue of the WBW Weremczuk Bobeł & Partners newsletter.

First of all, we recommend the articles discussing the amendments which were introduced into the Polish legal system as of 1 January 2016 regarding amicable dispute resolution as well as tax exemptions for venture capital funds.  

Furthermore, we also provide an overview of the planned changes in the administrative procedure aimed at streamlining and speeding up proceedings before the public administration bodies.

We also discuss the decision of the Supreme Court of August 2015 regarding competitive business activity conducted by a shareholder of a general partnership.

We wish you a pleasant reading

WBW Team

Another initiative concerning amicable methods of dispute resolution

 

The law of 10 September 2015 on changes of certain laws in connection with encouraging amicable methods of dispute resolution entered into force on 1 January 2016. We have often written about different kinds of initiatives, both official and non-governmental, that aimed at promoting out-of-court dispute resolution methods. Apparently, the lawmakers take the goal of spreading the practice of alternative means of redress seriously because they have been trying to encourage them by lying down new regulations.

 

The purpose and aim of the new law are to introduce a system of organizational and procedural facilitations that are to encourage the conflicted parties to attempt to settle the dispute in an amicable way before bringing it to be before a judicial body. The aim of the law is also to improve the quality of mediation. This should allow for reaching agreement between the parties more rapidly and will result in lowering costs, both for the conflicted entities and the state. Using amicable methods of resolution will reduce the burden on courts, as a result of transferring some cases from court rooms to offices of companies that offer mediation services. In this case, the procedures are much less formal, which can contribute to more active and substantial participation of the parties in the proceedings. What is more, it facilitates regulation of relations between them after the dispute is resolved.

 

In practical terms, the main and most important assumptions of the law include introducing to the civil code an obligation to include information that the parties have tried to settle the dispute in an amicable way in the lawsuit. The purpose of this regulation is to raise awareness and remind that in case of every conflict there should be an attempt to resolve it in an amicable way before engaging the state apparatus in the process. Another solution introduced by the law is reinforcement of the court’s obligation to inform the parties of the possibility of mediation, especially at the initial phase of the proceedings. The judge will be allowed to order the parties to participate in an information meeting on mediation. This kind of meeting will be conducted by a judge or a legal secretary, assistant, court official or a mediator. It can take place out of court. Additionally, the judge will be able to refer the parties to mediation at every stage of the case more than one time during the course of proceedings.

 

The law also introduces some improvements in the procedural aspect of mediation. For example, the parties will be given priority when choosing the mediator who will get their contact data in the shortest time possible and the mediation will be set for 3 months. At the same time, the law provides that, if the out-of-court mediation is not started for reasons beyond the control of the creditor (e.g. the other party does not agree for mediation), the creditor will retain benefits connected with interruption of preion or limitation periods, if he or she applies for it within 3 months. All mediation costs after the court order will count as proceedings costs, which will allow the winning party to enforce them if the settlement is not reached. It will also allow poorer citizens to avoid bearing the costs as they will be granted exemption from or assistance with the costs of proceedings. Unjustified failure to undertake mediation or a disloyal behaviour within its duration will result in a possible order to bare its costs by a certain person, regardless of the final result.

What is more, obligatory qualification requirements will be introduced for mediators in order to ensure high quality of their services which are necessary for proper functioning of the system that has been introduced.

Rafał Sałata, attoreny at law trainee

Tax exemptions for Venture Capital funds 

 

On 1 January 2016, the law of 25 September 2015 on changes of certain laws in connection with supporting innovation entered into force. In Art. 14, the regulation establishes tax exemption for financial entities called Venture Capital whose business activity concentrates on investing in non-public entities of high risk. This exemption will be full and will cover income from share and stake sales purchased by a Venture Capital entity in 2016 and 2017. However, certain important conditions will have to be fulfilled. All actors on the market should remember about them.

 

First, the exemption concerns only entities performing their business activity as limited liability companies, a joint stock companies and limited joint stock partnerships.

Second, the sole object of their activity must be financial investment in assets other than:

a)    securities in public trading or to be admitted to trading on a regulated market, except the situation when the securities were offered to the public or admitted to trading on a regulated market after being acquired by the entity;

b)    financial market instruments, unless they are issued by non-public companies whose securities were not admitted to trading on a regulated market or whose shares or stakes are a part of their investment portfolio;

c)    real estate.

 

Moreover, the entity must, in the fiscal year when the shares (sale of which is to be exempted from tax) had been purchased, invest at least 75% of the carrying amount of assets determined as at the last day of the fiscal year. Additional condition for the exemption is that the value of assets in which the entity invests must not exceed EUR 50,000,000.

 

Also, the law provides for conditions that limit the possibility of benefiting from the exemption and which concern companies in which a Venture Capital entity can invest. Such companies cannot be controlled foreign companies within the meaning of the provisions of the tax law. They must not carry out activities consisting of trading or the production of excise products. What is more, they must engage in research and development, definition of which, for the needs of this exemption (among others), was introduced by the discussed law in Art. 4a(26) of the of Corporate Income Tax Law. Finally, the Venture Capital entity must own no less than 10% of the shares or stakes of the capital of such company for an uninterrupted period of two years before the transfer subject to the exemption.

Rafał Sałata, attorney at law trainee

Reform of Administrative Procedure

 

A team was formed in order to frame a concept of modification of the administrative procedure. The team headed by professor Zbigniew Kmieciak has been working since October 2012 and it has prepared a set of draft amendments to the currently-binding code of administrative procedure.

The most important changes suggested by the above-mentioned team include: de-formalisation of the proceedings, introducing the concept of tacit approval, as well as resolving the matter of general decisions and administrative agreements.  

In the opinion of the head of the team, „an urgent matter is to break with excessive formalism and complexity of proceedings conducted before administrative bodies and, as a consequence, the level of detail of legal regulations that apply to them”. According to the assumptions of the project, the de-formalisation of administrative procedure is to be achieved through the possibility to resolve a case in a simplified procedure in cases provided for in the regulation, however, excluding the cases in which parties of conflicting interests participate. The most vital changes in this respect include the implementation of official forms for making applications and petitions, limiting the examination of evidence only to the evidence presented by a given party in the request to initiate a proceeding as well as generally known facts and evidence which a given body is familiar with or is able to establish on the basis of the data held, as well as tightening the formal requirements regarding an appeal against an administrative decision issued in the simplified mode. 

Another improvement of the procedure is the introduction of the mechanism of tacit approval. According to the assumptions, it will be possible to deem a given matter as resolved to the benefit of a person requesting the proceeding if a competent body does not issue a decision within the period of one month (tacit settlement) or does not file an appeal in the form of a decision (tacit approval) within the same period of time. This mechanism would apply only in cases expressly provided for in special provisions.       

The draft regulation also eliminates the existing legal loophole consisting in the lack of legal basis to issue in the administrative proceedings generally applicable acts, i.e. general decisions, even though such acts are, in fact, issued (e.g. art. 71 of banking law). According to the definition adopted by the team, a general decision is an act under which a given body of public administration settles a matter concerning an indefinite number or group of subjects. Before issuing such a decision, the body conducting the proceeding would be under an obligation to publish the information on commencing the work on a draft general decision together with the details on its scope, the possibility to make oneself familiar with the necessary documentation of the case and the place where it is available for examination, as well as the possibility to file objections.      

In its work, the team has focused on introducing to Polish law the notion of administrative agreement, which is used in almost all European legal systems. An administrative agreement executed between the body conducting the proceeding and the party to the proceeding would constitute one of the ways to settle the matter. The said agreement would be based on reciprocal concessions as to the establishment of the actual or legal state in a situation when establishing the same in the course of the proceeding turned out to be impossible or would involve excessive hassle or costs. 

Olaf Szczurowski, lawyer

Competitive activity of a general partnership shareholder

 

“The fact of setting up an own enterprise in the same branch of industry and terminating employees’ contracts on behalf of the partnership while offering them posts in their own company by a general partnership shareholder constitute competitive activity referred to in Art. 56, section 1 and 2 of the CCC.”, decided the Supreme Court in the judgment of 20 August 2015, II CSK 505/14.

The basis for this ruling was a conflict between former partners of a general partnership from the construction industry. One of them claimed that the other started his economic activity in the same field before the liquidation of the business of the general partnership in which they both participated.

In accordance with Art. 56 of the Commercial Companies Code, a shareholder of a general partnership is obliged to refrain from any activity contrary to the interests of the partnership (as stated in section 1 of the Article). What is more, he or she must not, without an explicit or implied consent of other shareholders, engage in any competitive business. In particular, he must not participate in any competitive business activity as a partner of a civil partnership, registered partnership, a general partner nor a member of a body of such company (as stated in section 2 of the Article). The provision mentioned above is non-mandatory, therefore, the principle of loyalty should apply as a rule from the application of which the partner can be exempt. However, it is necessary to emphasize that the exemption should not be understood as an approval to undertake activities contrary to the interests of the partnership. Opening an enterprise of an identical character within the same industry undoubtedly qualifies as such an activity.

Article 56 of the Commercial Companies Code applies only in the period of operation of the registered partnership. The issue addressed by the Supreme Court was the indication of the moment when the company can be considered to have ceased its economic activity. In the case considered by this judgement, the plaintiff terminated the agreement of the registered partnership. On the day of the submission of the notice of termination, the company was still carrying out construction works for several entities, however, from that moment on, the partnership was aiming to halt its activities and was not taking any new orders. Upon the fulfilment of its obligations in the form of the completion of ongoing works, the partners were only to settle their accounts.

In the period between the submission of the notice of termination and the final financial settlement, the plaintiff began his business activity. Its scope was identical to that of the registered partnership whose partner was the defendant.

The Court of First Instance dismissed the suit, stating that the defendant started his construction business after the plaintiff had terminated the partnership. The Court of Second Instance did not share this view. It stated that “the companies were in an actual state of competition at the time” as the partnership, regardless of its ongoing liquidation, continued its activity by signing new agreements in order to finish undertaken construction works. This opinion was confirmed by the Supreme Court, pointing out that the partner had infringed the competition rules stated in Article 56 of the CCC, and this sort of infringement constitutes the basis for a compensation claim.

Paulina Szymańska, 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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