Polish law provides for several forms of business organisations. The most common ones, regulated by the commercial companies law, are capital companies and partnerships.

This chapter focuses mainly on capital companies as these are the most common business organisations in Poland.

Capital Companies

The Polish commercial companies law provides for three types of capital companies:

• a limited liability company (spółka z ograniczoną odpowiedzialnością);
• a joint stock company (spółka akcyjna); and
• a simple joint stock company (prosta spółka akcyjna).

In general, capital companies have legal personality, and their shareholders are not liable for the company’s obligations.

Partnerships

Partnerships are more flexible entities than capital companies. Polish law provides for the following types of partnerships:

• general partnership (spółka jawna);
• professional partnership (spółka partnerska);
• limited partnership (spółka komandytowa); and
• limited joint stock partnership (spółka komandytowo-akcyjna).

Partnerships do not have legal personality; however, they are separate legal entities that may be the subject of legal acts (such as own assets, enter into agreements in their own name, etc). As opposed to capital companies, partnerships are characterised by the personal liability of the partners, which is different depending on the type of partnership. For example, in a limited partnership, the general partners bear unlimited liability, whereas the limited partners are liable only up to a certain threshold.

The principal sources of corporate governance requirements in Poland are:

• the act of 15 September 2000 – the Commercial Companies Code; and
• the act of 29 July 2005 on public offering, the conditions governing the introduction of financial instruments to organised trading, and on public companies.

Moreover, please note that corporate governance requirements are also established by non-governmental regulations such as applicable listing rules enacted by a stock exchange.

It should also be noted that the corporate governance rules might also stem from acts regulating certain sectors, such as in the case of banks and other financial institutions. 

The primary source of corporate governance concerning listed entities is the Commercial Companies Code, as it differentiates between private and public companies.

Moreover, the companies listed on the main market of the Warsaw Stock Exchange should comply with the code of corporate governance called the “Best Practices for GPW Listed Companies”. The Best Practices should be complied with or, if not, deviations have to be explained and disclosed (based on the principle of “comply or explain”) in a declaration of compliance by listed companies.

There are no other key principles or requirements under the general provisions concerning corporate governance in Poland that need to be specified in addition to those discussed below. However, it should be borne in mind that additional corporate governance rules cover supervised entities, such as financial institutions. These principles are mainly derived from industry-specific acts and recommendations issued by relevant public authorities.

The company′s management statement should include, insofar as it is relevant to an assessment of the company′s development, performance and position, at least key non-financial performance indicators related to the company′s operations and information on employee and environmental issues. This obligation applies to, among others, capital companies, provided that in the financial year for which it prepares financial statements and in the year preceding that year, it exceeds 500 people ─ in the case of average annual full-time employment, or PLN85,000,000 ─ in the case of total assets in the balance sheet at the end of the financial year, or PLN170,000,000 ─ in the case of net revenue from sales of goods and products for the financial year.

Furthermore, financial institutions must comply with the EU SFDR regulation on ESG reporting.

Limited Liability Company

The two obligatory governing bodies of a limited liability company are the management board and the meeting of the shareholders. The articles of association may additionally create a supervisory board or audit committee, or both. The establishment of a supervisory board or audit committee is obligatory in limited liability companies in which the share capital exceeds PLN500,000 and there are more than 25 shareholders.

Joint Stock Company

The principal and obligatory governing bodies involved in the governance and management of a joint stock company are:

• the management board;
• the supervisory board; and
• the general meeting.

Simple Joint Stock Company

Unlike in the other types of companies, in a simple joint stock company, a choice can be made between the one-tier and the two-tier governance system. In the one-tier system, there is only one administrative body, ie, a board of directors. The two-tier system in principle reflects the model of a joint stock company, in which we have a separate management body and a supervisory body. It is worth noting that even in the case of the two-tier system, the establishment of a supervisory board is not required by the legal provisions, and the only obligatory body is the management board.

The third governing body common to both systems is the general meeting, the competencies of which essentially correspond to the competencies of the general meeting of a joint stock company.

Management Board

The management board is the executive body of a company responsible for its day-to-day business. It represents the company and manages its affairs. Management board members, as a rule, are not liable for the company’s obligations against third parties. In some cases, however, they might be liable for the company’s debts if they fail to comply with specific provisions of the law.

The provisions of the law and the articles of association of the company might provide that certain actions require the approval of the supervisory board or the meeting of the shareholders (in a limited liability company)/general meeting (in a joint stock company/simple joint stock company). 

Supervisory Board

The primary duty of the supervisory board is to supervise the company′s activities in respect of all of the areas of its operations. 

The special duties of a supervisory board provided for in the provisions of the law include the evaluation of financial statements and management board reports and motions of the management board concerning the distribution of profit or the coverage of losses. The articles of association may provide for a broader scope of powers of the supervisory board and, in particular, provide for the obligation of the management board to obtain the approval of the supervisory board prior to undertaking certain actions. 

As a general rule, the supervisory board is responsible for the appointment and dismissal of the members of the management board (unless the articles of association provide otherwise).

The supervisory board does not have the right to issue any binding instructions to the management board in respect of managing the company′s affairs.

Board of Directors

In a one-tier simple joint stock company, apart from the general meeting, there is only one corporate body, ie, the board of directors, which serves managerial and supervisory functions at the same time. The board of directors is composed of executive and non-executive officers. The non-executive officers exercise supervision over the company’s activities, and their obligations generally correspond to those of the supervisory board.

General Meeting

The general meeting (the meeting of the shareholders in an LLC) is a body that represents the owners of a company – the shareholders. It has the final say and the broadest control over the company’s business. It decides the composition of the company’s business – it determines the purpose of the company and decides on the composition of the company’s authorities and the distribution of profits. Only selected decisions are reserved by law for the general meeting (the meeting of the shareholders). Such decisions in particular include: 

• the examination and approval of management board reports on the company's operations, financial statements for the previous financial year and acknowledgement of the fulfilment of duties by members of the company′s authorities; 
• the disposal or lease of the company’s enterprise or an organised part thereof; and
• the acquisition and disposal of real property by the company. 

Apart from the decisions provided for in the provisions of the law, the articles of association may require a resolution of the shareholders in respect of additional matters.

In a joint stock company, the general meeting does not have the right to issue any binding instructions to the management board in respect of managing the company′s affairs.

Management Board

In a limited liability company, a joint stock company and a two-tier simple joint stock company, the management board generally decides on the affairs of the company while holding in-person or electronic meetings. 

Decisions are by way of resolutions adopted by an absolute majority of votes, provided all of the members of the management board were duly notified about the meeting. As a general rule, the management board may also adopt resolutions in writing or through the use of direct remote communication, and the management board members may vote by casting written votes via another member of the management board. The articles of association may provide that the chair of the management board has a casting vote.

Supervisory Board

As in the case of the management board, the supervisory board decides on the affairs of the company while holding in-person or electronic meetings.

The supervisory board can adopt resolutions if at least one-half of its members are present at the meeting and all of its members were duly invited to the meeting (the articles of association may provide for more stringent requirements concerning quorums). As a general rule, the supervisory board may adopt resolutions in writing or through the use of direct remote communication, and the members of the supervisory board may also participate in the adoption of resolutions by casting written votes via another member of the supervisory board. Resolutions of the supervisory board of a joint stock company are adopted by an absolute majority of votes (unless the articles of association provide otherwise). In the case of a limited liability company, the provisions of the law do not define the majority of votes required, and such required majority is usually stipulated in the articles of association of the company.

Board of Directors

The board of directors decides on the affairs of the company while holding in-person or electronic meetings. As in the case of a supervisory board, the board of directors can adopt resolutions if at least one-half of its members are present and all of its members have been duly invited to the meeting unless the articles of association provide for more stringent requirements. The board of directors may adopt resolutions in writing or using means of direct remote communication, and the members of the board of directors may also participate in the adoption of resolutions by casting written votes via another member of the board of directors. Resolutions of the board of directors are adopted by an absolute majority of votes unless the articles of association provide otherwise.

General Meeting

The shareholders can only exert influence on the decision-making process by way of resolutions. The resolutions of shareholders are, as a rule, adopted at the general meeting (the meeting of the shareholders in an LLC).

As already mentioned in 3.1 Bodies or Functions Involved in Governance and Management, a limited liability company and a joint stock company follow the two-tier corporate governance system, whereas in a simple joint stock company, a choice can be made between the two-tier and the one-tier governance system.

The provisions of the law do not define the specific roles of the members of the management board. One member of the management board can be and is usually nominated as the chair. The internal division of competencies is most often provided for in the by-laws of the management board, which define the matters for which each of the management board members is responsible. The most commonly distinguished roles are CEO, CFO and COO.

With respect to the supervisory board, one member of the supervisory board is usually nominated as the chair. 

Management Board

In the case of a limited liability company, a joint stock company and a two-tier system simple joint stock company, the management board consists of one or more natural persons unless the articles of association require a minimum number of members.

Supervisory Board

As a general rule, in a limited liability company, a joint stock company and a two-tier system simple joint stock company, the supervisory board consists of at least three members. In the case of public companies, the supervisory board consists of at least five members.

Board of Directors

In a one-tier system simple joint stock company, the board of directors consists of one or more natural persons.

Management Board

As a general rule, in a limited liability company, the management board members are appointed and dismissed by the meeting of the shareholders. 

In the case of a two-tier simple joint stock company, the management board members are appointed and dismissed by the shareholders or by the supervisory board, provided the latter was established in the company. In the second case, a member of the management board may also be dismissed by the general meeting.

In a joint stock company, the management board members are appointed and dismissed by the supervisory board; however, a member of the management board may also be removed or suspended from the management board by the general meeting. The maximum term of office of the management board members in the case of a joint stock company is five years. Reappointment is in principle permitted.

Supervisory Board

As a general rule, in a limited liability company, the supervisory board members and/or the audit committee members are appointed and dismissed by the meeting of the shareholders. 

In the two-tier simple joint stock company, the supervisory board members are appointed and dismissed by the shareholders. 

In a joint stock company, the supervisory board members are appointed and dismissed by the general meeting.  The maximum term of office of the supervisory board members in the case of a joint stock company is five years. Reappointment is in principle permitted.

Board of Directors

In a one-tier system simple joint stock company, the members of the board of directors are appointed and dismissed by the shareholders.

Please note that the above-mentioned general rules concerning the appointment and dismissal of board members can be amended in the articles of association of a company. In particular, the articles of association may grant personal rights to shareholders to appoint and dismiss board members.

Management Board

The members of the management board and/or the board of directors are subject to a duty of loyalty to the company, have to observe the best interests of the company and are bound by a non-compete obligation for the duration of their term of office. They must also disclose conflicts of interest without undue delay and refrain from participating in decision-making processes concerning matters in which they have a conflict of interest.

Supervisory Board

A member of the supervisory board may not be a member of the management board, proxy, liquidator, manager of a branch or a plant, or a chief accountant, legal advisor or attorney-at-law employed by the company.

In a joint stock company, supervisory board members delegated to exercise supervision on a permanent individual basis are subject to a non-compete obligation.

In a simple joint stock company, supervisory board members are required to disclose conflicts of interest and refrain from participating in decision-making processes concerning matters in which they have a conflict of interest.

Management Board

In a limited liability company, a joint stock company and a two-tier simple joint stock company, members of the management board manage the company's affairs and represent it in judicial and administrative proceedings.

Board of Directors

Executive officers in a one-tier simple joint stock company, such as members of the management board, manage its affairs and represent it.

Non-executive officers in a simple joint stock company, like members of the supervisory board, supervise the company’s activities on a day-to-day basis, assess the accuracy and fairness of issued reports, and submit an annual written report to the general meeting on the results of such assessment.

Supervisory Board

The supervisory board exercises day-to-day supervision over the company′s activities in all areas of its business but does not have the right to issue binding instructions to the management board regarding the conduct of the company′s affairs.

The supervisory board evaluates the reports of the management board, in terms of their compliance with the books and documents as well as with the facts and the management board′s proposals concerning the distribution of profit or coverage of losses, and submits an annual written report on the results of such evaluation to the meeting of the shareholders.

The articles of association may grant more extensive powers to supervisory board members, such as approving specific activities of the management board or suspending its members.

In a simple joint stock company and a joint stock company, the supervisory board may examine all documents of the company, request reports and explanations from the management board and employees, and review the company’s assets.

In a joint stock company, the supervisory board appoints and dismisses the members of the management board, and if a member of the management board is unable to perform their duties, the supervisory board should immediately take appropriate action to change the composition of the management board.

Management Board

The management board members are accountable to the meeting of the shareholders. They may be dismissed at any time by a resolution of the shareholders or the supervisory board. The articles of association may require that the supervisory board approve specific activities of the management board. The accountability of directors in a simple joint stock company may be specified differently in the articles of association.

Board of Directors

As a rule, the directors are accountable to the meeting of the shareholders; however, the articles of association can state otherwise.

Supervisory Board

Members of the supervisory board are accountable to the meeting of the shareholders and dismissed at any time by a resolution of the shareholders. It can be specified differently in the articles of association in the case of a simple joint stock company.

The decision to suspend or dismiss a director for a breach of their duties is made by the supervisory board or meeting of the shareholders, depending on the situations indicated above.       

Directors are also civilly liable for breaches and omissions relating to their activities. Accordingly, they may be liable for damages under general principles, and the discharge of their duties (ie, a positive evaluation by the meeting of the shareholders) does not relieve them of this liability.

In a limited liability company and a joint stock company, the rules concerning the remuneration of members of the management board, in particular, the maximum amount of remuneration, granting members of the management board the right to additional benefits or the maximum value of such benefits are determined by a resolution of the meeting of the shareholders. However, the supervisory board may determine the exact amount within such rules. The remuneration of the members of the supervisory board is determined by the articles of association of the company or by a resolution of shareholders. However, they are entitled to the reimbursement of costs related to participation in the work of the board. Additionally, in the case of a joint stock company, the general meeting may determine the remuneration of supervisory board members in the form of a right to a share in the company's profit for a given financial year.

In a simple joint stock company, the remuneration of the directors and the management board members is determined by way of a resolution of the shareholders.

Publicly traded companies, by a resolution of the general meeting, adopt a remuneration policy concerning the members of the management board and the supervisory board based on which the company pays remuneration to the members of its corporate bodies.

The supervisory board of a publicly traded company prepares annually a remuneration statement providing a comprehensive overview of the remuneration, including all benefits, in whatever form, received by or due to individual members of the management and supervisory boards during the last financial year in accordance with the remuneration policy. Such statement is published on the company′s website.

Rights and Duties of the Shareholders

Commercial law distinguishes between the corporate and pecuniary rights of shareholders. The general rule is that shareholders have equal rights and duties in the company. Any special preference must be set forth in the articles of association and may concern: voting rights, the right to dividends or participation in the distribution of assets upon the liquidation of the company.

Pecuniary Rights

Firstly, a shareholder has the right to participate in the profits shown in the annual financial statements and earmarked for distribution in accordance with a resolution of the general meeting (the meeting of the shareholders), ie, a right to dividends.

Secondly, the Commercial Companies Code sets out a general rule that, with an increase of the share capital and the creation of new shares, the existing shareholders should be given the right to acquire such new shares in proportion to their shareholding and consequently preserve the status quo in the company, ie, a pre-emptive right to subscribe for new shares.

Finally, the shareholders have a right to their share of the assets of the liquidated company.

Corporate Rights

The most important of the shareholders’ corporate rights in the company are:

• the right to take part in the general meeting (the meeting of the shareholders) and vote at such meeting;
• the right to be informed of the situation of the company; and
• the right to file a claim in court seeking the annulment of a resolution of the meeting of the shareholders.

The shareholders are entitled to appoint and dismiss members of other governing bodies, but they cannot take over the competencies of the management board to run the company’s affairs and represent the company. However, a number of important decisions relating to the company’s affairs require the consent of the shareholders (eg, the sale of the enterprise, a sale of real estate, etc).

In a limited liability company and a simple joint stock company, the shareholders are entitled to issue binding instructions to members of the management board concerning the management of the company's affairs. This is not the case in relation to a joint stock company, where the provisions of the law prohibit the general meeting from issuing binding instructions to the management board.

The general meeting may be ordinary (annual) or extraordinary. An ordinary general meeting must be held within six months of the end of each financial year. An extraordinary general meeting is convened when provided for by the provisions of the law and when the persons authorised to convene such a meeting find it appropriate.

Appealing Resolutions

A shareholder has a right to file a claim in court seeking annulment of a resolution of the general meeting (meeting of the shareholders). The CCC distinguishes between:

• a claim to repeal a resolution of the meeting of the shareholders which conflicts with the provisions of the articles of association or good commercial practice and is detrimental to the company’s interest or aimed at harming a shareholder; and
• a claim to declare a resolution adopted in breach of the law as null and void.

Damage Claims

If anyone causes any damage to the company due to the improper performance of their duties, the company may file a statement of claim to redress such damage. However, sometimes this mechanism does not work, eg, if the person causing the damage is a management board member. Therefore, every shareholder is entitled to file a claim for the redress of damage if the company fails to do so within one year of the disclosure of the damage.

Shareholders of listed companies must notify the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego) and the issuer if their direct and/or indirect holding exceeds or falls below 5%, 10%, 15%, 20%, 25%, 33%, 33 and 1/3%, 50%, 75% or 90% of the voting rights. The notification requirement also applies to a change in a shareholding representing more than 10% of the voting rights by at least 2% or 5%, depending on the market. Finally, the notification requirement applies in the case of a change in a shareholding representing more than 33% of the voting rights by at least 1%. Such notification is to be published by the issuer and made publicly available.

Companies are required to prepare annual financial statements in Polish. These statements must be approved by the meeting of the shareholders.

Also, if an incorporated joint stock company makes in-kind contributions, or the company acquires property or pays consideration for services rendered upon its formation, the founders prepare written financial statements that must be audited.

In addition, publicly traded companies must prepare and deliver current and periodic financial reports. Moreover, such a company must prepare an ancillary statement to be audited if the payments due for shares for the publicly traded company to increase its share capital are to be made by way of the set-off of the company′s claim thereon against the subscriber's claim against the company. 

In a publicly traded company, at the request of shareholders holding at least 5% of the total number of votes, the general meeting may adopt a resolution on the appointment of a “special purpose auditor‟ who will examine a specific issue related to the formation of the company or management of its affairs and prepare a statement on that issue. In addition, all management statements issued by a publicly traded company should include a declaration on the application of corporate governance.

The incorporation of a company, changes to its articles of association, changes in its ownership structure, changes in the share capital and a number of other changes in a company must be registered in the National Court Register kept by the competent court. The data in the National Court Register is made publicly available through its website.

A company must appoint an external auditor to audit its financial statements. The selection is made by the corporate body approving the financial statements unless the articles of association provide otherwise.

The audited company′s relationship with the auditor is defined by the relevant audit agreement. The first audit agreement is concluded with the auditing firm for no less than two years, with the possibility of renewal for subsequent periods of at least two years. The audited company bears the costs of conducting the financial statement audit.

There are no general legal requirements for risk management in companies; however, specific requirements are in place in respect of banks and investment firms.

Internal control in a company is exercised primarily by the supervisory board. However, in a limited liability company and a simple joint stock company, each shareholder may at any time inspect the company′s books and documents, draw up a balance sheet for their own use or request explanations from the management board. Further internal control requirements are imposed on supervised entities such as banks or investment firms.