Group of companies in the light of the proposed amendment to the Commercial Companies Code
On 5 August 2020, a draft act amending the Commercial Companies Code and certain other acts by the Minister of State Assets was sent for public consultation, which introduces a number of significant changes to the existing regulations.
This article discusses the most important elements of the new institution being designed, the so-called „groups of companies„.
The amendment provides for the introduction of a definition of a legal group of companies, according to which it means „the parent company and the company or companies or its subsidiaries, guided – in accordance with the agreement or the statutes of each subsidiary – by a common economic strategy (group of companies interest), enabling the parent company to exercise uniform management over the company or its subsidiaries„.
A parent company and a subsidiary, participating in a group of companies, in its business activity is obliged to be guided by the interest of the group of companies in addition to the company’s interest, provided that this does not infringe the legitimate interest of creditors and minority shareholders of the subsidiary.
Participation in a group of companies by a parent company and a subsidiary is to be disclosed in the National Court Register by entering a note in the register.
A member of the management board, the supervisory board, the audit committee, the board of directors and the liquidator of a company belonging to a group of companies may invoke an act or omission in the specific interest of the group of companies if the company has disclosed its participation in the group of companies in a way.
A parent company may issue a binding order to a subsidiary belonging to a group of companies to conduct the company’s affairs if this is justified by the specific interest of the group of companies.
The possibility of refusing such an order is limited, which may raise serious doubts.
What is important is that a member of the management board, the supervisory board, the audit committee and the board of directors of a subsidiary shall not be held liable under the provisions of art. 293, art. 300125, art. 483 nor criminal liability under art. 483 or art. 296 of the Penal Code. This exemption from liability also applies to members of the management board, the supervisory board, the audit committee and the board of directors of the parent company acting in the interest of the group of companies, respectively.
A parent company may at any time review the books and documents and request information from a subsidiary belonging to a group of companies.
The supervisory board of the parent company (or, in its absence, the management board or the board of directors) shall exercise permanent supervision over the pursuit of the interest of the group of companies by the company or its subsidiaries belonging to the group of companies, unless the agreement or the statutes of the parent company and its subsidiary provide otherwise.
The Board of Directors or the board of directors of a subsidiary belonging to a group of companies shall prepare a report on that company’s relations with its parent company for the period of the last financial year. That report shall form part of the management report referred to in Article 2. 231 § 2 point 1, art. 30082 § 2 point 1 and art. 395 § 2 point 1. The report shall also indicate the binding instructions of the parent company to the company or subsidiaries belonging to the group of companies.
If the execution of a binding order referred to above has led to the insolvency of a subsidiary belonging to a group of companies in which the parent company directly or indirectly represents at least 75% of the share capital of such a company, the parent company shall be liable to the subsidiary for any damage caused to it, unless it is not at fault. An agreement or statute of a single-member subsidiary belonging to a group of companies may exclude this liability.
In such a case, the parent company shall be liable to the shareholder of the subsidiary belonging to the group of companies for the reduction of the value of the share or shares in the subsidiary attributable to that shareholder.
If enforcement against a subsidiary belonging to a group of companies proves unsuccessful, the parent company shall be liable for damage caused to a creditor of the subsidiary if such damage arises as a result of the subsidiary’s carrying out a binding order from the parent company.
The provisions of the Act on groups of companies concerning the parent company shall apply respectively to cooperatives, foundations or associations conducting business activity, to an investment fund and to an entrepreneur who is a natural person, subject to the obligation to be entered in the register of entrepreneurs or in the Central Register of Business Activity and Information, taking into account special provisions.