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Simple joint stock company – an opportunity for startups?

A company for one zloty

The procedure related to establishing a simple joint-stock company is modelled on a limited liability company. Similarly as in the case of a limited liability company, a simple joint-stock company agreement can be concluded in two ways: on the S24 portal run by the Ministry of Justice using a template agreement or with a notary who will draw up a notarized deed. The first solution is cheaper and faster, but using a template agreement we will not always be able to adjust the content of the agreement to the individual needs of the investors, and thus to take full advantage of the opportunities offered by a simple joint-stock company. In case of the need to introduce non-standard solutions or the intention to make non-cash contributions to the company, it will be necessary to conclude the articles of association in the form of a notarial deed. When entering into a memorandum of association through the S24 portal it is not possible to make non-cash contributions to the company. After concluding the articles of association, an application for registration of the company should be filed with the National Court Register. P.S.A. acquires legal personality upon registration in the National Court Register.

In order to register a P.S.A. in the National Court Register it is required to make a contribution to cover the share capital in the symbolic amount of 1 zł. In accordance with the regulations, the deadline for making the remaining contributions is set as 3 years from the date of entry of the company in the register. Shareholders may stipulate a shorter deadline in their articles of association.

Flexibility of solutions within P.S.A.

The P.S.A. creates share capital, which cannot be equated with the initial capital found in the limited liability company and joint-stock company. Share capital is used for cash and non-cash contributions. The amount of the share capital is not determined in the articles of association. Share capital to some extent resembles the status of reserve capital. The assumption of the P.S.A. is that there is no prohibition on the return of contributions and, consequently, there is considerable freedom with respect to the payment of funds allocated to the share capital. The return of contributions for the benefit of shareholders cannot result in the company losing its ability to perform due monetary obligations within six months from the date of making the payment.

An unprecedented solution in capital companies is the right granted to shareholders of a simple joint-stock company to choose between a dualistic and a monistic system of managing the company. The dualistic organizational system, common also in other capital companies, consists in exercising the management function (management board) and the supervisory function (supervisory council, shareholders’ meeting or general meeting) by two different bodies. In the monoist system both these functions are performed by the board of directors, which simultaneously manages the affairs of the company, represents the company and supervises the management of the company’s affairs.

The legislator has also introduced a number of facilitations with respect to the adoption of resolutions by shareholders. In P.S.A., shareholder resolutions are passed either at or outside the general meeting in writing or using electronic means of communication.

A significant advantage of P.S.A. is the possibility for a shareholder to contribute work or services. Thanks to this solution a P.S.A. shareholder may become a person who will not have capital to start a business, but for the shareholders contributing capital their personal involvement in the development of the company will be more important. Shares in P.S.A. do not have a nominal value, which was previously unheard of in capital companies, and constitute corporate rights of the shareholder.

The shareholders of P.S.A. may also prefer shares in any proportion – in P.S.A. there is no limit of preferential voting, right to dividend or distribution of assets in case of liquidation of the company.

The trading of shares has been significantly facilitated. Transfer of shares should be made in the form of a document under pain of nullity. In order to preserve the documentary form, it is necessary to make a declaration of will in any form and to record its contents in such a way as to make it possible to review it. In practice, the documentary form will be preserved e.g. in case of exchange of e-mails or text messages. The sale of shares in a limited liability company still requires written form with notarized signatures.

Simple joint-stock company in liquidation

A simple joint-stock company may also be liquidated more easily than other capital companies. The legislator has introduced a solution whereby a simple joint-stock company may terminate its legal existence without liquidation. All assets of the company may be taken over by a designated shareholder (acquiring shareholder), with the obligation to satisfy creditors and other shareholders. Acquisition of the company’s assets by the acquiring shareholder requires the permission of the registry court. As of the date of deletion of the company from the register, the acquiring shareholder enters into all rights and obligations of the deleted company. This solution should be assessed positively, as the process of liquidation of a capital company is costly and lengthy.

Advantages of P.S.A. can be appreciated especially by founders of startups. In a limited liability company and a joint-stock company the creators of innovative ideas, who brought only their work or services to the company, could feel undervalued, because the shareholders decided by the majority of their shares or stocks in the share capital, the number of which was closely related to the amount of money invested in the company. The P.S.A. gives a wide range of freedom in shaping the relations between shareholders.

Author: Łukasz Kupski, attorney at law, partner in Świostek Kupski Adwokaci.

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