Commercial law

Commercial law is a term which is used to define a set of norms regulating the functioning of commercial partnerships and corporations. In Poland, four forms of partnerships and two forms of corporations are recognized.

A general partnership [spółka jawna] is the simplest form of commercial partnership. A partnership [spółka partnerska] is intended to facilitate market activities of individuals who carry out liberal professions. A limited partnership [spółka komandytowa] aims to give an effective organizational structure to businesses in which not all of the partners will take an active role in the management of the partnership. A limited partnership with shares [spółka komandytowo-akcyjna] is one which fulfills the same functions as a limited partnership, but gives much wider possibilities of acquiring capital, and also facilitates the creation of supervisory organs, such as a supervisory board. A limited liability company [spółka z ograniczoną odpowiedzialnością] is a capital based entity which has legal personality and permits the creation of various bodies which conduct the affairs of the company and oversee other bodies. In a limited liability company, an audit committee and supervisory board can be convened, a board of managers and general shareholders meeting are mandatory. Corporation [spółka akcyjna] is the most advanced form of company organization. It serves primarily to acquire capital on a broad scale and features an organizational structure which allows it to implement very large scale projects.

In Poland there are two further forms of company organization, a sole proprietorship [jednoosobowa działalność gospodarcza] and a civil partnership [spółka cywilna]. A sole proprietorship is appropriate for those who will work in the business themselves, or who intend to employ staff but will form a structure so contained that the company can be identified with the owner himself.

A civil partnership requires particular care and attention when at the formation stage. At the outset, it needs to be said that despite its name, a civil partnership is not a partnership in the legal sense. It is rather a civil law agreement which creates a specific relationship of liabilities between its parties. It goes far beyond what is warranted by its economic goal, and may even interfere with the entire scope of rights and responsibilities of its partners.

The selection of the appropriate form of company organization is tremendously important to its success. Choosing to set up a company as a corporation when in fact it could easily be managed as a sole proprietorship is highly likely to result in the eventual bankruptcy of the company, or at least absorb majority of potential profits. Conversely, organizing a company as a general partnership when it should be a publicly traded corporation (assuming that there is no statutory obligation to transform the company into a corporation) may lead to serious organizational difficulties, and in the absence of business success may expose the partners to serious financial consequences.

Making the correct choice of legal form at the outset can significantly improve the functioning of the business and enhance its development. Frequent changes in organizational form may prove costly and tiresome. Of course, such changes are possible and sometimes downright necessary, but it is best if they are introduced in a planned manner in harmony with the growth of the company. A short pause for reflection on the organizational form, prospects for development, and difficulties anticipated along the way should allow us to select the form that will ensure the business several years of operations without the need to change forms.