Law Firm associated with KPMG in Poland Legal Newsletter€¦ · KPMG.pl March 2017 Law Firm...

Persons and contracts affected by new rules for settlement of contracts of mandate

Convening shareholders’ meetings - practical aspects

New anti-money laundering and terrorist financing solutions introduced by the European Union

Amendments to the law

Legal Newsletter

KPMG.pl

March 2017

Law Firm associated with KPMG in Poland

D.DOBKOWSKI sp.k.

http://www.kpmg.com/pl

LEGAL NEWSLETTER | 2

© 2017 D.Dobkowski sp.k., a Polish limited partnership is a law firm associated with KPMG in Poland.The KPMG name and logo are registered trademarks or trademarks of KPMG International.

On 1 January 2017 entered into force amendments to the Minimum Pay Act (amendment of 22 July 2016, Dz.U. 2016, item 1265; hereinafter: the “Amendment”), which introduced first of all new rules of remunerating contractors or service providers. In addition to the minimum hourly rate for the performance of an assignment or services, to which the new provisions apply, the Amendment imposes certain new concepts.

The Amendment does not apply, however, to all civil law contracts used as an alternative form of employment, nor does it affect all contractors / service recipients.

Summary of changes

The Amendment guarantees persons, to whom it applies, payment of a remuneration in the amount not lower than the minimum hourly rate for each hour of carrying out an assignment or providing services, payable to a contractor or a service provider. In 2017 the minimum hourly rate will amount to PLN 13 (and it will be adjusted on an annual basis).

Where a lifetime of a contract exceeds one month, a remuneration is payable at least once a month, in money only. This affects determination of a form of payment as a monthly one (term). It should be pointed out that the new rules concerning the date of remuneration payment relate only to remuneration in the amount resulting from the minimum hourly rate. Thus, where a contract provides for an hourly rate of e.g. PLN 25, an obligatory monthly payment results from multiplying the number of hours worked by PLN 13, and the remaining PLN 12 multiplied by the number of hours worked may be paid in accordance with the provisions of the agreement (e.g. after the project completion).

Another obligation is the preparation of a record of hours worked or other documentation that may constitute the basis of their settlement. Regardless whether the remuneration is determined on hourly, monthly, daily, or other basis, it is necessary to prove the amount of time worked on an assignment. This is aimed at demonstrating that the monthly salary paid is not less than PLN 13 for each hour worked. Documentation relating to the method of confirmation and the confirmation of the number of hours worked must be kept by the service recipient for three years from the date on which the remuneration was due.

Agreements affected by the Amendment

Apart from changes relating to the employment relationship, the Amendment refers to two types of civil law contracts, referred to in art. 734 (contract of mandate), and art. 750 (service contract) of the Civil Code, concluded with a contractor or a service provider, defined in the regulations changed.

Persons and contracts affected by new rules for settlement of contracts of mandate



contractor or service provider:

a) a natural person, who runs business activity registered in the Republic of Poland or in a country that is not the European Union or the European Economic Area member state, and who employs no employees and concludes no agreements with contractors, or

b) a natural person that does not run business activity,

- and that accepts an assignment or provides services under the agreements referred to in art. 734 and art. 750 of the Civil Code of 23 April 1964 (Journal of Laws of 2016, items 380 and 585), hereinafter referred to as the “Civil Code“ for the benefit of an entrepreneur within the meaning of the Freedom of Economic Activity Act of 2 July 2004 (Journal of Laws of 2015, item 584, as amended) or for the benefit of another organizational unit, as part of the business carried out by these entities;

Persons affected by the Amendment

DEFINITIONS - art. 1 sec. 1 b of the amended Minimum Pay Act:

Based on the definition of the contractor or the service provider (see the table) it may be pointed out that from the perspective of a service recipient, the new rules must be taken into account by those recipients that are entrepreneurs or organizational units that concluded contracts of mandate or service agreements with natural persons running no business activity or with natural persons running their business activity reregistered in Poland or in the EU or EEA country, and simultaneously employing no employees or concluding no agreements with contractors

Therefore, as transpires from the construction of the above-mentioned provision, the Amendment does not apply to contractors under agreements for the performance of a specific task (irrespective of whether they are running their business activity or not), contractors under contracts of mandate or service providers running their business activities registered in Poland or the EU / EEA and at the same time employing employees or concluding agreements with contractors, as well as all those contracts of mandate or service contracts that a service recipient concludes outside the scope of its business.



In addition, the Amendment precludes the application of the new provisions, among others, to contracts of mandate where the place or time of execution of assignment or service is decided by the contractor or the service provider that is entitled only and exclusively to a commission fee depending on results (other exceptions are included in art. 8d sec 1 of the amended Minimum Pay Act).

In addition, the Amendment does not apply to contracts of mandate and service contracts concluded with legal entities or organizational units as contractors / service providers.

It should be mentioned that under the transitional provisions, the Amendment will be applicable to relevant contracts of mandate and service contracts, which will be in force at the turn of the year (i.e. entered into before 31 December 2016 and continued from 1 January 2017). This certainly instigates the necessity of relevant amendment of previously concluded agreements (with due regard given to the settlement principles applicable up to 31 December 2016).

Action plan

If a service recipient believes that the Amendment might apply to civil law agreements it concludes, which was not verified before the end of 2016, it is still advisable for such a service recipient to:

1. check whether the Amendment applies to contracts concluded before 1 January 2017 (and those, whose lifetime commenced on 1 January 2017), and whether the new provisions apply to contracts of mandate or service contracts, or if one of the exceptions provided for in the Amendment applies,

2. examine the extent to which the contracts of mandate and the service contracts need to be amended,

3. adjust the provisions existing contracts to the new rules (in consideration of the transitional provisions),

4. introduce relevant provisions in new agreements concluded from 1 January 2017.

At the same time it should be borne in mind that the payment of remuneration in breach of the minimum pay is punishable with a fine from PLN 1,000 to PLN 30,000. Katarzyna Wojciechowska

Attorney-at-Law E: [email protected]

Author:



Convening shareholders’ meetings - practical aspects

Convening a meeting of shareholders is an important corporate action that each company must perform at least once a year.

The shareholders’ meeting and the general meeting (hereinafter: the “Meetings”) are undoubtedly the most important governing bodies of companies. They are equipped with the widest scope of powers and make key decisions with reference to the companies’ business. Still, these governing bodies are not permanent and their decisions may not be made otherwise than in the form of a resolution adopted at the Meeting. That is why it is of such a vital importance to convene the Meetings correctly. Although seemingly simple, in practice this activity very often causes difficulties. The matter is all the more important that a defective convening of the Meeting may result even in the lack of binding force of the resolutions taken.

As a rule, the companies’ shareholders’ meetings and general meetings are convened by the Management Board. Nevertheless, an applicable regulation of the Commercial Companies Code (art. 235 § 1 and Art. 399 § 1 of the Commercial Companies Code) is very laconic. In particular, it fails to clearly determine whether a decision made by the management is an act falling within the scope of running the company’s affairs or if it is an act of the company representation.

The said ambiguous provisions have been given a more precise interpretation by judicial decisions, which defined the convening of the Meetings as an activity related to the conduct of the company’s affairs, not its representation. Such a standpoint is a logical one and is shared by most commercial law theorists.

The rules for conducting affairs of a limited liability company and a joint-stock company differ. Under those applicable to the management board of a limited liability company, where the board consists of more than one member, each member has the right and obligation to manage the company’s affairs (art. 208 §2 of the Commercial Companies Code). An analogous provision applicable to a joint-stock company’s management board composed of several members provides for a different scope of rights and obligations: all members of the Board are required and authorized to jointly manage the company’s affairs (art. 371 § 1 of the Commercial Companies Code). Thus, a member of the management board of a limited liability company may manage the company’s affairs individually, but only within the scope of

day-to-day affairs. The above makes it necessary to consider whether convening the shareholders’ meeting falls within a day-to-day management of the company or if it exceeds that scope. Unfortunately, also in this respect the provisions of the Commercial Companies Code fail to provide a definite answer. Certainly an extraordinary meeting of shareholders exceeds the scope of a day-to-day management of the company’s affairs. Still the qualification of convening an ordinary meeting of shareholders is not that obvious as an obligation to convene an annual meeting of shareholders results directly from the law (art. 231 § 1 of the Commercial Companies Code). Moreover, the said meeting’s agenda is generally determined by the regulations of the Commercial Companies Code and the company’s management lacks freedom in that respect. Therefore, legitimate is an argument that the convening of a meeting of shareholders may be



regarded as an activity falling within the scope of a day-to-day management of the company. Thus, such a meeting could be convened by one member of the board of a limited liability company, unless this is opposed by another board member. In such a situation it will be necessary to pass a resolution in this respect.

The very process of convening a meeting of shareholders can be divided into two stages. The first one is to express the will of the body authorised to convene the Meeting. The other comes down to technical operations, namely to drawing up and sending invitations, which only confirm the decision taken earlier. As a rule, the Management Board should decide on convening the Meeting in the form of a resolution adopted at the Board’s meeting. If the articles of association do not provide otherwise, a relevant resolution is passed with an absolute majority of votes.

If there is no required majority at the meeting of the board, convening of the Shareholders’ Meeting may also be requested by the supervisory board, audit committee or a shareholder representing at least 10% of the share capital of a limited liability company or at least 5% of share capital of a joint-stock company. Should the management board fail to satisfy such a request, the supervisory board or the audit committee may convene a shareholders’ meeting on their own. In contrast, minority shareholders must submit their request to the court, which may convene an extraordinary shareholders’ meeting under its decision.

A defective convocation of the Meeting or an absence of its convocation may give rise to profound consequences. Defectiveness of convening the Meeting of shareholders is the basis for appealing any resolution passed at such a Meeting due to the breach of formal conditions. At the same time, the management board’s failure to convene the Meeting exposes the board members to criminal liability. The court may punish a member of the board who culpably failed to perform their duties with a fine of up to PLN 20,000.

In view of the above it should be stated that when convening the Meeting, one must first consider the type of the Meeting to be convened, as well as the type of the company and specific provisions of the company’s bylaws or articles of association. It should be noted that is not possible to create a universal procedure for all companies as each case requires an individual analysis.

Tomasz KamińskiAttorney-at-Law E: [email protected]

Authors:

Kacper KurowskiLawyer E: [email protected]



On 20 May 2015 adopted was Directive of the European Parliament and of the Council (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (Anti-Money Laundering – “AML”, Counter Terrorist Financing – “CTF”).

The Directive, commonly referred to as the 4th AML Directive, superseded the so-called 3rd AML Directive. Its aim is to strengthen the solutions adopted on the basis of the current legislation, to improve the coordination of controls carried out by entities cooperating with the General Inspector of Financial Information in controlling the relevant persons, and to implement systemic solutions aimed at facilitating the effective performance by the relevant persons of their duties related to counteracting money laundering and terrorist financing.

The main changes resulting from the new Directive apply to, among others, identification and disclosure of the beneficial owner, reduction of the level of transactions exceeding the threshold for certain entrepreneurs, extension of the list of politically exposed persons, comprehensive approach to risk analysis, as well as introduction of stricter penalties for infringement of the

provisions on counteracting money laundering and terrorist financing.

The new EU rules place greater emphasis on an obligation of identifying beneficial owners. Under the currently binding regulations, the relevant persons are required to merely “take actions, applying adequate due diligence, aimed at identifying a beneficial owner” (art. 8b sec. 3 item 2) of the AML and CTF Act). In practice, the above is often limited to verifying the first level of an entity’s ownership structure, i.e. its direct shareholder. The provisions of the new Directive require that such an identification is made with regard to the so-called direct ownership, and in justified cases also an indirect ownership. Hence, also a definition of the beneficial owner changed significantly.

Under a vital new provision introduced by the 4th AML Directive, where the relevant person, having made all the attempts in order to identify the beneficial owner, is unable to do so, a natural person or natural persons that occupy top managerial position at an entity will be regarded its beneficial owner. This solution will be associated with an obligation imposed on the relevant persons to keep documentation confirming activities undertaken by them in order to identify the beneficial owners.

New anti-money laundering and terrorist financing solutions introduced by the European Union



In addition, the new directive requires the member states to implement solutions that will enable keeping in the “central register” (e.g. a commercial register / a register of companies) or other public register, updated information on beneficial owners. It may be assumed that it will be the register of entrepreneurs (National Business Register). Still, numerous entities are entered in other registers, while other, e.g. those created on the basis of specific laws, are not entered in any register. Thus, the Polish legislator will have to take into account all of these cases when creating the national law. The relevant persons will have an on-line access to the information contained in the central / public register in order to identify the beneficial owner. This requirement means that the obligation to disclose the beneficial owner will be imposed also on entities that, as a rule, are not subject to the provisions of the anti-money laundering and counteracting terrorist financing act, as they are not the relevant persons.

In addition, the new Directive lowers, from EUR 15,000 to EUR 10,000, the level of cash transactions subject to registration (the so-called “transactions exceeding the threshold”) for entrepreneurs engaged in trading in a wider sense, regardless of whether it is a single transaction or a number of interrelated transactions.

Another change is an extension of a definition of the politically exposed person, the so-called PEP, to cover domestic persons. As a result, domestic and foreign PEPs will receive equal treatment from the relevant persons. The notion of a politically exposed person will also cover persons entrusted with prominent public functions in a country and those working for international organizations. Moreover, in case of cessation of exercise a prominent public function in a member state or in a third country, or a prominent public function in an international organization, the relevant person, when analyzing the risk, will have to take into account a period of at least 12 months from the date of cessation of performing such a function.

Provisions of the 4th Directive introduce also a number of changes in the risk assessment concerning money laundering and terrorist financing. Under the currently binding Act, this process is carried out at the level of the relevant persons only. However, in accordance with the new regulations, risk analysis will be carried out at the level of the relevant persons, at the national level of member states and at the EU level. The European Commission will be the first entity required to carry out (by 26 June 2017) such a risk assessment, which may affect the internal market and cross-border business. As a rule, risk assessment carried out by the European Commission will be updated every two years. Based on the AML and CTF risk assessment made by the European Commission, next assessments will be carried out by the member states and

the obligated institutions. As intended by the EU legislator, such a systemic approach is to enhance a proper risk identification and cause risk reduction.

Finally, it is worth mentioning that the 4th AML Directive significantly increases financial penalties for the failure to comply with the provisions on counteracting money laundering and terrorist financing, and introduces an obligation to publish a decision imposing penalties, including particulars of persons responsible for compliance with the AML and CTF requirements in the institution, on which a penalty was imposed.



Author:

Renata KulpaAttorney-at-Law E: [email protected]

Apart from those discussed above, the 4th AML Directive introduces a number of other changes, e.g. it tightens regulations on the possibility of an automatic exclusion by the relevant persons of an application of financial safeguards with respect to various categories of entities (e.g. public administration authorities), and removes provisions relating to a positive “equivalence” of third countries and the member states (it will not be possible to recognize third countries AML systems as “equivalent” to the systems operating in the EU; thus, the relevant persons will be required to carry out analyses with reference to clients from countries considered so far “safe”).

The European Union member states are required to implement national laws, regulations and administrative provisions necessary to execute Directive 2015/849 until 26 June 2017, and to provide the European Commission with texts of those provisions.

The provisions discussed above will certainly make the relevant persons amend their internal regulations, and impose new responsibilities on business entities that lack the status of the relevant person.



Accounting - new responsibilities for large entities

On 26 January 2017 entered into force an amendment to the Accounting Act (Dz.U.2017.61), aimed at increasing transparency in the area of corporate social responsibility (CSR). The changes adjust Polish law to the provisions of Directive 2014/95/EU. The amendment imposes on certain large entities and capital groups an obligation to disclose in their reports on activity (in the form of a statement), or in a separate report, vital non-financial information concerning: environmental issues; social and employee-related matters; respecting human rights as well as counteracting corruption and bribery. The report must include a description of the entity’s business model, its policy pursued

within a certain scope as well as its results and the related risks along with the manner of such risks’ management in relation to non-financial issues, and the presentation of non-financial key performance indicators associated with a certain activity. The new reporting obligation covers banks, insurance companies, securities issuers, national payment institutions or electronic money institutions. In addition, the obligation applies to companies that in the financial year covered with the report, and in the preceding year, employed on average more than 500 people annually, and whose total balance sheet assets exceeded PLN 85 million or whose net revenues from sales of goods and products exceeded PLN 170 million. In the near future the bill will be considered by the Senat.

Amendments to the law



The bill on insurance distribution

The Government Legislation Centre is working on new Insurance Distribution Act, which is to supersede the Insurance Intermediation Act. The new regulation is aimed at implementing Directive 2016/97 on insurance distribution and art. 91 of Directive 2014/65/EU on markets in financial instruments. It introduces solutions to improve the existing regulations in the field of insurance mediation and the extension of provisions to all distribution channels. The bill also includes a number of pro-consumer solutions. Directive 2016/97 is currently under implementation in the Community member states. The implementation deadline is 23 February 2018.

Act on Mortgage Credit and Supervision over Mortgage Credit Intermediaries and Agents

The Sejm is working on a bill on mortgage credit and supervision over mortgage credit intermediaries and agents, which is aimed at implementing Directive 2014/17/EU to the Polish legal system.

As assumed by the legislator, the new provisions are to contribute to increasing the comparability and transparency of creditors’ offers, strengthen the consumer’s position on the market of both

consumer credits and credits relating to residential immovable property (mortgage credits), as well as to ensure a comprehensive verification of the clients’ creditworthiness and protect them against misleading advertisements.

The bill on entrepreneurs

The Ministry for Development and Finance presented a bill on entrepreneurs. A new act is to supersede the Act on Freedom of Economic Activity. It is the most vital act of the Business Constitution package. The Entrepreneurs Law is meant to constitute the most significant legal act regulating the terms and conditions for running economic activity in Poland. Solutions proposed in the bill are based on three pillars. First, substantive law solutions aimed at strengthening freedoms and rights vested in entrepreneurs, in particular freedom of business activity. The second pillar refers to the principles of designing bills determining the terms and conditions of taking up and carrying out business activity. The last pillar covers relations between entrepreneurs and public administration bodies. The bill is to enter into force on the time and in accordance with the terms and conditions specified in a separate act introducing the Entrepreneurs Act and some other acts included in the Business Constitution package. The introductory provisions will amend approximately 200 acts.



Financial risk supervision – new EU regulation

On 1 January 2018 there will enter into force Regulation No 1286/2014 of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (EU Official Journal L no 352 of 9 December 2014, p. 1). Therefore, the Government Legislation Centre published draft provisions that make more precise Polish regulations in that respect. Most of the provisions included in the Regulation is of technical nature and needs not be introduced in the domestic legal system. Exceptions refer, for example, to implementation of sanctions and administrative measures where the EU provisions are breached.

The solutions provided for in the Regulation are to strengthen protection of individual investors in the environment where investment products offered on the market are more and more complex. The above is to be reflected, among others, in an obligation to prepare a document containing key information on an investment product. The EU act determines both the contents and the form of the document – its consolidation is to facilitate comparison of products offered by various entities.

With reference to sanctions that may be applied by the Financial Supervision Authority, the drafted provisions repeat the EU regulation: the sanctions include, among others, a prohibition of an investment product marketing, public warning and administrative fines. Polish and EU provisions are to enter into force on the same day – 1 January 2018.

Maria Pazio-WitkowskaLawyer E: [email protected]

Autor:

kpmglegal.pl

Contact person:Elżbieta Dobrzyńska-Bajger E: [email protected]

D.Dobkowski sp.k. ul. Inflancka 4A 00-189 Warszawa

T: +48 (22) 528 13 00 E: [email protected]

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