Pros and Cons of a Simple Joint-Stock Company in Poland
A simple joint-stock company is the newest among capital companies It was created for entrepreneurs who, for various reasons, cannot form a traditional joint-stock company. As with any other form of business, it is worth knowing the advantages and disadvantages of a simple joint-stock company in Poland. A simple joint-stock company can be established by one or more persons for any purpose that is legally permissible. Only a single-person limited liability company cannot establish it. Shareholders of a simple joint-stock company are only liable for contributions specified in the company’s agreement. They are not liable for its obligations.
Is it worth conducting business in this form?
What are the advantages and disadvantages of a simple joint stock company in Poland?
Advantage: The amount of share capital
The provisions of the CCC state that the share capital of a simple joint-stock company should be at least 1 PLN. This means that there are no financial limitations on starting a business in this form. Such a low level of minimum share capital is for sure the advantage of a simple joint-stock company.
Advantage: Non-monetary contribution to the company
Another advantage of a simple joint-stock company in Poland is the possibility of taking up shares in exchange for monetary or non-monetary contributions. A non-monetary contribution for the coverage of shares can be any item of value. In particular, the performance of work or services. This solution takes into account the specificity of start-up companies. This form of business combines unique skills, knowledge, ideas, and inventors’ work with capital provided by investors. According to the CCC, contributions must be made to the company in full within 3 years from the date of its entry in the register.
Advantage: Online registration
The provisions of the Commercial Companies Code provide for the possibility of concluding a simple joint-stock company agreement also using a template agreement. In this case, you should fill in the contract form provided in the teleinformatic system. You must also sign the agreement with a qualified electronic signature. Another possibility is to authorise it with a trusted profile or personal signature. This is undoubtedly an advantage of a simple joint-stock company. Especially considering the simplification of the founding process and the short time of performance. There is no need to fill in a separate application for the company’s entry into the register. As a result, the time needed for the company’s registration is shorter. In this case, the application for entry of the simple joint-stock company in the register should be considered within 1 day from the date of receipt.
Advantage: Calling the general meeting
There is no doubt that the possibility of calling a general meeting by electronic mail is an advantage of a simple joint-stock company. The notification is sent, among others, to the address entered in the register of shareholders. Or, alternatively, to the address indicated for delivering electronic mail. This should happen at least two weeks before the scheduled date of the general meeting. Importantly, shareholders may participate in the general meeting using electronic means of communication.
Advantage: Choice of company management model
The CCC provides the possibility to choose between the dualistic and monistic model of managing a simple joint-stock company. In the dualistic model, decisions in the company are made by the management board and supervisory board. The monistic model assumes the existence of only one organ of the company – the board of directors. The board of directors combines management and control competencies. It is also the main representative body. The possibility of choosing a management model is a significant advantage.
Disadvantage: The newest capital company
The simple joint-stock company is the newest organizational form of a capital company. It appeared in the Polish legal system on July 1, 2021. The short time of existence is another disadvantage of a simple joint-stock company. It may cause uncertainty about the practical aspects of its functioning.
Disadvantage: Register of shareholders
Entering into an agreement to keep a register of shareholders is obligatory for a simple joint-stock company. Yet, a resolution of the company’s shareholders on the choice of an appropriate entity to keep the register must come first.
In this case, maintaining the register of shareholders limits the freedom of a simple joint-stock company. The following entities can maintain it:
• an entity authorized to operate a securities market under the Act on Trading in Financial Instruments,
• a notary public who runs a notary office in Poland.
The CCC states that the register must at a minimum contain information about the firm, its shareholders, and the shares themselves. The data in the agreement and the KRS should match the information provided in the register.
The obligation to enter into an agreement to keep a register of shareholders is thus a disadvantage of a simple joint-stock company. It involves the need to collect documents for data identification. It is also connected with additional fees for the simple joint-stock company.
Disadvantage: No possibility of listing on the stock exchange
According to the CCC, the shares of a simple joint-stock company cannot be admitted or introduced into organized trading. Thus, it is not possible to enter the stock exchange in the form of a simple joint-stock company. This restriction is a disadvantage of a simple joint-stock company. It limits the potential ways of obtaining capital for its operations.
Disadvantage: Obligatory reserve to cover losses
Another drawback of a simple joint-stock company in Poland is the need to create an obligatory reserve from its profits to cover losses. This applies to situations where the company’s share capital has not reached 5% of its total liabilities. The share capital should be increased to cover the losses. At least 8 % of the profit for a given financial year should be allocated for this purpose. Until the share capital reaches that level, there is a need to create such an obligatory reserve. This reserve is essentially part of the share capital.
Disadvantage: Double or triple taxation
A simple joint-stock company in Poland, at the level of income earned, is subject to corporate income tax. The same income is also taxed on the side of shareholders, in part, in which it will be allocated to the share capital.
As stated above, a simple joint-stock company creates an obligatory reserve to cover losses. The reserve amounts to 8% of the profit for a given financial year. If shareholders of a simple joint-stock company decide to withdraw funds allocated to the share capital, these funds will be taxed for the third time. Double, and sometimes even triple taxation, is certainly a disadvantage.
A simple joint-stock company in Poland allows running a business in a more digitalized and flexible way. Adding this type of company to a catalogue of capital companies is another convenience for entrepreneurs. A simple joint-stock company has many advantages. Yet they surely may become disadvantages in some situations.