Criminal liability of collective entities
Adopted by the Government on 8 January 2019, a draft Act on Liability of Collective Entities for Acts Prohibited under Penalty was submitted to the Sejm on 11 January 2019. The proposed act may be a breakthrough regulation in respect of the quasi-criminal liability of collective entities (such as companies) for acts committed by their officers, employees or even contractors.
The draft act is intended to amend the currently applicable regulation on liability of collective entities by imposing much stricter criminal sanctions, including, for instance, company liquidation or fines of up to PLN 60 million.
Moreover, it removes the closed list of prohibited acts or the requirement of a previous conviction. This amendment provides for some possibility to avoid liability for the acts described above as an entity if the collective entity demonstrates that it has exercised due care, in principle, in three areas of organisation, supervision and choice.
Importantly, if the law is to come into effect, businesses will have 6 months to align their internal regulations to comply with the regime introduced by the legislator.
Transformation of perpetual usufruct into ownership
Effective 1 January 2019, the perpetual usufruct right to land developed for housing purposes was transformed into land ownership. The new regulation has significant implications both for private individuals who own property sitting on land in perpetual usufruct and for businesses which are owners of commercial property or property developers.
When reviewing the procedure and timelines of making transformation fee payments, those businesses which own land affected by this transformation have to consider the risk of exceeding the acceptable limits of state aid associated with seeking the ownership title to the land.
The National Cybersecurity System Act imposes obligations on entities engaged in the so-called key services and on digital service providers. The year 2019 will be crucial for reinforcing awareness of the importance of IT security at companies and institutions.
Mitigating payment gridlocks
The Ministry of Entrepreneurship is working on a law to mitigate payment gridlocks, for instance, by imposing a reporting obligation on large enterprises with regard to the payment terms they use and by establishing financial penalties for late payments and by conferring additional rights on creditors in settlements of their personal/corporate income tax.
The proposed changes are to restrict the application of long payment terms (over 60 days) in arrangements between business entities and they create opportunities for reducing delays in payment. For the largest companies, these also mean getting ready for new regulatory obligations. These changes to the legislation are scheduled to come into force on 1 June 2019.
Changes within the Penal Fiscal Code
The long-promised and awaited draft amendment of the Polish Penal Fiscal Code was published on the website of the Government Legislation Centre on 9 January 2019. There is no doubt that this draft law is certainly a close reflection of the policy of increasing the repressiveness of the tax system.
Looking at the proposals included in the draft act, it is evident that, in addition to the fiscal function traditionally associated with the Penal Fiscal Code, the focus of the draft initiators is on stepping up criminal sanctions for offences described in the Code while simultaneously reducing some popular mechanisms such as, say, the taxpayer-friendly remedy of active repentance under Article 16 of the Polish Penal Fiscal Code.
Amendment of the Code of Civil Procedure
The amendment to the Polish Code of Civil Procedure provides for significant changes in all aspects of the civil procedure, including reinstatement of separate proceedings in business matters; changes to the taking of evidence (by permitting a court expert opinion to be prepared by that expert who has prepared a private opinion for the party; or witness depositions to be made outside of a hearing); and a number of solutions to curb misuse of procedural laws by parties.
Changes to the Code of Commercial Companies and Partnerships with relevance to businesses
Effective March 2019, the provisions of the Polish Code of Commercial Companies and Partnerships on resignation of the sole (last) management board member are changing. The purpose of this new legislation is to avoid a scenario where a company is left without a management board.
In addition, the rules governing issues such as dividend payouts and repayment of interim dividends will change and the new regulations will already have to be followed at this year’s annual general meetings.
An act implementing the EU legislation on mandatory disclosure of tax planning schemes used by taxpayers (MDR – Mandatory Disclosure Rules) came into effect as of 1 January 2019.
The Polish act provides for a broad range of obligations going beyond what is required under the Directive, both in terms of its scope (which includes not only schemes used in cross-border transactions but also typically domestic transactions and schemes in the conceptual phase) and as regards the moment of implementation (by introducing the solutions a year in advance).
Additionally, the new law imposes reporting obligations on as many as three categories of entities: promoters (i.e. persons such as tax consultants, attorneys-at-law and advocates); users (i.e. entities implementing such schemes); and supporters (i.e. entities which provide support at the stages of development and implementation of, and compliance oversight for, those schemes).
The legislator has provided for severe sanctions for non-compliance with the obligations imposed by this act. Those taxpayers who fail to meet their MDR obligations may face administrative fines of up to the hefty sum of PLN 10 million under the Tax Law. Breaches such as failure to fulfil or late fulfilment of the reporting obligations with regard to tax planning schemes may also result in criminal or criminal fiscal liability.
Legal function of the future
This year will see the trend of an increased focus on effectiveness, flexibility and quality of legal functions within business organisations. The market recognises a growing receptiveness to new solutions designed to streamline the existing processes and to adapt the organisation to a changing regulatory environment (legal function effectiveness).
Outsourcing parts of legal processes to third-party advisory service providers remains one of the most popular solutions, but businesses are increasingly taking a more comprehensive approach to enhancing work effectiveness. The new approach uses solutions known as legal managed services and LegalTech services.
The Sejm is working on a draft act on property investment companies (also known as F.I.N.N. in Polish). The business of such entities will be restricted to residential property lease.
Only listed companies which have satisfied a number of requirements and hold registration in the relevant register to be maintained by the Polish Financial Supervision Authority (KNF) will be eligible to become an F.I.N.N.