Liquidation of a branch of a foreign entrepreneur in Poland

Poland’s accession to the European Union, the development of cross-border activity of enterprises, and the desire to enter new markets contribute to the opening of branches of foreign entrepreneurs on the Polish market. For this reason, the issue of terminating the business in Poland is interesting. Pawel Dyrduł, lawyer from law office KG Legal Kiełtyka Gładkowski Sp.p with its registered office in Krakow, discusses the problem of liquidation of a branch of a foreign entrepreneur in Poland.

Freedom of establishment

Foreign entrepreneurs, under the provisions of the Treaty on the Functioning of the European Union (Articles 49, 51, 54), may establish branches, agencies, subsidiaries, etc. in the Member States. Poland can not affect the restriction of the freedom of establishment of nationals of other Member States. Exceptionally, freedom of establishment does not apply in cases where conducting a given activity by a foreign entrepreneur in Poland would be, at least temporarily, connected with the exercise of official authority. Entrepreneurship entitlement is granted to them in relation to any type of business activity – civil and commercial law, cooperative, etc.

Doing business in a branch form

The conditions of doing business in Poland – both for citizens and foreign entrepreneurs – are regulated in the Act of 2 July 2004 Act of Freedom of Economic Activities. In the context of a foreign entrepreneur, the legislator defined in Art. 5 pt. 4 branch concept. The branch will be understood as a separate and independent organizational part of economic activity, performed by the entrepreneur outside the seat of the entrepreneur or the main place of business. Transfer of treaty freedom of establishment to the Polish market was made in Art. 13 of the cited law. Its scope was further extended to the European Free Trade Association (EFTA) countries. The article cites the principle that citizens of the countries listed in it may conduct economic activity in Poland on the same basis – and thus have the same rights and obligations – as Polish citizens. Polish law allows foreign nationals to conduct business activity in our country in the form of a branch or representative office. A foreign entrepreneur decides to open a branch of its enterprise in Poland and must be aware that starting a business in such a branch can only take place after the entry into the register of entrepreneurs – the National Court Register (KRS) (art.88 Act of Freedom of Economic Activities). The entry requirement – and therefore it is obligatory – was also regulated in the Act of 20 August 1997 on the National Court Register in Art. 36 point 14.

Liquidation of a branch of a foreign entrepreneur

As regards the liquidation of a branch, the Act of Freedom of Economic Activities refers, in Article 92, to the provisions of the Code of Commercial Companies on the Liquidation of a Limited Liability Company. Code of Commercial Companies the issue of liquidation of a Ltd company. So, by analogy, liquidation of a branch of a foreign entrepreneur is regulated in art. 270 – 291. The opening of the liquidation of a branch of a foreign entrepreneur will be dated to the date of the decision of the court of dissolution of the company, the resolution of the dissolution of the company made by the shareholders, or another reason for the dissolution of the company. The entity initiating the liquidation is obliged to inform the National Court Register on the KRS-Z61 jointly with the enclosures KRS-ZR, KRS-ZK and KRS-ZL, provided that a proxy has been established, within 7 days. In addition, the entrepreneur should be referred to as “liquidation”. Changing the company’s data by adding the term “in liquidation” entails the obligation to report this change to the tax office on Form NIP-8. The company is not losing its legal personality during the liquidation process. Liquidators areliquidated by members of the management board (the company agreement or the resolution of shareholders may differ). They are obliged to draw up a balance sheet to open the liquidation and submit it to the shareholders’ meeting for approval. The Accounting Act in Art. 46 sec. 1a, ie if the balance sheet is prepared for a different balance sheet date than the end of the financial year – ie for the day of liquidation opening, it is the rule that the valuation of assets and liabilities at that date and at the end of the financial year (in this case on day of closure, the day preceding the opening of liquidation) will be the same. The head of the unit is obliged to submit the annual financial statements within 15 days from the approval date in the National Court Register. Approval of the financial statements of a foreign trader’s branch is deemed to be approved if the financial statements of the foreign trader, including the financial statements of that branch, have been approved. Where the opening of liquidation occurs during the financial year, the submission will be subject to two financial statements:

  • For the period from the beginning of the accounting year to the closing date of the accounting books (the day before the opening of liquidation)
  • From the opening date of liquidation until the end of the financial year

Abstract: International transactions, Company Law, Liquidation

The article was prepared by KG LEGAL KIEŁTYKA GŁADKOWSKI based in Cracow, Poland, specialising in cross border cases, with its focus on new technologies, IT and life science. It discuesses problems of liquidation of a branch of a foreign entrepreneur.

Paweł Dyrduł, lawyer (specializing in banking law, financial law) from KG LEGAL KIEŁTYKA GŁADKOWSKI – PARTNERSHIP office in Cracow, specializing in cross border issues and servicing life science and IT companies, discusses the essence of create and liquidate a branch of a foreign entrepreneur