As stated in the Explanatory Memorandum to the draft Act amending the Commercial Companies Code and certain other Acts, Sejm document No. 3236 of the 8th term, No. 3236), “the simple joint-stock company is therefore intended to constitute a separate type (legal form) of capital company, combining elements characteristic of a joint-stock company, a limited liability company, and even commercial partnerships. Although the initiative to commence legislative work on provisions regulating the new form of capital company has found particularly fertile ground in the startup and high-tech company communities, the draft defines the simple joint-stock company as an entity of a universal rather than sector-specific nature (available to investors planning to undertake business in any industry, barring exceptions arising from specific legislation) and as permanent rather than temporary (the company’s legal existence is not limited in any way: by duration, scope of activity or composition of shareholders).
This company has many structural advantages. The most important of these are:
- a very low share capital requirement for setting up the company – a symbolic PLN 1;
- a flexible approach to the structure of the company’s governing bodies (the possibility of appointing a board of directors that combines the functions of the management board and the supervisory board);
- a register of shareholders maintained in digital form by a notary or a brokerage firm;
- simpler rules regarding the liquidation of the company;
- simpler procedures and greater freedom in adopting resolutions remotely, via email and instant messaging;
- trading in shares in documentary form, on pain of nullity.
In addition to the above measures, the legislator has also introduced safeguards designed to meet the expectations of shareholders who are founders of a simple joint-stock company and who possess innovative solutions and ideas regarding the company’s business activities.
Article 30026 of the Commercial Companies Code introduces the concept of ‘founder’s shares’.
According to its wording: “§ 1. Preference shares may confer a special right whereby any subsequent issue of new shares may not breach a specified minimum ratio of the number of votes attached to such preference shares to the total number of votes attached to all the company’s shares (founder’s shares). In the event of an issue of new shares which could breach this ratio, the number of votes attached to the founder’s shares shall be increased accordingly. § 2. The resolution on the issue of new shares shall specify the number of votes to be attached to the founder’s shares following the entry of the new share issue in the register. § 3. Founder’s shares may be the subject of subsequent issues.”
The above provision constitutes a novelty in the Polish legal system. The purpose of regulating the institution of founder’s shares in the Commercial Companies Code is to protect shareholders against losing their influence over decisions taken by the company in the event of subsequent share issues subscribed to by new investors.
The preferential treatment of founder’s shares amounts to maintaining the ratio of the number of votes attached to those shares to the total number of votes attached to all shares of a simple joint-stock company.
This means that in the event of subsequent issues of new shares, resulting in an increase in the total number of shares, the number of votes attached to the founder’s shares will be automatically increased so that this ratio remains unchanged.
For example, as indicated in the Explanatory Memorandum to the draft act amending the Commercial Companies Code and certain other acts, Sejm Document No. 3236 of the 8th term: if 100 founder’s shares (out of a total of 1,000 shares issued by the company) represent a 10% share of the total number of votes at the general meeting, then the issue of 100 new shares and their acquisition by an entity other than a shareholder entitled to the founding shares results in the number of votes attached to each of the founding shares being increased to 1.0 (one) vote, and consequently the percentage share of these shares in the total number of votes remains at 10%.
By design, this mechanism is aimed at shareholders who are the founders of the company, intended to guarantee them a specific number of votes at the company’s general meeting of shareholders and to ensure they retain a real influence over the decisions taken by the general meeting of shareholders.
The literature indicates that preference shares relate to the so-called anti-dilution clause, which is common in the investment market. This clause is of particular importance as it protects the shareholder against losing influence over the direction of the company’s development and the decisions taken by the company’s governing body, namely the general meeting of shareholders, by safeguarding them against a reduction in their share of the company’s share capital relative to the total number of shares.
As it turns out, founder shares may be issued at any time. The Commercial Companies Code contains no restrictions in this regard, which means that founder shares may also be issued after the formation of a simple joint-stock company to entities other than the company’s founders, for example, investors joining the simple joint-stock company.
From the perspective of business practice, the solution involving the introduction of founder shares into the structure of a simple joint-stock company should be welcomed. In particular, one should bear in mind start-up companies and those in the high-tech sector. The institution of founder’s shares enables shareholders seeking sources of financing to recapitalise a simple joint-stock company whilst safeguarding their ownership rights without the simultaneous risk of losing control over the business activities carried out by the company.
He gained his professional experience in one of Lublin's renowned law firms, dealing with civil and business law in its broadest sense. At the law firm Hewelt Wojnowski i Wspólnicy spółka komandytowa, he deals on a daily basis with current counseling in the field of business and the development of corporate documentation of companies, such as. Company agreements, bylaws of company bodies, agreements regulating relations between shareholders, resolutions of company bodies, M&A transactions. In addition to…
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