The Dilemma

As readers of these articles may have gathered (The Bank Job, The Paper Chase) nobody would describe Polish company law and procedure as being especially friendly to business.  While it may be said that as a generalisation (with caveat that all generalisations are dangerous, even this one) the needs of business had a significant influence on the development of English common law, particularly contract, Poland operates under the typical continental codified civil law system which, whatever its benefots dies encourage a “gate keeper” mentality.   Not only is civil law therefore less flexible than common law but Poland has had to spend the last 20 odd years throwing off a political and economic system that was down right hostile to business.  Much has changed for the better but despite the very welcome (and, to be fair, sincere) Tea and Sympathy from the minister of justice old habits die hard.

Here is one recent case in point.  A client operating a number of limited liability partnerships wished to reorganise its group structure and to change the make up of the partnerships. The change, simple in concept, more complicated in document (of course) was effected by the same two limited partners in each case transferring all their rights and obligations under each partnership agreement to one of the remaining limited partners in each partnership.  Such a transfer was specifically allowed by each partnership’s articles of partnership and the appropriate agreements of transfer were concluded by the relevant limited partners.  As a matter of law the changes took effect as from the date of the transfer agreements.  So far, so good.

The next step was to register the changes in the Polish Companies Registration Court a process requiring voluminous paper forms and copies of each agreement, powers of attorney under which they were signed and the statutory fee.  Imagine the surprise when the application was initially rejected by the registration court on the wholly unjustified grounds that the original partnership agreements had not been amended to reflect these changes.  The reason these had not been amended was because it was not required by law to do so.  Indeed, the registration court acknowledged that the transfers were valid but, for reasons of its own, requires a change to the partnership deeds as a condition of effecting registration.

The dilemma for the client is whether to appeal against the decision and face further cost and delay while the appeal is decided or whether simply to comply with the request of the court and amend all seven partnership agreements.  This, inevitably, involves additional work and expense and a visit to our friend the public notary (who, incidentally, agrees that the registration court is wrong).  The client, familiar with Polish procedures, in fact chose the latter course.

You may think that this is all very unimportant and, in the scale of human happiness, it is.  But the serious point is that business should not be burdened by the unnecessary cost and delay of unjustified – and wrong – decisions taken by bureaucrats with the dilemma that submitting is probably cheaper and quicker than establishing the undoubted right.  The ministry of justice appears to have grasped this – and not a moment too soon.

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