Holding law

On 4 April 2022, the President signed the Act of 9 February 2022 amending the Commercial Companies Code and certain other acts (hereinafter: the “Act”). Under the Act, legal regulations concerning so-called holding law (the law of groups of companies / corporate group law) were introduced into the Commercial Companies Code. These regulations primarily govern the relationships between a parent company and its subsidiaries, taking into account the interests of creditors, members of corporate bodies, and minority shareholders, in particular of the subsidiary. These provisions apply exclusively to private companies.

Currently, the prevailing trend in relations between companies is the de facto holding structure, whereas contractual holdings and so-called tax capital groups occur very rarely. As a result of the amendment, a new Section IV entitled “Group of Companies” will be introduced within Title I of the Commercial Companies Code. Moreover, the concept of a parent company will be updated by extending its scope so that a parent company will also mean an entity that exercises decisive influence over the activity of a subsidiary capital company or a subsidiary cooperative, in particular by concluding an agreement between the parent and subsidiary providing for the management of the subsidiary or for the transfer of profit by such company.

The shareholders’ meeting or general meeting of the subsidiary should adopt a resolution on participation in a group of companies, indicating the parent company, by a majority of three-quarters of the votes. In addition, both the parent company and the subsidiary are required to disclose their participation in the group of companies in the register. Disclosure of participation in a group of companies is made by entering a note in the register; if the parent company has its registered seat abroad, it is sufficient to disclose participation in the group of companies in the register of the subsidiary only.

Importantly, the parent company may issue to a subsidiary participating in a group of companies binding instructions regarding the conduct of the subsidiary’s affairs (“binding instructions”), if this is justified by the interest of the group of companies and unless specific provisions provide otherwise. The required form of such instructions is written or electronic form, failing which they are null and void. The execution of a binding instruction by a subsidiary participating in a group of companies requires a prior resolution of the subsidiary’s management board, which is obliged to inform about the execution of the binding instruction or about the adoption of a resolution refusing to execute it.

Moreover, the Act provides for the exclusion of liability of members of the management board, supervisory board, audit committee, and the liquidator of the subsidiary for damage caused by the execution of a binding instruction.

A shareholder or shareholders representing no more than 10% of the share capital of a subsidiary participating in a group of companies may demand that the agenda of the ближайшее shareholders’ meeting or general meeting include a resolution on the compulsory buy-out of their shares or stocks by the parent company, which directly, indirectly, or under agreements with other persons represents at least 90% of the share capital of the subsidiary participating in a group of companies. This right may be exercised only once in each financial year, and not earlier than three months from the date of disclosure in the register of the subsidiary’s participation in a group of companies.

It should be noted that, apart from binding instructions of parent companies, a number of detailed legal instruments have been provided that enable the parent company to manage the group of companies efficiently.

From an economic perspective, the Act should be assessed positively, as it expressly regulates the principles of effective supervision, the catalogue of duties of members of corporate bodies, and liability for actions or omissions. The regulations introduced by the Act are mandatory in nature, and the obligations covered by them may not be excluded or limited in the company’s articles of association (statute).

The Act will enter into force after six months from its promulgation.