The amendment to the Commercial Companies Code, effective from July 1, 2021, introduced a new legal form of enterprise — the simple joint-stock company (prosta spółka akcyjna, PSA). It is therefore worth discussing the distinctive features of this new institution, highlighting the differences between PSA and the limited liability company (spółka z ograniczoną odpowiedzialnością, Sp. z o.o.), and considering whether PSA may be relevant in potential business transformations.
Registration of PSA vs. Sp. z o.o.
The registration procedure for a PSA is similar to that of a Sp. z o.o., but simplified due to fewer formal requirements. PSA must be registered in the National Court Register (KRS), but this can be done not only traditionally, but also electronically via the S24 system. The key difference lies in the share capital — PSA requires a minimum of just 1 PLN. It is important to note that PSA, like Sp. z o.o., is a capital company with legal personality, meaning it can incur obligations and acquire rights.
Liability of Shareholders in PSA vs. Sp. z o.o.
One of the major advantages of a Sp. z o.o. is limited liability for company obligations. The liability of PSA shareholders is structured similarly. In principle, a PSA shareholder is liable only up to the amount of their contribution. This protects the entrepreneur’s private assets. However, a PSA shareholder will be liable if they receive an unlawful distribution — in such cases, they must return the amount. For comparison, a sole proprietor is liable with their entire personal property, including that of their spouse if no marital property separation exists.
Decision-Making in PSA vs. Sp. z o.o.
The general meeting is the highest governing body in both PSA and Sp. z o.o. However, the management model in PSA differs significantly. The general meeting of shareholders decides which management model to adopt. There are two options:
- The traditional model used in existing Polish companies, where the management board handles company affairs and the supervisory board oversees operations. A supervisory board is mandatory in joint-stock companies, and in Sp. z o.o. if there are more than 25 shareholders and the share capital exceeds 500,000 PLN.
- A new model where the central governing body is the board of directors, combining the roles of the management board and supervisory board. This body handles day-to-day operations and oversight simultaneously. There are no restrictions on the number of members — it may consist of one, two, or several individuals. If there are multiple members, they may be divided into executive and non-executive directors. Executives manage daily operations (similar to management board members), while non-executives supervise the company (similar to supervisory board members). Both shareholders and external individuals appointed by shareholders may serve on the board.
Taxation of PSA vs. Sp. z o.o.
Taxation of PSA shareholders mirrors that of Sp. z o.o. shareholders. As a separate legal entity, PSA is subject to corporate income tax (CIT) at 9% or 19%. This means the shareholder is also taxed separately, potentially resulting in double taxation. Income reaches shareholders only after CIT is applied, in the form of dividends, which are subject to a flat 19% income tax — without deduction of acquisition costs. Dividend income is not combined with income taxed under the progressive scale and is not reported in the annual tax return.
Double taxation may be avoided, for example, by employing the shareholder under a contract for specific work or appointing them as a management board member. One may also benefit from the Innovation Box tax relief, which reduces income tax to 5% for income derived from qualifying intellectual property rights (e.g., patents, utility models, copyrights for software).
Other Key Features of PSA
Additional advantages include:
- Flexible voting procedures — resolutions may be adopted via email or videoconference
- Simplified liquidation rules and shorter liquidation timelines
- Greater flexibility in share types and company operations, including shares issued for work or services
A notable innovation in Polish law is the possibility of liquidating a PSA by transferring all company assets to a single shareholder. Such a resolution must be adopted by a ¾ majority at the general meeting. The shareholder acquiring the assets must satisfy claims of other shareholders and creditors, if any. The final decision on whether such asset transfer is permissible rests with the registration court.
