A Simple Joint Stock Company (PSA) is a new form of running a business in Poland. This type of business activity, alternative to traditional joint-stock company, was created mainly for entities that do not have high share capital. The act introducing the simple joint-stock company is aimed at strengthening the development of startups, which obtain funds for the development of new technologies mainly from investors - the combination of the advantages of the existing companies: joint-stock company and limited liability company is supposed to increase the competitiveness of startups and inhibit the export of Polish ideas.
The simple joint-stock company, which combines features of partnerships and capital companies, has been implemented as a new type of private equity company since July 1, 2021. This legal form is to be attractive regardless of the size of the business. The simple joint-stock company was introduced in order to strengthen the position of startups on the Polish market: the new formula is supposed to increase their competitiveness and encourage them to implement new ideas in their home country.
The plan assumes that entrepreneurs from countries without an equivalent of a Polish joint-stock company will also be interested in starting up a PSA.
Simple joint stock company - what is it?
A simple joint-stock company is a third capital company, which is an answer to the needs of young entrepreneurs who run their business as a startup. The newest type of company combines features of companies already known on the market, i.e. limited liability company and joint-stock company.
A simple joint-stock company (PSA) was originally supposed to be introduced as early as March 1, 2021, but eventually PSA will appear in the Polish legal system as of July 1, 2021. The postponement resulted from the extension of works on the eKRS platform, which will enable electronic registration of a new type of company.
Why was a simple joint-stock company created in Poland?
The creation of a new type of capital company under simplified rules that are primarily beneficial to entrepreneurs results from the steady growth in the importance of modern technologies. Modern economy is driven by innovative solutions, which also give importance to human capital, as it is people who are responsible for new solutions, innovativeness and entrepreneurship. A simple capital company is supposed to meet the expectations of young entrepreneurs, whose basic capital is knowledge and skills. Such capital is difficult to value, therefore the requirements for initial capital and types of own contribution have been reduced as much as possible.
How to set up a PSA?
Although a simple public limited company is based on the familiar types of companies - limited liability company and joint stock company - the differences can be seen on many levels. The founder of a PSA can be one or more people, and shareholders can report the business electronically or by notarial deed.
When deciding to establish a simple joint-stock company electronically, one has to fill in a form available in the teleinformatic system (the document can be filled in on the S24 portal). Thanks to that the registration of the company is very simple and quick, however, the company's shares may be covered only with a cash contribution. On the other hand, establishing a PSA in the form of a notarial deed requires a visit to a notary, but it is the only way to make an non-cash contribution.
In the case of non-cash contributions, when shareholders want to contribute work or services, the agreement should specify the type and duration of the work or services to be provided to the company.
The rule of strictness of the statute does not apply to PSAs, therefore the agreement may contain other provisions apart from the required elements. Another novelty is the share capital - prior to registration, shareholders are not obliged to make contributions in excess of the minimum share capital, which amounts to PLN 1.
The application must be filed with the registry court having jurisdiction over the company's registered office.
It is worth remembering that regardless of the choice of the company's bodies, both the management board members and the board of directors are liable for the PSA's obligations. It means that joint and several liability for the obligations of a simple joint-stock company takes place when execution against the company is ineffective.
To whom is a simple joint stock company for?
A simple public limited company has been developed for innovative activities that have quite specific needs. It is assumed that the main purpose of PSA is to help startups grow. This is only an assumption, as PSA registration has no restrictions, and practically anyone who can exploit the potential of the new formula can choose to set up a simple joint-stock company.
As a mixture of the characteristics of a limited liability company and a joint-stock company, a simple joint-stock company is meant to be a means of investing in innovative activities and new technologies. Providing flexibility of operation and access to teleinformatic tools, the PSA enables the use of electronic means of communication at every stage of the company's functioning without the need to visit public offices.
According to the legislator's assumptions, a simple joint-stock company is an attractive legal form for innovative enterprises, including startups and high-tech companies, and at the same time it is a universal entity, because the possibility of establishing a PSA applies to all investors, regardless of the size of the company or the industry in which they operate.
The advantages of a simple joint-stock company are, first of all, fast and simple registration of business activity, flexible capital structure and full use of electronic communication means while making decisions about the registration and company structure. Moreover, a simple joint-stock company in Poland may be transformed at any time into another type of company - into a limited liability company, joint-stock company, commercial partnership, limited partnership or general partnership. This is particularly important in the case of startups, which not infrequently need to be transformed when an innovative idea is appreciated: it starts generating significant profits and requires the company to grow.
Fast registration of a company online saves time, and great freedom and flexibility in determining the principles of operation of the company and the functioning of its authorities allow to adjust the mechanisms to the needs of a particular business. Additionally, due to the fact that a simple joint-stock company does not have the status of a public company, it is not subject to many restrictive obligations.
Simple joint-stock company - property structure
The basic differences between a PSA and its prototypes can be seen most clearly in the property structure of the companies. The first thing that draws attention is the minimum share capital, which for a limited liability company is PLN 5000, for a joint stock company is PLN 100,000, whereas for a PSA the share capital is at least PLN 1. In case of share capital change no changes to the articles of association are required, and the introduced act allows for any type of contribution, i.e. so called non-nominative shares: cash contribution and contribution in the form of work or services for the company. If the articles of association do not contain a provision on the necessity to make the contribution before the statutory deadline, the contribution should be made within 3 years.
The characteristic feature of a simple joint-stock company is precisely the possibility of making a contribution in the form of rendering labor or services to the company. Created for start-ups, the PSA takes into account knowledge as an extremely valuable element of the company's activity, which is often one of the most important, if not the only capital of young entrepreneurs, who implement innovative ideas only thanks to money provided by investors.
In addition to valuing innovation, a simple joint-stock company also protects the interest of potential creditors. To this end, strict rules have been established for making distributions to shareholders, who can withdraw funds from the contributions made, but the distributions made must not lead to the company's insolvency.
Simple public limited liability company: types of contributions for shares
Unlike other capital companies, a simple joint-stock company (PSA) allows for contributions in both monetary and non-monetary forms. This is due to the purpose of this legal form of business for startups and high-tech companies, where the basic capital is skills and know-how.
When a shareholder makes a cash contribution to a company, he thereby undertakes to pay cash to a particular simple joint stock company. When a non-cash contribution increases the amount of the share capital, it is measurable and included in the balance sheet of the company and has a transferable nature.
When a contribution does not contribute to the share capital, it is a taking up of shares of the company in return for work or services rendered to the company. The value of such contribution is not taken into account when calculating the share capital and thus does not affect the balance sheet situation of the simple joint-stock company. This makes it possible to acquire company shares in exchange for skills, knowledge and unique ideas.
The simple joint-stock company and the rights of shareholders
According to the amendments to the Act, shares of a simple joint stock company are dematerialized shares, that is, shares that are not in documentary form. PSA shares must be recorded in the shareholder register maintained by a notary public, the National Depository for Securities, banks simultaneously conducting brokerage activities or foreign investment firms. The dematerialization of shares is intended to minimize the costs of running a simple joint-stock company as well as to protect shareholders, as entries in the register allow them to be identified.
The shareholders of a PSA may transfer their shares, but this must be done in documentary form - it is permissible to transfer shares of a simple joint-stock company by mail.
The company's shareholders may decide that certain shares will be preferred, either as to voting or as to dividends, and there may also be an emission of company shares. Each shareholder has a pre-emptive right, which in practice means that existing shareholders are the first to acquire new shares. They may also obtain special rights concerning, for example, the right to appoint or dismiss members of the Management Board and the Supervisory Board.
The rights available to PSA shareholders also include the ability to resign from the company or exclude a minority shareholder from the company. If a shareholder's interests are prejudiced by the company or other shareholders, it is possible to resign from the company.
Such rules have been developed following the standards of startups - usually a simple joint-stock company is established by persons who know each other on professional and/or personal grounds, which may be reflected in the company's activity in various ways.
Termination of a Simple Joint Stock Company
When it is necessary to declare bankruptcy of the company or the reasons indicated in the articles of association occur, a simple joint stock company may be dissolved. The dissolution of a PSA takes place as a liquidation of the company or as a so-called simplified dissolution of the company.
The liquidation of a simple joint-stock company is a procedure based on the principles of the original joint-stock company. The members of the management board or the board of directors, as liquidators of the company, should represent the company and thus conduct all the affairs related to it, including the collection of debts. Simplified dissolution of a company is a new solution that does not function in case of other entities - the company's assets are taken over by a designated shareholder. Such an option is possible only if a resolution adopted by the general meeting of the company receives a majority of votes: ¾ of votes of shareholders owning at least half of the total number of shares.
When the decision issued by the registration court becomes final, the management board of the simple joint-stock company should file an application for deletion of the company from the National Court Register (KRS) - the shareholder acquiring the company's assets acquires all the rights and obligations of the PSA as of the date of deletion from the register.
Advantages of a Simple Joint Stock Company
A simple joint-stock company has been developed to facilitate the functioning of companies and strengthen competitiveness on the market, so this type of business has many advantages visible at first glance.
A PSA can be formed for any legally permissible purpose, and the founder can be one or several persons.
Depending on the type of contribution, the company can be registered online or with a notary public. Online registration is quick and easy, and this way of setting up a simple limited company is also a small registration cost. If the PSA is to be formed based on non-cash contributions, it is necessary to visit a notary public and create a company agreement in the form of a notarial deed.
Thus, in contrast to other companies, the capital is not a barrier to the establishment of the company, and what is more, the contribution can also be the provision of labor or services to the company. Until now, incorporated companies required capital to be covered by tangible goods that can be objectively valued. Thanks to the changes introduced in the simple joint-stock company, shareholders may provide their contribution in cash or in kind, which will make it possible for persons who can contribute only (or as much as) knowledge and skills to become shareholders.
Also new is the trading of PSA shares, which will become less formalized. The shares of a simple joint-stock company may be encumbered and disposed of in a documentary form, which will require a declaration of intent in the form of a document that makes it possible to identify the person making the declaration - it will be possible, for example, by e-mail or through an Internet communicator. Additionally, trading in and issuance of the company's shares will have to be registered in an electronically maintained shareholder register. This task is to be entrusted to a notary public or to an entity that is authorised to keep securities accounts, such as a foreign investment firm or banks conducting brokerage activities.
A great convenience for the founders of PSA shareholders is the possibility to choose the authorities of the company - it can be a monistic system of authorities in the company, i.e. the board of directors, or a dualistic system, i.e. the management board and the supervisory board.
The board of directors of a PSA has the task of managing all the affairs of the company, including representing the company externally and supervising the internal affairs of the company.
The board of directors is characteristically divided into executive directors to run the company and non-executive directors responsible for the ongoing oversight of the company's affairs. If the founders decide to set up a supervisory board, it must consist of a minimum of three members who will be appointed and removed through shareholder resolutions. The supervisory board is supposed to exercise permanent supervision over the company's activities, but it does not have the power to issue any mandatory instructions in this respect.
Does a simple joint-stock company have disadvantages?
A simple joint-stock company, designed to facilitate the establishment of companies and their further functioning may in fact turn out to be a trap for some entrepreneurs. Solutions that are supposed to encourage business registration may raise doubts among potential investors and thus slow down the development of startups.
Reducing the rigor associated with PSAs, removal of restrictions on the minimum share capital and the ability to adopt resolutions by electronic means may reduce the credibility of entrepreneurs and raise concerns about the safety of investments. In some cases investors may even be afraid of investing capital in an entity that operates on the principles of a simple joint-stock company.
Features of a PSA, or what you should know about a simple joint-stock company
Features of a simple joint-stock company (PSA):
1. Simplified company registration procedures
Registration of the company can be done online, traditionally in the office or in the form of a notarial deed. The model contract is available in the teleinformatic system in the S24 mode, thanks to which establishing a simple joint-stock company is easy and fast (it takes up to 24 hours). If the shareholders contribute to the company in the form of provision of services or work, i.e. non-cash contribution, the only option is an agreement in the form of a notarial deed.
2. Flexible approach to company bodies
The founders of a PSA have complete freedom in the formation of the authorities of a simple joint stock company - it can be a dualistic system (management board and supervisory board) or a monistic system (board of directors). In the case of a simple joint-stock company it is also characteristic that the parties to the articles of association are free to determine the structure and the rules of operation of the various bodies of the company.
3. Minimum share capital
The minimum initial capital of a simple joint-stock company is 1 zloty, but it can be changed at any time without the need to modify the articles of association. No fixed capital is an option prepared for those entrepreneurs who want to develop their ideas using the knowledge and skills they have gained so far as their basic capital.
4. Registration of company shares in the register of shareholders
Registration of shares of a simple joint-stock company in a shareholder register is done electronically through a qualified entity - this could be a bank that provides brokerage services, a notary public, a foreign investment firm or the National Depository for Securities. The shareholder register should be open to the company and each shareholder.
5. Simplified liquidation of the company
Simplified procedures for the operation of PSAs also apply to the liquidation and closure of the company. The rules refer, among others, to the introduction of the requirement of a single announcement on the opening of liquidation or a three-month period for the filing of claims by potential creditors. It is also characteristic that there is no statutory grace period relating to the possibility of distribution of the company's assets among its shareholders.
A Simple Limited Liability Company vs. Taxes
Taxes connected with running a business are often a basic determinant when choosing a legal form for a new company. When establishing a company it is worth knowing how the detailed organization of the enterprise will look like, including the tax issues.
A simple joint-stock company established on the basis of previous capital companies is subject to corporate income tax (CIT), whereas income of its shareholders may be subject to flat-rate income tax or be exempt from tax.
Corporate income tax (CIT) is a corporate income tax on Polish corporations - CIT covers limited liability companies, limited partnerships (although they are classified as partnerships), joint-stock companies and simple joint-stock companies.
The lower rate applies only to entities whose annual income for a given financial year does not exceed EUR 2 million - this is the gross amount, i.e. the amount including the value of the value added tax (VAT) indicated on sales invoices. A simple joint-stock company may benefit from a preferential tax rate only with respect to its operating income, whereas income from capital gains is subject to the standard CIT rate.
It is worth remembering that a Polish simple-stock company is entitled to tax benefits connected with the nature of its business.
In addition to CIT, income of the company's shareholders from participation in the company is also taxed. Dividends paid out are subject to 19% flat rate income tax, however, this applies only to natural persons. If the shareholder is a legal person, the paid dividend may be exempted from the obligation to pay the tax - the condition is that the shareholder owns at least 10% of shares in the share capital of the PSA and declares that he will hold the shares of the given company for at least two years.
Another aspect is Social Security contributions, which can be a considerable financial burden for the company. A simple joint-stock company allows optimizing the costs of running a business and at the same time limits the obligation to pay Social Security contributions. In a PAS, shareholders are not obliged to pay social insurance premiums regardless of the number of shareholders. The exemption from the obligation to pay social insurance premiums does not apply only to shareholders who have contributed work or services and will be recognized as persons running a non-agricultural business activity.
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