Holding law | When does it come into force and what will change?

A new, revolutionary law (referred to as holding law) will become effective as of October 2022. 

The main points in the new provisions include:

  • the authority of parent companies to give binding instructions to their subsidiaries,
  • the concept of corporate group’s interest,
  • limited liability of the management of a subsidiary for following instructions from its parent company.

 

Group of companies in the Commercial Companies Code

In practice, companies operate within groups and it is not unusual for the management of a group company to be instructed, off the record, how to manage the company’s affairs for the benefit of the group. Until now, compliance with such instructions could expose management boards to damages and criminal penalties. While there was case law according to which the management board of a subsidiary, acting in the interests of the group, could have limited liability, there were no provisions that would ensure that management boards were confident in this assessment of their actions.

New holding law aims to address such issues. On the one hand, it serves to protect the interests of the parent company and the group. On the other, it offers greater security to the management of subsidiaries.

IMPORTANT

Following informal instructions – in a situation where there is a statutory mechanism for issuing them – will expose the management board of the subsidiary to an additional risk of personal liability for damages and criminal penalties. Such risk may be significantly reduced by establishing a group of companies.

The new law will not automatically apply to all companies: additional steps will be needed.

Holding law | The advantages and benefits of the solution

The new law will make it easier for companies to operate, as their managers will now be allowed to reflect the interests of the entire group of companies, not only those of a particular company, in their decision-making.

Parent companies will be provided with a new, formal instrument they can use to manage their subsidiaries more efficiently by issuing binding instructions to them.

The management of a company that is part of a group of companies will not be liable for loss or damage caused by compliance with such binding instructions, and the criminal liability of the management will be limited as well in certain situations.

In practical terms, the management of subsidiaries, and subsidiaries themselves, will feel more secure and more comfortable when operating within groups.

How can we help you?

Why CRIDO?

  • We have extensive experience in the field of corporate and economic matters – confirmed by numerous recommendations in rankings (including in the Corporate and M&A category).
  • Our experts are the authors of a practical commentary to the Holding Law – therefore the provisions of the Amendment and the practical aspects related to them are really well-thought-out
  • We are a large consulting company, thanks to which we respond to various business needs of clients – including using the knowledge and experience of the transfer pricing team in the context of changes in the Commercial Companies Code

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