Most entrepreneurs doing business in Poland are subject to certain reporting obligations, including the annual submission of their financial documents to the National Court Register (Pl: KRS). However, if a company fails to comply with their reporting duty within the prescribed timeframe, then the register court may initiate enforcement proceedings against such entity.
Recently, the Polish government, as part of its wider efforts to deregulate and simplify the system for businesses, has proposed significant changes to the enforcement proceedings conducted by register courts.
What are the key changes to be introduced?
| enforcement tool to compel companies to submit their due financial statements | Until now, the main enforcement tool used by the courts was a fine of up to PLN 15.000 for each individual responsible for filing the documents (that is each board member in an LLC à spółka z o.o.) When the register court identified that financial statements for a given year were missing, it would summon the company to submit the documents within 7 days, under the penalty of imposing the above-mentioned fine. The proposed changes introduce an entirely new approach: the fine would be replaced by simply a formal entry in the NCR that the company failed to comply with the court’s order to submit its financial documents. |
| the court’s approach to failure to submit financial documents for additional reporting periods | At present the court initiates separate enforcement proceedings for each reporting period missed. Consequently, if financial statements are not submitted for multiple years, then the company can expect to receive multiple court notices and face repeated fines for their non-compliance. However, the reform introduces a ban on initiating multiple enforcement proceedings by the court. Instead, an entry in the company’s NCR will remain visible for as long as it fails to submit all of its due documents. |
The planned shift in approach results from the fact that the fines have so far proven to be ineffective and offered little incentive for the companies to comply with their reporting obligations. In contrast, a public entry on the entity’s non-compliance will be easily accessible by any third parties and may have a direct impact on the company’s reputation on the market.
Consequently, the proposed changes are mainly intended to:
- encourage businesses to timely submit their financial statements,
- improve efficiency of enforcement proceedings conducted by register courts,
- protect the interests of third parties entering into cooperation with the company.
Although work on the draft bill concerning the National Court Register is still in progress, the formal legislative process is expected to begin shortly, and the changes may come into force soon. That is why businesses operating in Poland should already start preparing for their implementation.
