
On 9 February 2022, the lower house of the Polish parliament amended the Commercial Companies Code, introducing a parent company’s liability for any damage caused to a holding subsidiary. The amendment has also introduced a binding instruction as to the parent’s handling of the subsidiary’s affairs if the holding’s interest so dictates. The parent must follow certain formalities when issuing the binding instruction, as will the subsidiary when accepting it, and cooperation between both companies’ officers will be required.
Parent’s Binding Instruction
According to the amendment, the parent may issue a binding instruction to its holding subsidiary – justified by the holding’s interest. The binding instruction should indicate:
- The behaviour that the parent expects of the subsidiary in compliance with the instruction
- The holding’s interest justifying the subsidiary’s compliance with the instruction
- The potential benefits or detriments for the subsidiary as a consequence of compliance with the instruction
- The anticipated manner and date of rectifying the damage suffered by the subsidiary following compliance with the instruction
The holding subsidiary, other than a single-shareholder company, may refuse to comply with the binding instruction if the instruction contradicts the subsidiary’s interest and may cause damage that will not be rectified by the parent, or by any other holding subsidiary, within two years as of the date of the event causing such damage.
Other holding subsidiaries may refuse to comply with the binding instruction if doing so would lead to or threaten insolvency. The holding subsidiary’s articles of association may also include additional prerequisites for refusing to comply with the binding instruction. If the subsidiary’s shareholders wish to introduce additional compliance refusal prerequisites, the effectiveness of the resolution amending the subsidiary’s articles of association would be contingent upon the parent purchasing the shares held by the subsidiary’s dissenting shareholders.
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