Shelf company vs new company in Poland – speed comparison

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Lots of foreign investors are not familiar with Polish legal system. That is why there are sometimes confused about which option to choose: shelf company or new company. For majority of them the most important factor is speed. Their main concern is how fast they can start trading using their new Polish business vehicle. In order to help to make a wise choice please familiarize with comparison below.

Shelf company in Poland

Necessary steps:

1. Share purchase contract.
2. Dismissal of current board and appointment of a new director.
3. Customization – amendments of Articles of Association – if necessary.
3. Updating the changes with KRS (National Court Register).

In general a foreign investor can start trading using purchased shelf company the same day.
However in order to any changes (name, objects of activity, etc.) to take effect there is a need to wait until KRS ratifies them (within around 2-3 weeks).

New company incorporation in Poland

Necessary steps:

1. Formation of a company at the notary.
2. Registration with REGON – same day.
3. Registration with tax office (NIP, EU-VAT) – can be initiated the same day. NIP is issued within 7 days.
4. Full ratification by KRS – within 2-3 weeks.

A new company can enter in contracts as well as for example buy property or intellectual rights on the same day as the incorporation.
However it can start selling goods and services only once VAT registration is done by the tax office (within 7 days – depends on how busy is the tax office).
Before the company is fully ratified by the KRS, the notary deed of incorporation is used as a proof of incorporation instead of KRS excerpt.

Differences

So basically the difference is only when it comes to trading. A purchased shelf company can start trading immediately whereas new company within 7 days.

There is no difference when it comes to entering into contracts or buying the property.

There is also no difference with the KRS. A new company will have its KRS reflecting the actual shareholding and directorship within 2-3 week whereas a shelf company will get the KRS updated also within 2-3 weeks.

Bank accounts

Also in terms of bank accounts there is no advantage of a shelf company. Even when it has already a bank account, there is a need for the new director to come to the branch to get the access to bank accounts.
When it comes to new company, a director can go to the bank on the same day as incorporation.

Polish shelf company vs new company formation in Poland

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Shelf company PolandCompany formation Poland

Polish shelf company vs new company formation in Poland

The choice of the appropriate business vehicle is the most important stage for every investor entering Polish market. This decision has many implications in future performance of the company registered in Poland. There are many options offered by company formation providers, however all of them have their pros and cons. In this article we will analyze all options in details.

Legal type of Polish business entity

Please note that the analysis below does not take into consideration the choice of the actual legal type of business entity. We will devote another article to this issue.

Intention of setting up a business in Poland

The main factor that needs to be taken into consideration for a choice between brand new company formation and shelf company solution in Poland is the actual intention of an investor. There are various reasons that lead foreigners to establish business in Poland. This might be (for investors with non-EU origin) a wish to register a subsidiary in Europe and start trading in European Union through Poland. This allows such investor to enjoy Polish low cost of operation together with the easy access to whole EU market due to Polish membership in European Union.

On the other hand some investors just want to get a trading vehicle fast and without the need to visit Poland very often. This might be just because of trading partner requirements or the speed up the transactions with Polish business partners.

Furthermore other businessmen want to just get a vehicle which is ready to take part in public bidding or to purchase a property. Then, there are some foreign investors who need a company just in case some opportunity comes up.

Also very often there are also cases where there is a need to get the company with some history or appropriate age (incorporated for example 5 or 10 years ago). This all brings us to the comparison below of all the possible options of entering Polish market with own business vehicle registered under Polish law.

Opening a business in Poland – options

  1. Brand new company formation in Poland

  2. Registering a company in Poland from the scratch is the best solution when the investor’s intention is serious engagement in Poland. This way of entering Polish market allows all necessary company’s customization. Memorandum and Articles of Association can be adjusted perfectly to the needs of business venture. Also scope of activity can be defined properly from the start. The investor can choose the city where the company will be registered as well (as opposed to a ready made company where change of the city requires amendments in Articles of Association).

    This solution also reduces the risk and increases the credibility of a company, because:

    • the name of the company can be chosen,
    • the first director of the company will be the director nominated by the investor,
    • first shareholder will be the investor himself.

    Those two above mentioned factor are beneficial because all the data of previous company names, directors and shareholders is stored in the National Court Register – KRS. Thus every business partner is able to check easily that the company was registered as a brand new one, which in Polish reality increases the credibility.

    In case of a newly registered company a formation provider needs to prepare:

    • Memorandum and Articles of Association,
    • assist the client at the notary,
    • register new company with Central Statistical Office (REGON),
    • register new company with Tax Office (NIP, PL-VAT, EU-VAT),
    • register company with the KRS (National Court Register).

    Brand new registered company can usually start trading within 7 days (when tax office issues VAT number) when investor uses experienced and fast formation firm. This includes sales of goods and services. However a brand new company registered in Poland can acquire other companies or enter into legal contract immediately after formation at the notary.

  3. Purchase of an already registered shelf company in Poland

  4. A shelf company is usually the company which was registered some time ago by a company formation provider. It already has REGON, VAT number and KRS. It is a little bit faster solution than brand new registration. However in Poland the difference in speed is not that significant. Investor who buys the shelf company can start trading (selling goods and services) immediately after purchase.

    Polish shelf company is also better solution when investor wants the process to be done as remotely as possible. Share transfer agreement requires less formalities than the registration of a brand new company (which usually requires personal visit of a shareholder/shareholders to Poland.

    Below the list of weaknesses of shelf company solution.

    • Already set name (in order to change name Articles of Association need to be amended),
    • Inherited Articles of Association (Click here to see possible errors in M&AoA),
    • Already set scope of activity that might not include investor’s industry (in order to change Articles of Association need to be amended),
    • higher risk for example previous director dishonest activity,
    • hidden liabilities might be in the company when investor uses services of dishonest provider.
  5. Purchase of an aged company in Poland (registered many years ago)

  6. Very often investors are looking for an aged company. That is the company which was registered long time ago. In some people’s opinion the company like this can enjoy higher credibility in the eyes of potential business partners. Of course this is not always the truth. There are certain other requirements to achieve good company image.

    Not many firms can deliver a reliable aged company service in Poland. The choice of the provider is very important as it would be very unpleasant situation when investors started business using defected vehicle.

  7. Company with trading history in Poland

  8. Sometimes, for various reasons, foreign investors are looking for a company that has already been trading. This might be because of a need to show some credit history or to present company activity to potential business partners.

    Companies with trading history can be divided into:

    • those that made a loss,
    • Purchase of a company that made a loss in history might be profitable due to tax reasons. Such a company can enjoy possibility to make tax free profit up to the limit of historical losses. That is why some foreign investors are interested in this option. However this solution requires caution and engagement of trustworthy consulting firm.

    • those that made a profit,
    • When somebody want to get a credit on behalf of the new acquired company in Poland, as it is sometimes useful to prove to a bank or a supplier that the company is making a profit. This would enable it to get more favorable conditions for crediting.

Conclusions

Taking into consideration all above mentioned options that can be used in different circumstances it is always a good idea for an investor to find a reliable formation company and explain them all the needs and business idea itself so the best solution of a business vehicle can be suggested.

For more information feel free to Contact us.

Importance of Memorandum and Articles of Association during company formation process in Poland

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company formationCompany formation and registration in Poland is not an easy process, even though plenty of companies offer company formation services, many of them provide poor quality companies, erroneously registered (wrong tax office jurisdiction, unfavorable or inappropriate wording of company’s Memorandum and Articles of Association, etc.). For a foreigner it is hard to notice the difference, but the company registration process requires a careful approach, a lot of experience and attention to many details. Many times we take over clients from our competitors and after the audit of their company’s registration quality we detect lots of mistakes. Therefore those clients need to pay us for putting things in order after incorrect registration by a cheap, inexperienced company.

What can be wrong:
1. Wrong scope of activity.
2. Unnecessary limitations and restrictions.
3. Provisions not in line with the common practice.
4. Wording errors.
5. Unhelpful and even cumbersome provisions concerning Board of Directors and Shareholders’ Meetings.

Foreign investors must pay appropriate attention to the wording of the Memorandum and Articles of Association (referred further as M&AoA) of their Polish Sp. z o.o. because in Poland the provisions included therein have a huge impact on the company’s operation, taxation flexibility, ease of share transfers, regulatory compliance and many other issues. When buying shelf companies foreign investors always “inherit” the existing M&AoA that was prepared by the formation agent who sold them their company. These often include errors and unnecessary limitations as well as lacking several useful provisions. The companies that we form always include carefully constructed M&AoA that result from
our 30 years of experience of doing business in Poland.
For more information on our services visit Poland Zalewski Consulting’s website: Company Formation in Poland.

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