Polish Subsidiary in Crisis – the Parent Company's Options

Option 1: Out-of-court restructuring

Capital measures, subordination or conversion of shareholder loans, negotiations with banks, landlords and suppliers, and instalment arrangements with the tax office and ZUS. This option makes sense while the company is not yet insolvent.

Option 2: Restructuring proceedings

Where insolvency is imminent or has already occurred, an arrangement with creditors can be reached through arrangement approval proceedings (PZU) or court-run proceedings, e.g. with a partial write-off, instalments or a debt-to-equity swap. Benefits: a stay of enforcement, termination restrictions on key contracts, continuation of the business and a possible defence for board members (→ Director liability (Art. 299 CCC)).

Option 3: Liquidation (likwidacja)

The orderly closure of a solvent company:

1. shareholders' resolution (notarised) to dissolve the company and appoint liquidators,
2. entry in the KRS and publication of a notice calling on creditors,
3. completion of ongoing business, sale of assets and payment of debts,
4. distribution of remaining assets no earlier than six months after publication of the notice,
5. deletion from the KRS.

Note: If the assets are not enough to pay all creditors, liquidation is not the right route. The liquidator must then file for bankruptcy.

Option 4: Bankruptcy (upadłość)

If restructuring is not possible, the management board must file for bankruptcy within 30 days of becoming insolvent. A pre-pack sale is also possible: the business or parts of it are sold within the bankruptcy proceedings to a buyer identified in advance.

Points for the foreign parent company

• Shareholder loans granted in the five years before bankruptcy are subordinated in bankruptcy. This expressly includes deliveries of goods on deferred payment terms, which matters where the parent supplies its subsidiary on credit.
• Intra-group payments made shortly before bankruptcy may be challenged.
• Comfort letters, sureties and guarantees from the parent come into play in a crisis and should be assessed early.
• Foreign managers seconded to the board are personally liable under Polish law (→ Director liability (Art. 299 CCC)).
• Employment law: collective redundancies require consultations and notifications to the labour office.

Decision guide