A Western European parent company had operated a Polish subsidiary for six years without incident. Then came a routine audit. The National Court Register (KRS) showed three outdated board entries, the shareholders' agreement contained clauses incompatible with Polish corporate legislation, and the management board had been passing resolutions without a quorum for over a year. The parent's legal team had assumed Polish governance ran the same way as at home. It did not.
Corporate governance failures in Polish subsidiaries typically surface during due diligence Poland processes, regulatory inspections, or shareholder disputes – not during quiet periods. Under Polish corporate legislation, a spółka z ograniczoną odpowiedzialnością (private limited liability company, sp. z o.o.) must maintain a fully updated KRS entry, hold annual general meetings within six months of the financial year-end, and ensure every board resolution meets quorum requirements set out in the company's articles of association. Failure to comply exposes parent companies to personal liability of directors and can preclude a clean exit in any future M&A Poland transaction.
This case study traces how KORDECKI & Partners identified the governance gaps, rebuilt the compliance framework, and delivered a subsidiary that could withstand both a Polish Financial Supervision Authority (KNF) inquiry and international buyer scrutiny. The matter involved a manufacturing subsidiary in the Mazowieckie region. The lessons transfer directly to any foreign-owned sp. z o.o. operating in Poland.
What governance failures did the subsidiary face?
The parent's internal audit flagged three categories of risk. First, the KRS listed a board member who had resigned 14 months earlier. Under Polish corporate legislation, an outdated KRS entry is not merely an administrative nuisance – third parties can rely on it, and the resigned director remained technically exposed to liability. Second, the shareholders' agreement required supermajority approval for contracts above EUR 50,000, but the board had been signing contracts at twice that value on ordinary resolutions alone. Third, the company had missed its statutory deadline to hold an annual general meeting in two consecutive years, triggering a right for any shareholder to petition the district court to convene one.
Each defect compounded the others. The invalid resolutions created a chain of potentially voidable contracts. The outdated KRS entry meant that counterparties dealing in good faith could enforce obligations against a person who believed he had left the board. (This is the scenario that concentrates minds quickly.) The missed meetings left the financial statements formally unapproved, a serious obstacle for any set up company Poland process aimed at integrating the subsidiary into a larger group structure.
- Outdated KRS board entries – third-party reliance risk
- Quorum breaches on material resolutions – voidability risk
- Missed annual general meetings – court intervention risk
- Shareholders' agreement inconsistency with articles of association
We secured a full governance audit for this Mazowieckie client in spring 2025, identifying over 30 individual compliance gaps across a six-year operating period. That audit report became the foundation for the remediation plan.
How did the remediation strategy address each risk?
Strategy required sequencing. Fixing the KRS first was non-negotiable. An application to the district court registry department to update the board entry carried a statutory filing fee of PLN 250 and a standard processing window of seven to fourteen business days. We filed within 48 hours of instruction. Simultaneously, we prepared a legal opinion on the voidability of the resolutions passed without quorum, distinguishing between those that could be ratified and those that required fresh execution of underlying contracts.
Ratification of defective resolutions is permitted under Polish corporate legislation, provided the ratifying meeting itself meets quorum and the original act was not unlawful. This distinction matters: a resolution to pay a dividend without quorum is ratifiable; a resolution to transfer assets at undervalue may not be. The board had signed three lease agreements and one equipment purchase contract under defective resolutions. All four were ratified at an extraordinary general meeting convened within 21 days.
The shareholders' agreement required more careful handling. The parent held 100 percent of shares, so there was no minority to negotiate with – but the agreement had been drafted under the law of another jurisdiction and imported wholesale. We replaced the conflicting clauses with provisions consistent with the Kodeks spółek handlowych (Commercial Companies Code, KSH), while preserving the parent's governance preferences on reserved matters. The revised agreement was executed and registered within 30 days of the initial audit findings.
For a tailored strategy on subsidiary governance remediation, reach out to info@kordeckipartners.com.
What does the remediation process look like in practice?
The full remediation ran over 11 weeks. Phase one – audit and triage – took two weeks. Phase two – KRS corrections and resolution ratification – took three weeks. Phase three – shareholders' agreement revision and articles of association alignment – took four weeks. Phase four – preparation of a governance manual and board training – took two additional weeks. The total timeline was tight but achievable because the parent committed internal resources alongside external counsel.
Checklist: what to prepare before a governance audit
- Current KRS extract (full print, not abbreviated) dated within seven days
- Articles of association and any amendments registered since incorporation
- Shareholders' agreement and any side letters
- Minutes of all general meetings and board meetings for the past three years
- Copies of material contracts signed by the board in the same period
The district court did not need to be petitioned for a compulsory general meeting – we convened the meeting voluntarily before the shareholder's right to petition crystallised. That decision saved an estimated six to eight weeks and avoided a public court record that would have appeared in any subsequent due diligence Poland review. Foreign buyers conducting M&A Poland transactions search court databases as a standard step; a compulsory meeting petition signals governance dysfunction to any experienced acquirer.
Real estate holdings added a layer of complexity. The subsidiary held a long-term lease on industrial premises. Confirming that the lease ratification was effective required coordination with the landlord and a review of the property register. For context on real estate due diligence considerations in Poland, see our real estate practice overview.
What lessons transfer to other foreign-owned subsidiaries?
Three lessons stand out. First, governance drift is silent. Subsidiaries that operate without incident for years accumulate compliance gaps that only become visible under pressure – an audit, a transaction, or a dispute. A law firm Warsaw-based team conducting an annual governance health check costs a fraction of emergency remediation. Second, KRS accuracy is not optional. Polish corporate legislation treats the KRS as a public register on which third parties rely. The parent cannot disclaim responsibility for an outdated entry by pointing to an internal resignation letter that was never filed.
Third, shareholders' agreements imported from other jurisdictions without local law review are a recurring source of risk. The KSH contains mandatory provisions that override contractual terms. (This surprises many German and Dutch parent companies in particular.) Any sp. z o.o. governance framework must be built on Polish law foundations, not adapted from a template designed for another market.
Buyers conducting due diligence Poland reviews will examine all three areas. For insight into what experienced acquirers flag in Polish targets, see our analysis of red flags in Polish M&A for UK buyers and our parallel piece on red flags for Ukrainian buyers. Governance defects that survive into a sale process give buyers price-chip arguments or, worse, grounds to walk away entirely – an irreversible consequence that no seller wants to face at the final stage of a transaction.
To receive an expert assessment of your subsidiary's governance position, contact info@kordeckipartners.com.
Frequently asked questions
Q: How often should a foreign-owned sp. z o.o. conduct a governance review?
A: Annual reviews are the standard for subsidiaries with active commercial operations. At minimum, a review should be triggered by any change in board composition, any amendment to the articles of association, and any planned transaction. The cost of a structured annual review is typically between PLN 5,000 and PLN 15,000, depending on the complexity of the corporate structure and the volume of resolutions to be examined.
Q: Can defective board resolutions always be ratified under Polish law?
A: Not always. Polish corporate legislation permits ratification of resolutions that were procedurally defective – for example, passed without the required quorum – provided the underlying act was lawful. Resolutions that violated mandatory provisions of the Commercial Companies Code, or that constituted an act to the detriment of the company, cannot be cured by ratification alone and may require separate legal remedies. Early assessment of each defective resolution is essential before any ratification meeting is convened.
Q: Does the KRS update happen automatically when a director resigns?
A: No. The KRS does not update automatically. The company's management board is obliged to file an application to amend the register entry within seven days of the change occurring. The application must be accompanied by documentation of the resignation and, where applicable, the appointment of a replacement. Until the amendment is registered, the outgoing director remains listed and third parties may rely on that entry in good faith.
KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to corporate governance, M&A, and subsidiary compliance. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.