A German parent company acquires a Polish subsidiary in the logistics sector. Two years later, the subsidiary runs into serious financial trouble. Creditors start asking whether the parent can be held liable for the subsidiary's debts. The parent's board is surprised to learn that Polish law contains specific mechanisms – some triggered automatically – that can expose the parent to claims it never anticipated.
Polish corporate law does not, as a general rule, impose liability on a parent company for its subsidiary's obligations. However, the Kodeks spółek handlowych (Commercial Companies Code, KSH) and insolvency legislation carve out several situations where that protection disappears. These include cases of dominant-entity instructions causing harm, piercing of the corporate veil in insolvency, and board-level personal liability where directors acted on parent directives. Understanding which mechanism applies – and when – is the central challenge for any group operating in Poland.
This guide walks through the four key exposure pathways, the timeline and costs associated with each, and the practical steps a group can take to manage risk before a crisis materialises. Three business scenarios – a manufacturing group, an IT holding, and a foreign investor structure – illustrate how the rules operate in practice.
How does Polish law define the parent-subsidiary relationship?
Polish corporate legislation draws a clear line between ordinary shareholding and a relationship of dominance. Under the KSH, a dominant entity (spółka dominująca) is one that controls another company through voting rights, board appointment power, or contractual arrangements. The threshold is not purely numerical. A parent holding 40 percent of votes may still qualify as dominant if it controls board appointments.
The National Court Register (KRS) records ownership structures, but dominance is assessed functionally, not just from the register. The Polish Financial Supervision Authority (KNF) applies a similar functional test in regulated sectors. Courts have confirmed that informal control – such as consistent instruction-giving without a formal contract – can establish dominance for liability purposes.
Why does this matter? Because the KSH creates a specific liability rule for dominant entities that issue binding instructions to a subsidiary's board. If those instructions damage the subsidiary, the dominant entity can be held directly liable to the subsidiary, its shareholders, and – in insolvency – its creditors. The damage does not need to be intentional. Negligent instructions that erode the subsidiary's financial position are sufficient.
One practical consequence: groups that operate through informal management coordination without documented governance frameworks carry higher exposure. A manufacturing group in Wielkopolska that we advised in winter 2025 had no formal instruction protocols between its German parent and Polish operating entity. Formalising those arrangements reduced the parent's exposure materially before a planned restructuring.
What are the main liability mechanisms under KSH and insolvency law?
Four distinct mechanisms can impose liability on a parent or its representatives. Each has different triggers, different defendants, and different consequences. Identifying the correct mechanism early determines the entire response strategy.
First: dominant-entity instruction liability. Where a dominant entity gives binding instructions that damage the subsidiary, the KSH makes the dominant entity directly liable to the subsidiary. The subsidiary's minority shareholders can also bring a derivative claim. There is no minimum threshold for the instruction – a single directive that causes measurable harm is sufficient.
Second: board liability in insolvency. Insolvency law requires a board to file for insolvency within 30 days of the company becoming insolvent. If a parent-appointed director delays that filing – for example, to protect the parent's supply chain or intercompany position – that director faces personal liability for the full amount of unsatisfied creditor claims. This is the most frequently litigated pathway in Polish group insolvencies.
Third: corporate veil piercing. Polish courts are cautious here. Veil piercing is not a general remedy. It applies where the subsidiary was deliberately undercapitalised, where assets were stripped to the parent before insolvency, or where the subsidiary had no genuine independent existence. The evidentiary bar is high, but the consequence – full parent liability for all subsidiary debts – is severe.
Fourth: fraudulent transfer claims. Insolvency law gives the syndyk (bankruptcy trustee) tools to reverse transactions between the subsidiary and the parent that occurred within defined look-back periods. Payments made within one year of insolvency to a related party are presumed harmful. The look-back extends to two years for transactions at undervalue.
- Dominant-entity instruction liability – subsidiary and minority shareholders as claimants
- Board liability – personal liability of directors for unsatisfied creditor claims
- Corporate veil piercing – full parent liability, high evidentiary threshold
- Fraudulent transfer reversal – trustee-initiated, one to two year look-back
For cross-border structures, the interaction between Polish insolvency proceedings and foreign parent jurisdiction adds another layer. Our guide on cross-border insolvency involving Poland and the Czech Republic addresses how COMI (Centre of Main Interests) determinations affect which court has primary jurisdiction.
Step-by-step: how to assess and reduce subsidiary liability exposure?
Groups rarely discover their exposure at a convenient moment. The practical question is: what can be done now, and what can still be done once financial stress has begun? The answer depends on which stage the group is at.
Stage 1 – Governance audit (weeks 1 to 4). Map every formal and informal instruction channel between the parent and the Polish subsidiary. Identify whether any instructions were binding rather than advisory. Check whether the subsidiary's board has independent authority to reject instructions that damage the entity. Document the findings. This stage costs between PLN 15,000 and PLN 40,000 depending on group complexity.
Stage 2 – Financial health assessment (weeks 2 to 6). Determine whether the subsidiary is currently solvent. Polish insolvency law uses two tests: a cash-flow test (inability to pay debts as they fall due for more than three months) and a balance-sheet test (liabilities exceeding assets for more than 24 months). If either test is triggered, the 30-day filing clock may already be running. Missing that window forfeits the board's defence against personal liability claims.
We secured a reversal of a fraudulent transfer claim exceeding PLN 3m for a technology group's Polish subsidiary in Mazowieckie (spring 2025). The key was demonstrating, with contemporaneous documentation, that the intercompany payment had been made at arm's length and reflected genuine services rendered.
Stage 3 – Structural remediation (weeks 4 to 12). Options include formalising instruction protocols with board-level approval requirements, recapitalising the subsidiary to remove balance-sheet insolvency, renegotiating intercompany arrangements, and – where appropriate – initiating a pre-pack (pre-packaged insolvency arrangement) to transfer viable operations while managing legacy liabilities. Pre-pack procedures under Polish restructuring law can be completed in as little as three months.
Stage 4 – Ongoing monitoring. Polish law requires the subsidiary's board to monitor solvency continuously. Groups should install quarterly solvency reviews with documented sign-off. This creates a contemporaneous record that the board was not negligent – a critical defence in any subsequent board liability claim.
Three business scenarios: where does liability actually arise?
Abstract rules become clearer through concrete situations. The following three scenarios represent the most common patterns we encounter in practice.
Scenario A – Manufacturing group. A Polish manufacturing subsidiary receives binding instructions from its German parent to defer payments to suppliers in order to manage the parent's consolidated cash position. The subsidiary's own cash position deteriorates. After six months, the subsidiary becomes insolvent. The trustee brings a claim against the parent under the dominant-entity instruction mechanism. The parent argues the instructions were advisory. The court examines email chains, board minutes, and the subsidiary's governance documents. Where no independent board veto existed, the parent's liability is established.
Scenario B – IT holding structure. A Warsaw-based IT subsidiary holds valuable intellectual property. The parent transfers that IP to another group entity at below-market value, six months before the subsidiary files for insolvency. The trustee reverses the transaction under the fraudulent transfer rules. The IP returns to the insolvency estate. The parent also faces a white-collar defence exposure because the transfer may constitute an act harmful to creditors under the Polish Penal Code. Directors' personal exposure in this scenario is real and immediate.
Scenario C – Foreign investor entry. A foreign investor establishes a Polish subsidiary as a project vehicle. The subsidiary is undercapitalised from the outset – its share capital is PLN 5,000, while it takes on obligations of PLN 8m. When the project fails, creditors seek to pierce the corporate veil. The court examines whether the subsidiary had genuine independent existence. Absent a real governance structure, adequate capitalisation, and independent board decision-making, veil piercing becomes a realistic risk.
Directors appointed by parent companies should also review their personal D&O coverage. Our analysis of D&O insurance coverage for Polish directors sets out what standard policies cover – and where the gaps typically lie.
For groups with significant intercompany invoicing and VAT implications, compliance with e-invoicing obligations also affects the evidentiary record in insolvency disputes. Our overview of what KSeF means for your business in Poland explains how the National e-Invoice System affects document integrity in group transactions.
What are the most common mistakes – and how to avoid them?
Most liability exposure in Polish corporate groups is not the result of deliberate wrongdoing. It accumulates through governance habits that seemed harmless during normal operations but become legally significant in a crisis.
The single most common mistake is the absence of a formal instruction protocol. Parent companies routinely coordinate subsidiary operations through operational calls, email directives, and informal management oversight. None of this is documented as either binding or advisory. When insolvency strikes, the trustee reconstructs the instruction chain from email metadata and witness testimony. The parent loses the ability to characterise its involvement as mere shareholder oversight.
The second common mistake is delay in solvency monitoring. Boards appointed by parent companies sometimes treat solvency assessment as an annual exercise tied to the audit cycle. Polish insolvency law demands continuous monitoring. A board that misses the 30-day filing window – even by a few weeks – cannot later argue it acted diligently. Personal liability of up to the full amount of unsatisfied creditor claims follows automatically.
The third mistake is intercompany pricing that does not reflect arm's-length terms. This creates two problems simultaneously: transfer pricing exposure with the National Revenue Administration (KAS), and fraudulent transfer exposure in insolvency. Both agencies examine the same transactions from different angles. Groups that set intercompany prices to optimise tax without adequate transfer pricing documentation find themselves defending the same arrangements on two fronts.
A fourth mistake, specific to foreign investors, is treating the Polish subsidiary as a pure cost centre with no genuine board authority. This is the factual pattern that courts use to justify veil piercing. Independent board decision-making – even on routine matters – creates the governance record that distinguishes a legitimate subsidiary from a shell.
- No formal instruction protocol between parent and subsidiary board
- Solvency monitoring treated as annual rather than continuous
- Intercompany pricing without arm's-length documentation
- Subsidiary board with no genuine independent authority
- Failure to review D&O policy scope before crisis
Groups that address these five points proactively – before any financial stress – retain the ability to manage outcomes. Waiting until a creditor files a claim forfeits most of the available options. That is the lost opportunity that makes early action the only rational choice.
Every group with a Polish subsidiary should conduct a liability audit before the next financial year begins. The cost is a fraction of the exposure. Our team has structured governance frameworks for groups across manufacturing, technology, and real estate sectors, reducing both insolvency and regulatory risk.
To receive an expert assessment of your group's subsidiary liability exposure in Poland, contact info@kordeckipartners.com.
Frequently asked questions
Q: Does a parent company automatically become liable for its Polish subsidiary's debts if the subsidiary becomes insolvent?
A: No. The general rule under Polish corporate law is that a parent company is not liable for its subsidiary's obligations. Liability arises only where specific legal mechanisms are triggered – such as the dominant-entity instruction rule, corporate veil piercing, or fraudulent transfer reversal. Each mechanism has its own evidentiary requirements and procedural pathway. Automatic liability does not exist.
Q: How long does the board have to file for insolvency, and what happens if the deadline is missed?
A: Insolvency law sets a 30-day deadline from the moment the company becomes insolvent under either the cash-flow or balance-sheet test. Missing that deadline does not merely expose the company to procedural consequences – it triggers direct personal liability of each board member for the full amount of creditor claims that remain unsatisfied. This liability is joint and several, meaning each director can be pursued for the entire shortfall.
Q: Is there a common misconception about what "dominant entity" means in Polish law?
A: Yes. Many foreign investors assume that dominance requires a majority shareholding – typically more than 50 percent. Under the Commercial Companies Code, dominance is assessed functionally. A parent with a minority stake can qualify as dominant if it controls board appointments or consistently issues binding operational instructions. Groups that structure their shareholding below 50 percent to avoid dominance classification often find that their actual governance behaviour establishes dominance anyway.
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 restructuring, insolvency, and corporate group liability. 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.