This edition of our newsletter focuses mainly on the COVID-19 crisis. We would like to present some of the remedies offered under the latest, fourth edition of the anti-crisis shield, which was recently adopted by the Polish Parliament. We also look at the financial shield offered by the Polish Development Fund (Państwowy Fundusz Rozwoju S.A., PFR), and summarise opinions given by entrepreneurs on the existing anti-crisis regulations; we remind you of important dates and advise you on how you can save your money! All that and other, non-COVID-19-related, news from the legal world. Enjoy!
1. Anti-Crisis Shield 4.0 – what’s new for businesses?
On 19 June 2020, the lower chamber of Poland’s parliament (the Sejm) backed the final version of the Act on Interest Subsidies on Bank Loans Granted to Businesses Impacted by the COVID-19 pandemic and Simplified Proceedings for Approval of an Arrangement with Creditors Due to the COVID-19 outbreak (simplified restructuring), also known as Anti-Crisis Shield 4.0. Having been signed by the Polish president, the bill has already entered into force. The following measures are some of the legal instruments that may have special importance to businesses.
1) New measures for employers
New rules for wage subsidies
From now on, employers who have not introduced a downtime, economic downtime or reduced working hours may also seek a wage subsidy from the Guaranteed Employee Benefits Fund (FGŚP). To be eligible under the subsidy scheme, an employer must have suffered a drop in economic turnover (by 15% or 25% – as it has been the case so far). It means that an arrangement with trade unions or employee’s representatives will no longer be required. Wages will be subsidised up to 50%, but no more than 40% of the average monthly wage from the previous quarter, as announced by the president of Statistics Poland (GUS) – as it was before in the case of reduced working hours. The other conditions applicable to subsidies have generally remained unchanged.
Economic downtime and reduced working hours – new opportunities for employers
Under the new act, employers who have reported a loss of revenues from the sale of goods or services as a result of COVID-19, and suffered a significant increase in their payroll, may reduce their employee’s working hours or introduce economic downtime. Therefore, an employer will no longer need to demonstrate that its turnover has actually dropped (by 15% or 25%) in order to be eligible for such support (other than a wage subsidy). Naturally, it must be pointed out that the introduction of such measures does not prevent the employer from seeking a wage subsidy if its turnover has actually dropped.
Work-from-home policy – rules clarified
The new regulations assume that an employer may request its employees to work from home, provided that they have the appropriate skills, technical capabilities and suitable premises required to perform such work, and provided that the assigned work may be performed remotely. The employer is required to arrange for work-related materials and resources necessary for teleworking, as well as the logistics involved in working-from-home. What is more, it has been clarified that, at the request of the employer, an employee working remotely will be required to keep records of the tasks completed, with a description of the work, and the date and time dedicated to the work. The employee will have to keep such records in the form and as frequently as the employer may instruct. In accordance with the new act, the employer may withdraw its work-from-home instruction at any time, which may raise doubts.
Using up outstanding holiday entitlements
Since the Supreme Court has never previously allowed the possibility, the legislator has decided to regulate the issue of using up outstanding holiday entitlements by employees under the anti-crisis shield. Under the new regulation, during a state of epidemiological threat or a state of epidemic announced due to the COVID-19 outbreak, the employer may instruct an employee to use up to 30 days of his or her outstanding holiday entitlement carried forward. The days are to be used in the period specified by the employer, without the employee’s consent and regardless of the work establishment’s holiday schedule. The employee will be required to use up his or her holiday entitlement as instructed.
Option to terminate a non-compete agreement
During a state of epidemiological threat or state of epidemic announced due to the COVID-19 outbreak, a party to an non-compete agreement after the termination of the employment relationship (including an agency agreement, a contract of mandate, other service agreement and an agreement for the performance of a specific task), who has agreed to refrain from any competitive activities, may terminate the agreement unilaterally with seven days’ notice.
2) Loan interest subsidies
In accordance with the new rules, businesses who have been affected by the COVID-19 pandemic, will be able to obtain a lower interest rate on their loans. This will be possible thanks to subsidies on bank loans extended to sustain financial liquidity. In practice, it means that, under Shield 4.0, banks will grant low-interest loans to businesses impacted by COVID-19, with interest subsidised by state-run Bank Gospodarstwa Krajowego (BGK) from the state budget funds. Subsidised loans may be taken until 31 December 2020.
3) Temporary anti-take-over provisions – protection for Polish companies
Anti-Crisis Shield 4.0 vests more powers in the president of the Polish antitrust authority (the president of the Polish Office of Competition and Consumer Protection, UOKiK) with respect to protecting Polish businesses from hostile take-overs. The new law applies to companies whose operations are important to public order, public security or public health, including specifically producers of electricity, chemicals, fertilisers and chemical products, companies operating in the telecommunications sector and food sector enterprises processing meat, milk, grains, fruits and vegetables. Any acquisitions of a significant number of shares (at least 20%) in such companies will be subject to merger clearance. Merger clearance will apply to companies with revenues within Poland, in any of the two financial years preceding the filing for merger clearance, exceeding the equivalent of EUR 10 million. The new merger control rules involving Polish companies will apply for two years.
4) Micro loans will be forgiven ex officio and excluded from enforcement
Under Shield 4.0, businesses will no longer have to submit an application for its micro loan to be forgiven. It means that a loan with interest will automatically be forgiven on the condition that the borrower continues to operate its business for three months from the loan being disbursed. Additionally, funds from the loan will not be subject to court or administrative enforcement, and will be exempt from seizure under a court or administrative enforcement title.
Anti-Crisis Shield 4.0 includes many more measures aimed at alleviating the consequences of the COVID-19 crisis. We invite you to follow us on social media and read our legal alerts to stay up-to-date on issues important for businesses.
2. PFR financial shield for large companies
On 9 June 2020, the second of the pillars of the PFR Financial Shield, a support scheme for large companies, started to be implemented. Unlike the support scheme for SMEs, the funds will be provided directly by the Polish Development Fund (Państwowy Fundusz Rozwoju, PFR). The application form for funds is available at https://pfrsa.pl/tarcza250; applications may be submitted until the end of the year, with support offered until the end of 2021.
As mentioned, the scheme is dedicated to large enterprises, i.e. those with more than 249 employees and an annual turnover exceeding EUR 50 million, if they meet additional criteria such as a specified reduction in economic turnover. Nevertheless, the scheme is also available to SMEs employing more than 150 employees and with an annual turnover in 2019 exceeding PLN 100,000,000, provided that a few additional conditions are also satisfied.
The support scheme for large enterprises is worth PLN 25 billion and offers three types of financing:5>
- liquidity financing
- preferential financing
- investment financing.
An entrepreneur can benefit from several forms of financing, as long as the aggregate financing amount does not exceed the thresholds specified by the European Commission in the terms and conditions and notifications of the programmes of measures.
3. Businesses do not perceive the “Anti-Crisis Shield” measures positively – what’s next?
A market survey entitled “KoronaBilans MŚP” (Coronavirus SME Impact Survey), conducted by IMAS International at the end of April 2020, shows that 49.3% of micro, small and medium-sized enterprises describe their current economic situation as bad. Additionally, that more than half of SMEs predict that their economic situation are likely to further deteriorate in the next three months. It is little wonder then that the majority of respondents expressed a desire to benefit from the government’s measures under the subsequent parts of the anti-crisis shield. The government support pays as special interest in small enterprises (as much as 86.2%). The survey shows that the measures put in place by the government to mitigate the economic impact of the coronavirus outbreak on businesses include: tax relief, exemption from social insurance contributions and wage subsidies. On the other hand, the respondents showed the least interest in preferential loans and credit facilities.
Despite their willingness to benefit from the shield measures, enterprises are apparently not satisfied by the solutions. It is a common opinion that the support currently offered is not sufficient and that wage subsidies and stoppage pay should be higher. The partial forgiveness of taxes would also be well received. Moreover, another problem is that the procedures that need to be followed to obtain the funds are too complicated and should be simplified.
Perhaps Anti-Crisis Shield 4.0, adopted by the Sejm last week, will increase the availability of the support measures, which seems to be possible given the expanded catalogue of those eligible for wage subsidies. Nevertheless, it should be noted that, in accordance with public statements made by government officials, the fifth edition of the anti-crisis shield is supposed to be the ultimate and final. Therefore, it is difficult to declare today whether employers can expect anything more.
4. Please note! Wage subsidies under the Guaranteed Employee Benefits Fund only until the end of September!
The version of the anti-crisis shield applicable from April 2020 encourages businesses to apply for benefits to safeguard employment in the event of introducing economic downtime or reduced working hours due to the pandemic.
A number of employers have already benefited from this opportunity. If your company has also been hit by the crisis and has reported a drop in turnover this year, you may still apply for a subsidy. Please remember that, under the new edition of the anti-crisis shield, there is no need to introduce economic downtime or reduced working hours in order to be eligible for the subsidies. It opens new opportunities for employers in distress, but they should remember that the submission deadline is fast approaching! The provisions introducing wage subsidies under the Guaranteed Employee Benefits Fund (FGŚP) are in force for 180 days from the date on which the act entered into force, i.e. until 27 September 2020. Please note that an application must be submitted to the regional labour office (wojewódzki urząd pracy) relevant for the applicant. Submissions can be made electronically through praca.gov.pl.
5. R&D relief and IP Box – potential savings
Amid the crisis, it is worth looking for opportunities to save money. If your firm is engaged in innovative business, it may be a good idea to apply for the IP Box and R&D tax relief. The interesting thing is that you may benefit from both relief measures at the same time!
R&D tax relief is tax relief for research and development activity. It allows the deductible costs incurred for research and development activities (the qualified costs) to be deducted from the taxable base. In turn, IP Box is a tax incentive that allows income generated from the sale of products or services based on intellectual property rights to be taxed at a preferential rate. Businesses that derive income from intellectual property (IP) rights resulting from their research and development activity, or research and development services purchased from other entities and patented by themselves, could use the preferential tax rate of 5% on their CIT or PIT settlements. In 2020, entrepreneurs could use the IP Box relief for the first time for their income earned in 2019.
At the end of May 2020, our tax advisor, Agata Wleklińska, held a webinar on this topic. If you were not able to participate at this virtual meeting and you would be interested in benefiting from such relief, please do not hesitate to contact us.
6. The Court of Arbitration at the Polish Chamber of Commerce wants to settle corporate disputes
Thanks to the latest civil procedure reform in 2019, corporate disputes concerning resolutions adopted by the meeting of shareholders of a limited liability company or the general meeting of a joint-stock company may be settled through arbitration. To date, such disputes were not considered arbitrable and could not be included in an arbitration clause. Given the opening up of new opportunities, the Court of Arbitration at the Polish Chamber of Commerce (SAKIG) expressed its willingness to settle this type of corporate dispute, and has just referred draft regulations on corporate disputes over shareholders’ resolutions for consultation.
What can you get from referring such a dispute to arbitration? First of all, time and flexibility. In many common courts of law, one has to wait a long time for a ruling, so where there is a conflict between shareholders, the due operation of the company may sometimes be hindered or even blocked. Arbitration gives the parties an opportunity to resolve their dispute faster. What is more, in arbitration the parties have more influence on the proceedings – they may agree the time and venue, select arbitrators and decide whether they want to hold a hearing or just exchange submissions. The costs of the proceedings are also worth mentioning. In arbitration, the fee depends usually on the value of the object of dispute. Nevertheless, given that this is often hard to estimate with corporate disputes, the Court of Arbitration at the Polish Chamber of Commerce is considering introducing a fixed fee, as in common courts of law. The amount may be another argument for referring a shareholders’ dispute to arbitration.
7. The Posting of Workers Act – what’s new?
The Sejm is currently working on a bill implementing the EU rules regarding the terms and conditions of employment to be applied to posted workers. The new rules must be implemented to the Polish legal system by the end of July. Specialists believe that the solutions provided for in the bill will mean Polish employers will incur significantly increased costs when posting workers, and will need to review their employee posting structure and to comply with new obligations.
Among other changes, a minimum standard of protection guaranteed to posted workers will be extended, including: allowances or reimbursement of expenditure to cover travel, board and lodging expenses for workers away from home for professional reasons. Importantly, in accordance with the bill, once the actual duration of the posting exceeds 12 months, the posted worker will be entitled not only to the minimum terms and conditions of employment provided for in the Posting of Workers Directive, but also all of the mandatorily applicable terms and conditions of employment of the host (receiving) Member State. In practice, posted workers will have the same status as local workers in a given host Member State.
One of the assumptions underlying the implemented solutions is the closing of the wage gap between local workers and posted workers according to the “same work, same pay” principle. The Member States will be required to disclose information on wages resulting from industry-specific laws and regional collective bargaining agreements.