Abstract

The draft reform bill regarding the financial structure of limited liability companies (“LLCs”), which was released by the Polish Civil Law Codification Commission in 2010, has stirred an animated discussion among commercial law specialists in Poland. The purpose of this paper, prepared by the co-author of the draft bill, is to present key elements of the reform and respond to its critique. The paper shows that systemic objections raised against the proposed reform are based on inappropriate assumptions and lack comprehensive justification. The draft bill draws conclusions from the inefficacy of the system to protect creditors basing on the concept of legal capital. However, the draft bill does not seek to abolish the legal capital provisions. Instead, it grants companies the right to choose between three alternative models of the financial structure: 1) legal capital and par value shares; 2) no legal capital and shares without par value; 3) a combination of the two. Moreover, the draft reform bill introduces a solvency test for all LLCs, and several other new legal instruments which are aimed at protecting creditors. The paper shows, inter alia, that legal capital is not an indispensable element of the LLC. The proposed reform will increase the level of protection for LLC creditors, rather than reduce it.