News

News / A HELPING HAND FOR ENTREPRENEURS

A HELPING HAND FOR ENTREPRENEURS


19.03.2020

A HELPING HAND FOR ENTREPRENEURS

A Survival Guide for Entrepreneurs in 7 simple steps prepared by the COVID 19 Team at Ożóg Tomczykowski

Events of force majeure, namely those that are outside the parties’ control and impossible to anticipate, such as the COVID 19 virus epidemic, have a negative impact on the economic condition of many entrepreneurs.

What are the measures an entrepreneur can resort to in order to stay afloat in a time of economic
decline?

TABLE OF CONTENTS:

  • CONTRACTS AND RELATIONS WITH CONTRACTORS
  • FINANCIAL CREDITORS
  • ENTERPRISE RESTRUCTURING
  • BANKRUPTCY
  • LABOUR ISSUES
  • TAXES
  • SOCIAL INSURANCE

CONTRACTS AND RELATIONS WITH CONTRACTORS

Due to the natural economic cycle becoming disrupted because of the coronavirus situation, performing all signed contracts may prove to be considerably more difficult or result in the company’s rapid loss of liquidity and bankruptcy.

Not every contract has built-in clauses that protect the parties’ interests in the event of unforeseeable circumstances taking place. This is especially true for
oral contracts.

What are the tools available to an entrepreneur in such a situation?

RENEGOTIATING SIGNED CONTRACTS

The impact of an event of force majeure, such as an epidemic, is not limited to any individual entrepreneur, as it affects the entire economic landscape. That is why parties to a contract may be interested in changing its terms and conditions, resulting in them voluntarily negotiating
such issues as performance date or volume, as well as many other provisions that the parties consider significant.

  1. An entrepreneur has the option to evade the obligation of paying damages
    for non-performance or improper performance of the contract, as well as the obligation of paying the contractual penalty, if during the proceedings they demonstrate that their non-performance or improper performance was caused solely by circumstances connected to an event of force majeure. If the
    ‘force majeure’ clause of the contract does not cover an ‘epidemic’ or an ‘epidemic emergency’, the obligation will be waived on the basis of relevant Civil Code regulations, i.e. it will require demonstrating that the non-performance or improper performance occurred as a result of circumstances for which the entrepreneur cannot be held liable (Article 471 of the Civil Code).
  2. The entrepreneur also has the option of petitioning a Court to modify the entire obligation relationship connecting them to the contractor. Such a modification is introduced through clausula rebus sic stantibus. This clause allows for the contents of signed contracts to be changed and adjusted to the new situation in the event of very serious economic crises. The Court’s application of this clause restores the equivalency of the parties’ performances, which provides a natural economic foundation for the functioning of most reciprocal contracts (Article 3571 of the Civil Code).
  3. Another potential option to consider is the expiration of the entire obligation or its part, if a performance has become impossible due to the circumstances which the parties are not liable for (Article 475 and 495 of the Civil Code).

Considering that the activity of general courts and enforcement bodies has been considerably limited or even suspended, it is crucial to first initiate a constructive dialogue with our business partners. A solidarity-based approach in business can offset the threat that would be carried by a contractor’s insolvency and lack of prospects for future cooperation. The impossibility to predict the development of this situation is exactly the reason why making these arrangements and regulating mutual obligations
over the long term should be considered a priority, especially ensuring that the situation becomes stable in the coming days
and weeks. These arrangements should in particular focus on determining the manner and deadline for the performance of obligations, spreading payments over time so as to maintain our own financial liquidity while adjusting to the capabilities of our contractor. In the case of a judicial dispute, all measures that we take in relation to our contractors will be reviewed post factum by the Courts.
Therefore, it is crucial for the actions aimed at preserving our own company to fall within the limits set by the aforementioned regulations.

SECURING EXISTING CLAIMS

It is certain that in the nearest future our contractors will not be able to perform 100% of their obligations on time. No company is an island and maintaining business continuity requires continued exchange of goods and services with our suppliers.

In a situation like this we should take care to properly secure receivables from contractors that are not capable of paying for delivered goods and services in advance. Civil law and proceeding provide for a wide array of accessible and inexpensive protective measures that will, should it become necessary in the future, accelerate or substantially reduce the cost of pursuing claims from a contractor defaulting on payments.

In the context of assessing the risk of future disputes being raised by our contractors, we should be mindful of the important difference between a delay attributable to a party which did not perform the contract on time because of reasons it is liable for, and a delay which occurs when a deadline is not met because of reasons outside that party’s control.

Contact our experts:

Michał Mieszkiełło (company law / contracts / civil law)

e-mail: m.mieszkiello@ozogtomczykowski.pl, mobile: 503 316 264

Karol Sowa contracts / restructuring / reorganizing)

e-mail: k.sowa@ozogtomczykowski.pl, mobile: 600 092 510

Monika Wystrychowska-Zawiślak (real estate, lease, labour law)

e-mail: m.wystrychowska-zawislak@ozogtomczykowski.pl, mobile: 695 966 110

FINANCIAL CREDITORS

In the time of widespread payment hold-ups, banks and companies financing an entrepreneur’s activity through various financial products (leasing/factoring) can prove to be the best friend to a company struggling with temporary payment issues.

They are creditors who are often privileged in relation to the other contractors, on account of having established collaterals on the company’s assets, as well as various instruments that allow them to recover their receivables faster, before the company’s other creditors are able to take any measures to recover theirs.

At the same time, these creditors have a vital interest in their customer’s continued liquidity and uninterrupted service of their financial obligations in the long term. Seeing their customer filing for bankruptcy and having to recover their receivables by resorting to enforcement of debts or from the customer’s bankrupt assets, is not a scenario any of these creditors prefer.

However, it is absolutely necessary to initiate a dialogue with these creditors before the company permanently loses financial liquidity.

Contact our experts:

Karol Sowa contracts / restructuring / reorganizing)

e-mail: k.sowa@ozogtomczykowski.pl, mobile: 600 092 510

Roksana Barysz (civil procedure / pursuing liabilities / restructuring)

e-mail: r.barysz@ozogtomczykowski.pl, mobile: 603 138 038

 

ENTERPRISE RESTRUCTURING

Should your company show the first symptoms of losing liquidity, it is crucial that you initiate talks with the creditors as soon as possible and show them a viable plan for the company regaining its financial stability in the long term, so that they do not resort to executing their due instruments and collaterals, which could bring nearly any business to a halt in a heartbeat.

Our experience shows that enterprises which began their financial restructuring from constructive talks with financial creditors, were able to regain liquidity more often and faster than companies who decided to fight the financial institutions financing them.

The entrepreneurs whose financial situation deteriorated substantially and is not likely to improve soon, should consider filing for a restructuring proceeding to be opened, including its most popular variant: the sanative procedure. Opening a restructuring proceeding can lead to ineffective terminations, including for credit agreements, in the scope of funds disbursed to the borrower prior to the opening date of the proceeding, financial leasing agreements, property insurance policies, guarantees and/or letters of credit issued prior to the opening date of the proceeding.

As part of an ongoing proceeding, the restructuring of the debtor's obligations consists of:

  1. deferring the performance date or arranging instalments for the payment, or reducing the obligation amount, or converting a liability into the debtor’s shares, as well as changing, replacing or waiving the right securing a given liability;
  2. deferring the payment deadline or arranging instalments for the payment of obligations connected to payments from the Guaranteed Employee Benefits Fund;
  3. deferring the payment deadline or arranging instalments for the payment of taxes or obligations connected to guarantees and assurances issued by the State Treasury and local government units;
  4. arranging instalments and/or deferring the payment deadline for obligations connected to the payment of social insurance premiums in part financed by the debtor as the employer, premiums paid for the Labour Fund, Guaranteed Employee Benefits Fund, Bridging Pensions Fund, premiums paid for the debtor’s own social insurance and/or health insurance, as well as debtor’s other obligations to the Social Insurance Institution.

The sanative procedure provides the debtor with the most comprehensive protection against enforcement throughout the entire duration of the procedure.

Contact our experts:

Karol Sowa contracts / restructuring / reorganizing)

e-mail: k.sowa@ozogtomczykowski.pl, mobile: 600 092 510

Roksana Barysz (civil procedure / pursuing liabilities / restructuring)

e-mail: r.barysz@ozogtomczykowski.pl, mobile: 603 138 038

BANKRUPTSY

Ultimately, if the company’s situation becomes so dire that restructuring is no longer an option, it may become necessary to file for the company’s bankruptcy.

The period to file for bankruptcy provided for in the existing regulations is 30 days from the debtor becoming insolvent. Filing for bankruptcy within the aforementioned period protects the company’s management from being personally responsible for the damages caused by failing to do so.

In the current dynamically changing situation, it may be reasonable to simultaneously file for restructuring and for bankruptcy. The restructuring petition takes priority over the one for bankruptcy and given the wording of existing regulations, filing both petitions simultaneously ensures protection to the persons managing the company.

Contact our experts:

Michał Mieszkiełło (company law / contracts / civil law)

e-mail: m.mieszkiello@ozogtomczykowski.pl, mobile: 503 316 264

Karol Sowa contracts / restructuring / reorganizing)

e-mail: k.sowa@ozogtomczykowski.pl, mobile: 600 092 510

Roksana Barysz (civil procedure / pursuing liabilities / restructuring)

e-mail: r.barysz@ozogtomczykowski.pl, mobile: 603 138 038

LABOUR ISSUES

 Each employer’s most valuable asset are their employees. However, their wages are a significant item on the budget of every enterprise. Currently, the government is working on the so-called ‘cover package’ for entrepreneurs, which also aims to protect and support the labour market. Due to the circumstances changing dynamically, the entrepreneurs should not wait for any final solutions (those still need some time), but rather act ‘here and now’, resorting to the measures currently available to them and consider introducing new rules for paying wages applicable to all employees or a specific subset of them.

Changes to employment conditions can be made through an agreement changing the wage payment conditions or by way of a notice of change. To be considered effective, the changes need to be made in writing, with the employee’s consent and can never feature provisions less favourable for the employee than those provided for in the Labour Code, also in the context of minimum wage or withdrawing any optional remuneration components. Agreements signed for an indefinite period will mandate providing an appropriate justification.

The conditions and mode of work during the period of economic downtime or reduced working hours are arranged by the employer under a collective bargaining agreement or by way of an arrangement with the company trade union organisations, and if a given entrepreneur does not have any trade union organisations in place– in cooperation with employees’ representatives selected in accordance with a procedure adopted by this entrepreneur.

Such a collective bargaining agreement or arrangement specifies at least the following:

1) professional groups affected by the economic downtime or reduced working hours;

2) reduced working hours the employees are bound by;

3) period during which the solutions related to economic downtime or reduced working hours shall apply.

Making quick decisions is key because when it comes to employees
with the longest tenure, the change to remuneration will only become effective after 3 months, counting from the last day of the month when the employee received the notice of change.

The planned cover package for entrepreneurs includes an amendment to the Act on special solutions related to the protection of workplaces (i.e. Journal of Laws of 2019, item 669).

In their current wording, the provisions of the aforementioned Act allow for releasing funds from the Guaranteed Employee Benefits Fund in order to protect workplaces, on request of an entrepreneur who experienced a decrease of economic revenue (defined as sales of goods and/or services, calculated using a quantity or value-based approach), by a total of at least 15%, calculated as a relation of total revenues for 6 consecutive months during the period of 12 months preceding the request date. Pursuant to the planned amendment, the period of crisis determining eligibility for
this support, is to be reduced to 2 months.

Due to the above, the employee will be entitled to receive the following benefits during the period of economic downtime:

- benefit from the Guaranteed Employee Benefits Fund up to the equivalent of 100% of the unemployment benefit (PLN 823.60) augmented by the amount of social insurance premiums;

- remuneration financed from the entrepreneur’s funds, whose total amount is at least the equivalent of the minimum wage, accounting for the employee’s tenure.

The employee is entitled to receive the aforementioned benefits for no more than 6 months
during the period of 12 months from signing the agreement for the payment of benefits (pursuant to the current wording of the Act).

Importantly, in the case of a given employer introducing economic downtime
and the resulting employment changes, the provisions of the Labour Code no longer apply
in the scope of the notice of change altering working conditions and remuneration
,
which simplifies matters considerably under current circumstances. The rules and mode of providing work during this period will become binding when the collective agreement or another relevant arrangement enters into force.

Furthermore, the government announced additional cover support for the labour market, including such solutions as:

  • covering 40% of the employees’ wages (max. up to the national average remuneration amount),
  • providing support for the self-employed (operating a one-person business),
    as well as persons whose employment is predicated on so-called ‘junk contracts’, namely commission contracts and contracts for specific work, in the amount equivalent to 80% of the minimum wage,
  • adding another
    2 weeks to the payment period of carer’s benefits to parents of children under 8, should the suspension of school activities continue.

 

Contact our experts:

Katarzyna Karpiuk (company law / labour law / succession, law of succession)

e-mail: k.karpiuk@ozogtomczykowski.pl, mobile: 885 505 408

Monika Wystrychowska-Zawiślak (real estate / lease / labour law)

e-mail: m.wystrychowska-zawislak@ozogtomczykowski.pl, mobile: 695 966 110

TAXES

Nowadays, the majority of Polish entrepreneurs are considering what measures are available to them if they wish to better protect their businesses. Below we explain what solutions are available to the entrepreneurs
when it comes to relief in the repayment of fiscal obligations.

  • Deferring the deadline for payment of a tax and payment of arrears

Tax payment deadlines may be deferred on the tax payer’s request. Deferment occurs based on a decision made by the tax authority authorised to make it. Decisions on these matters should be issued no later than the base payment deadline.

  • Arranging instalments for a tax and tax arrears.

The tax payer can petition for their arrears to be paid in instalments, and, once the petition is filed, the tax authority is obligated to consider it as part of a relevant proceeding. Instalments can be arranged in different amounts, adjusted to the tax payer’s payment capabilities
and the payment deadline for a given instalment may be specified by indicating a specific date. It is also possible to arrange instalments for part of the tax or tax arrear.

  • Writing-off of tax arrears and the prolongation fee.

The tax payer may petition the tax authority to write-off arrears in their entirety or in part, along with interest for the delay. The amount of the prolongation fee following from the decision can also be written-off.

  • Exempting the tax payer from the tax obligation.

In justified cases, following the tax payer’s request, the tax authority may exempt the tax payer from the tax obligation.

  • Limiting the collection of tax advances.

Should it turn out that advances calculated in accordance with the principles of the tax law are disproportionately high, the tax authority, following the tax payer’s request, limits the collection of tax advances.

  • Deferring the deadlines imposed by tax law regulations.

In cases justified by the tax payer’s vital interest or public interest, the tax authority, following the tax payer’s request, may defer the deadlines imposed by tax law regulations.

 

Contact our experts:

Bartłomiej Biały (income taxes / international tax law)

e-mail: b.bialy@ozogtomczykowski.pl, mobile: 609 349 949

Wojciech Kotowski (VAT)

e-mail: w.kotowski@ozogtomczykowski.pl, mobile: 607 499 189

Jacek Matarewicz (VAT / excise / Penal and Fiscal Code / tax proceedings)

e-mail: j.matarewicz@ozogtomczykowski.pl, mobile: 661 975 552

Paweł Stańczyk (income taxes / fiscal planning)

e-mail: p.stanczyk@ozogtomczykowski.pl, mobile: 607 407 837

 

SOCIAL INSURANCE INSTITUTION

  Arrears in the payment of social insurance and health insurance premiums

The Social Insurance Institution, as part of the so-called ‘cover package’, is working on several facilitations for entrepreneurs, the aim of which is to help companies in the nearest future. The Social Insurance Institution has already made certain solutions available to the payers.

Due to the penal and fiscal risks carried by e.g. persistent failure to settle tax obligations on time, contacting the institutions listed below is a much safer option than deciding to discontinue the payment of obligations. The Tax Office and the Social Insurance Institution may grant the entrepreneur a relief in the repayment of obligations only in a form and manner that they consider appropriate.

 

  • submitting an application for deferment of a payment deadline for premiums or submitting an application to arrange instalments for the repayment of debt (the existing RSO and RSR forms) - as of 17 March this year. 
    The Social Insurance Institution has made the following resources available on its website

https://www.zus.pl/o-zus/aktualnosci/-/publisher/aktualnosc/1/ulgi-dla-przedsiebiorcow-w-zwiazku-z-koronawirusem/3223283

special forms of applications for:

  • deferral of the payment deadline of premiums for the period from February to April 2020 by 3 months;
  • Suspending the execution of the contract with the Social Insurance Institution for 3 months, where the payment deadline of instalments or premiums was set in the period from March to May 2020, and thus extending the deadline for the contract’s performance by 3 months.

The application will require specifying how the coronavirus epidemic affected the financial situation of the enterprise and the impossibility to make timely payments to the Social Insurance Institution. The application should be sent electronically via the Social Insurance Institution’s Electronic Services Platform (PUE), deposited in a box provided in a ZUS facility or sent by post.

After the application has been considered to a positive effect, ZUS will send the agreement together
with documents concerning public aid electronically and relief will be granted on this basis. The signed original documents will have to be sent back no later than within 14 days of declaring the end of the epidemic emergency.

If the company’s financial situation does not improve within 3 months it will be possible to apply for re-negotiating the signed agreement.

Crucially, the aforementioned reliefs will be granted as de minimis aid. If within the last 3 years the amount of de minimis public aid granted to the entrepreneur exceeded EUR 200 000, they will not be entitled to take advantage of said relief.

  • submitting an application for writing-off liabilities to ZUS (RSU form) - due to financial distress, the application may be submitted only for the premiums the entrepreneur paid for themselves. Should the application be considered to a positive effect, the liabilities will be written off. However, if the application is considered to a negative effect, the debt must be repaid, along with interest for delay accrued up to and including the payment date.
  • reliefs under enforcement proceeding.

In the case of an ongoing enforcement proceeding launched as a result of arrears
in paying premiums, it is possible to apply for relief in the said enforcement proceeding.

Contact our experts:

Aleksander Dyl (PIT / Social Insurance Institution)

e-mail: a.dyl@ozogtomczykowski.pl, mobile: 885 505 406

Kontakt:

Elva dressed as a fairy Facebook icon LinkedIn icon