Problems connected with the electronic registration of a company

This advice has been written for virtual office Warsaw VSL-System company by Jakub Bonowicz,
Legal Counsel and virtual office lawyer.

If you need legal advice use this link : Polish law legal advice

For the company you register, you may of course receive from us the address of our virtual office.
It will be your company's registered office. We can also collect your mail, open your company's mail,
scan your mail to PDF and send all PDFs to your email.

1. Firstly, founders must use the articles of association form which provides for very limited regulations on relationships between shareholders. Admittedly, the form includes items where shareholders may choose between two or more variants, but the choice is not big. In such a case, shareholders may, however, take advantage of the following solution: they may amend the articles
of association already after the company is registered (Art. 157(1) § 4 of the Code of Commercial Companies). All amendments must be prepared in the form of a notarial deed. In addition, during the first amendment to the articles of association of a limited liability company incorporated on the basis of the official form, the notary public must prepare the consolidated articles of association of the company (including amendments) in the form of a notarial deed.

An example from the virtual office: Shareholders would like that in accordance with the articles
of association of the company, shares of a certain shareholder are preference shares in terms of vote
or dividend. The articles of association form does not include such an option. Shareholders may either execute the articles of association of a limited liability company and register the company in a traditional way (which will, however, substantially extend registration time) or register the company via S24 and,
after registration, go to the notary public to amend the articles of association so that it provides for preference shares. In the latter case, the company may carry out its activity as of its registration date.

Thus, you may ask what for to register a company via the Internet and then go to the notary public to amend it, if you may just simply go to the notary public at once and do not lose time for electronic registration. Well, through electronic registration, the company may be established very fast. As of its registration, the limited liability company is a lawful market player with legal personality and its shareholders are not responsible for the company's liabilities. Thus, the company may normally operate in the market, make commitments, issue invoices, pay taxes already in the period from its registration to the amendment of the company's articles of association by the notary public, as well as from the amendment to the registration of the amendment. While, if shareholders choose the traditional way of the company's incorporation, they would have to sign the articles of association before the notary public and wait for the registration of their company for around 2 months. In the meantime, i.e. from signing the agreement till registration, the company would be only a company under organisation and such a legal status causes many problems in practice.

2. Secondly, when a limited liability company is established via the Internet, no in-kind contributions may be made. This results from Art. 158 § 1(1) of the Code of Commercial Companies, based on which, capital contributions for a company whose articles of association are executed with the use of the defined form may be paid only in cash. If shareholders want to make in-kind contributions, they must do it already after they register share capital increase and cover such an increase with in-kind contributions. Of course, capital contributions in the increased share capital may be also paid up in cash.

An example from the virtual office: Shareholders want to make the following contributions to the company: shareholder X: 10 000, shareholder Y: 10 000, and shareholder Z: an Internet domain. Contributions of shareholders X and Y are cash contributions and shareholder Z's contribution is an in-kind contribution. During the registration of a company via the Internet, only cash contributions are allowed. Thus, at this stage, only shareholders X and Y may pay their contributions. Shareholder Z will be able to make its contribution in the form of the Internet domain only as soon as the share capital is increased after the company is registered (e.g. from PLN 5 000 to PLN 7 000) and the capital increase is paid up with an in-kind contribution by shareholder Z. The in-kind contribution will be an Internet domain. Of course, to increase the share capital, the articles of association of the company must be amended (thus, the procedure described in item 1 must be followed).

3. An unclear status of an entity in the period between the execution of its articles of association and its registration Although the legislator planned that this period will be 24 hours, but in practice it takes much longer. Thus, de facto, in the period from the execution of the company's articles of association until the company's registration, it will be the company under organisation. This complies with Art. 161 § 1 of the Code of Commercial Companies, based on which the moment the articles of association of a limited liability company are executed a limited liability company under organisation is established. This article does not differentiate between a company established traditionally or online with the use of the form, which means that it applies to the latter, as well.

4. The security of S24 is also doubtful. Practically, any unauthorised person having, for example,
a stolen ID card, is able to incorporate a limited liability company using a founder's PESEL that exists in the system (to establish a limited liability company, it is enough to have a personal ID number and PESEL). The legislator has not enforced any user verification mechanism, like, for example, sending a letter with logging data to the address given by the user to verify whether account data are authentic).
Of course, this would extend company registration, but such security is a standard used by websites that try to be reliable in their users' eyes. It is strange that such a security standard is not used in the official system used to establish a limited liability company whose registration brings about material legal consequences both in terms of the civil law, companies law, as well as tax law and accountancy.
The same applies to the fact that documents are signed only with the use of ordinary electronic signature, which does not guarantee that the document is true, authentic and reliable.