Launching business activities on the Polish market calls for compliance with a number of legal and administrative requirements. From the foreign investors point of view, this process may seem very complex. However, entities undertaking broadly defined innovative activities (operations or investment) can (and will in the future) benefit from financial support under a vast range of state aid instruments financed from EU funds.

The key to successful completion of the above mentioned processes – i.e. starting up a business on the Polish market and obtaining funding for the planned activities – is a thorough preparation. Therefore, in our series of articles not only will we attempt to present basic issues related to legal regulations on starting and running a business but we will also suggest some practical tips on how to prepare the process of applying for EU funding.

The first one in a series of articles touches upon the launching stage of a business. The next ones will discuss issues such as:

  • Finding and hiring employees
  • Intellectual property issues
  • Statutory obligations and development opportunities at the operational stage

Launching a business on the Polish market – how to plan this process (legal and administrative requirements, preparation to apply for EU grants)

In recent years, we have observed more and more international entities starting operations on the Polish market. Investment attractiveness can be confirmed by NBP (National Bank of Poland) data: at the end of 2019, foreign direct investment (FDI) liabilities in Poland amounted to PLN 892.2 B and were higher by PLN 29.2 B, or 3.4%, than at the end of the previous year. We do not yet know the data for 2020. However, it may be assumed that after a temporary slowdown caused by the pandemic, investors will resume making decisions concerning the expansion of their activities. Forced by the COVID-19 pandemic, the acceleration of digitalization of companies and the transitioning to remote work may, paradoxically, foster this process. The availability of highly skilled human resources on the Polish market is an incentive to relocate and transfer know-how, especially in the case of highly advanced, innovative industries and technologies. At the same time, for several years in a row Poland has been the largest beneficiary of EU funds. Within  2021–2027 the pool of EU funds allocated to support broadly understood innovation and entrepreneurship is to be significant – approx. EUR 11.78 B. Foreign entities deciding to start innovative activity on the Polish market may therefore count on significant financial support, primarily in the form of non-refundable grants. However, in order to be able to apply for co-financing granted by Polish institutions it is necessary to properly prepare this process, both in administrative and organizational terms.

Company registration

Only entities operating on the territory of the Republic of Poland may apply for funds granted by Polish institutions. It should be confirmed by an entry in the appropriate commercial register. Chiefly, in the vast majority of cases there are no requirements as to the minimum duration of the entity's operation – it is possible for all registered companies to apply, regardless of the length of their operating history.

In the case of entities that plan to start business activity in Poland on a larger scale, the most popular solution is a limited liability company. An investor can establish a company from scratch or purchase a ready-made and fully registered entity, which saves time.

From the perspective of maximizing the chances of obtaining co-financing, the amount of support and even the possibility of applying is often dependent on the location of the project. The available funds for more developed regions are limited. In addition, in the case of investment projects, economically more developed regions are assigned lower maximum state aid intensity. At the end of 2021, the regional aid map determining the maximum level of aid for a given region will be updated, and everything indicates that further voivodships will join the group of regions that are developed better. These dependencies should be taken into account when choosing the location of your company.

In order to comprehensively approach the aforementioned topics it is worth considering cooperation with a legal and tax advisor. Regardless of whether you decide on such cooperation, we recommend appointing a person who will act as the company's manager and will be responsible for concluding agreements, accepting payments, representing the company before authorities / courts, establishing bank accounts, etc. Such person may act e.g. as a member of the management board or the company's proxy, and a properly drafted articles of association will allow to shape the scope of this person's responsibilities. A common solution is e.g. to appoint one member of the management board who resides permanently in Poland and speaks Polish as well as another member of the management board who comes directly from the investor. Doing so the shareholder of the company retains control over the entity and may freely move within the Polish market environment.

Recently the level of digitalization of Polish administrative institutions has been increasing – more and more matters can be handled remotely by authorizing oneself in the system via ePUAP (Electronic Platform of Public Administration Services), as well as with the use of an electronic signature that is compliant to the European eIDAS regulation. Unfortunately, the practice has shown, that despite developed digital facilities, it may not be easy for people coming from abroad to settle administrative matters – the ePUAP system requires having a personal identity number (PESEL), and most systems and forms are available only in Polish. Therefore, it is important to choose a manager for the Polish company at the very beginning of the administrative process.

While a company may be represented in its relations with many institutions, e.g. in legal, tax or accounting matters by a proxy in the form of a local advisor, unfortunately, it often happens in practice that such a form of authorisation is insufficient, e.g. for a bank to open a bank account for the company. We cannot forget about the necessity to carry out and confirm the KYC (Know Your Customer) process, establishing key data concerning the company, the investor, as well as managing persons. A similar process, concerning the beneficial owner, a person at the very top of the investor's structure, must be carried out when applying to the Central Register of Beneficial Owners, which must be submitted directly by the company's management under penalty of perjury for making false declarations. Due to the obligation to exercise due diligence, both processes require prior analysis, as well as the interaction of the investor, the company's management and the local advisor.

The registration process of a limited liability company should take about 1.5 months, however, the company should be operational and able to conclude contracts much earlier – after signing the articles of association in case of establishing a new entity or the share purchase agreement if the investor decides to purchase a ready-made company. There are pros and cons to both solutions – the choice of the right path depends on many factors, such as business goals, number of investors or further investment plans, and should be made on a case-by-case basis. The most time-consuming process is obtaining all documentation from an investor required to register or purchase a company, as a large part of it has to be prepared in a paper version, often in a special form with apostille, as well as the very process of registration in court, which can take 3-4 weeks.

Business strategy

A registered company can start the process of applying for state aid: choosing the call for proposals in which the company has the greatest chance of success, developing the project concept and preparing a complete set of application documentation. It would be worthwhile if the project, with which the company will run for co-financing, is a (key) element of a broader, long-term strategy of the company on the Polish market. This definitely increases the credibility of the company as an applicant in the eyes of institutions evaluating applications for co-financing. In the case of R&D projects, a long-term strategy increases the probability of effective implementation of the project results. The company should therefore have a comprehensive strategy for further activities and its next steps should be precisely planned. Another solution to strengthen the credibility of the company can be setting up the project in cooperation with Polish entities (applying in a consortium) or establishing business partnerships.

The concept of the scope of future activities on the new market and the necessary know-how usually belong to the parent company. In the case of applying for EU funding it is worth considering, at the very beginning, appointing of a Polish-speaking substantive coordinator and providing him with full know-how about the planned project. Such a person can prepare or verify the application documentation prepared by the advisor from the content-related point of view – as a rule, the documentation requires very detailed information about the project, and even a small inaccuracy can be detrimental to the applicant. It is recommended that the coordinator takes part in the project assessment process as a representative of the company on the panel of experts, which is a common element of the grant project assessment. This solution limits also purely practical problems such as inconveniences resulting from time zone differences or costs of translation of the whole application documentation for the representatives of the parent company.

Apart from purely technical issues, preparing a grant application usually involves a number of preparatory and organizational activities to be carried out, such as establishing cooperation with other entities, obtaining offers and letters of intent from suppliers / contractors for project budgeting, property rights analysis, translations or staff recruitment. Coordination of the above activities should also be the responsibility of the parent company's representative who is physically present in Poland.

Buffer time

Planning and execution of the matters described above is very time consuming. Preparation of a grant application in "standard" conditions, for an already operating company as an applicant requires min. 1 month of full engagement of several or even over a dozen people depending on the level of complexity of the project. In the case of a foreign entity even more time is needed – the time needed to register the company, to get acquainted with the new market and its rules is added to the calculation. For this reason you should reserve at least 4-5 months for the process of commencement and registration of business activity, and then preparing full documentation enabling you to apply for financial support for the project – at the same time the help of a person who has successfully led other companies through a similar scenario and thus knows perfectly well where and how to arrange subsequent steps may turn out to be a great time and stress saver.

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