Category: Law

Monopoly the way we know it is not much of a game…


A German Monopoly board in the middle of a gam...
Monopoly - the only game in town

In Monopoly, whichever player is banker is supposed to keep the bank money separate to the money he’s also doing business with in the market. He’s also supposed to run the bank according to certain rules and if he was cheating it’d be game over. They should bring out a new version of Monopoly in which the Banker is allowed to cheat all he likes and always automatically wins, and another player is called The Government and that player chooses from the Chance and Community Chest cards for the other players instead of just getting them to take the next one in a shuffled pack. The Government cannot only do it to the banker – they automatically give the Banker the best card. Banker and Government get to throw three dice instead of two, and they are also allowed to compulsorily purchase other player’s properties, and also send them to Jail for two turns if they complain about the unfairness of the rules.

That modern update to the famous board game would be most enlightening. Nobody would play it given the choice, but in reality of course we don’t really have a choice. After all, there’s a monopoly of government in any country and there’s an oligopoly of banks.

Liability of Polish company Management Board members – TGC Legal Alert


Warsaw skyline from Pole Mokotowskie
Warsaw Skyline - TGC's new office is near the left side.
 
 TGC corporate lawyers have sent in the following reminder of legal responsibilities of directors in Poland that are often overlooked. Please take a moment to ensure you know the following if it impacts on you.
Dear Quoracy.com subscribers,We would like to draw your attention to the liability of members of the management board in Polish companies, as regulated by a number of legal acts. Management board members bear civil liability, criminal liability, liability for tax obligations, liability to the Social Insurance Office and liability resulting from specific provisions (e.g. resulting from the Accounting Act – Journal of Laws of 2009, no. 152, position 1223).According to the provisions of the Commercial Companies Code (Journal of Laws of 2000, no. 94, position 1037) members of the management board bear civil liability for actions taken on behalf of the company already at the stage of establishment of the company, i.e. from the date of signing of articles of incorporationof the company. This applies even before registration of the company with the State Court Register.It should be noted that members of the management board bear civil liability towards the company, among other things, for any damages inflicted upon the company in result of the management board members’ activities or omissions contrary to the articles of incorporation. Furthermore, they are jointly and severally liable for the company’s liabilities when enforcement proceedings against the company have proven ineffective.

Criminal liability of members of the management board arises as a result of a property damage caused to the company.

Apart from civil and criminal liability, members of the management board are jointly and severally liable for tax arrears, as well as for lack of (timely) payment of contributions to social insurance. It has to be noted that this type of liability lasts even after deletion of the company from the State Court Register.

In most cases members of the management board may protect themselves against responsibility for the company’s liabilities on condition that they undertake appropriate preventive activities in due time.

We will be happy to give you any detailed information with regard to the liability of the management board members, as well as circumstances of release of the liability.

For further information please contact our expert:

Agata Pastuchow-Brzezińska
Director of Corporate Department
T: +48 22 653 3649
E: apastuchow

TGC Corporate Lawyers
ul. Królewska 27
00-060 Warsaw, Poland
T: +48 22 653 3644
F: +48 22 827 6915
E: tgc
W: http://www.tgc.eu

We are moving!From 1st May 2011our new Warsaw office address and phone numbers will be:Crown Tower
ul. Hrubieszowska 2, 01-209 WarsawTelephone: +48 22 295 3300
Fax: +48 22 295 3301

It pays to avoid the BBBs (Bargain Basement Bookkeepers)


Violent Storm Strikes Western Europe
Is a storm brewing over your books and records?

I am writing to relate a story based on true events which came to light last week when one gentleman came into one of our offices and spoke to me. To keep matters confidential, I won’t say the country – the same can happen in any country – or identify anything about this company the gentleman had – even the sector. It can happen to many sectors.

This gentleman had given his company bookkeeping and tax affairs to an outsourced book-keeper for his business in that particular country. He used outsourcing back home in his own country (I’m not saying where that is either) and he appreciated the benefit of being able to have his bookkeeping professionally handled by experts without needing to employ anyone, worry about holiday cover, etc etc.

Some time ago this gentleman had included our firm in his search, and we gave him a price entirely fair for a company with our niche in the market, that is, internationally trained people, with English, with proper quality assurance, supervision and back-up.  In other words,  a peer-reviewed, branded service tailored absolutely to the needs of West European businesses in the middle tier coming to start up in East Europe, and also very good for businesses not exactly in the middle tier and from places outside West Europe.

That means that the fee offered was not nearly as high as a Big Four service would cost, but certainly higher than a purely local service.

Now I’m not knocking the purely local services – many of them are very good, but for purely local clients as they don’t tend to be claiming proficiency in foreign languages or have the ability to engage cross-culturally with the client (a source of just as many miscommunications as the language barrier on its own). They are not a great fit with the international client, and often their cheaper price becomes a false economy as frustrations rise on both sides of the desk.

The problem in this case wasn’t lack of English – this gentleman’s chosen bookkeeper spoke English, apparently.

But she was in business just on her own. With no back-up employees, probably very little insurance, probably very few resources to turn to, and very few overheads hence enabling a price no quality firm could ever compete with. That was the price that tempted this gentleman to take her bid over mine.

But since then, it became apparent that this bookkeeper was not entirely what she seemed to be.

Neither this gentleman nor myself are qualified psychiatrists, and we could only speculate on what might have gone wrong, or been wrong all along with this person. The fact is, though, that mental illness happens in the human population. We’ve probably all had employees or acquaintances who have had a mental illness, and in a larger company they quickly get noticed by colleagues, and steps taken to look after them and safeguard the clients’ affairs. When they are on their own, no such controls exist.

Suffice it to say this lady no longer was answering emails or picking up the telephone when he was calling, and when he rang from another number she didn’t know, she put the phone down when she heard his voice – the person entrusted with his company’s books and records and processing a VAT reclaim for more money than she would normally earn in many years. As you can see, the situation is now much harder – and therefore more costly – for us to repair than if he had simply given us the work in the first place.

It simply doesn’t pay to use these Bargain Basement Bookkeepers. You know what you get if you pay peanuts, and if a price looks too good to be true, it probably is.

Domain names scam – what to do if affected


World Map Politic 2005 with ccTLDs - LQ version
CCTLD map from Wikipedia

You may have received e-mail (especially from Chinese and Hong Kong companies relating to .cn domains bearing your name if you didn’t register in China, but now more commonly in East Europe also) which says that if you use these people’s services they can prevent your name’s domain in that country from getting blocked.

Now this email gets sent out all over the world to addresses harvested from the internet page and chats and from usenet fora by robots, and of course the people behind the email cannot really afford to block every single domain that they are fishing for.  The one sure fire way of making sure that they do block your domain is if you respond to them, whether with threats or with asking for the help, even in terms of “what it would cost”. I suggest you only do this if you don’t want the domain really and have no intention of buying it, as if you are lucky it will lead the scammers into real cash outlay which they’ll never see any return on. I highly encourage that! Maybe some of these pests will stop it if they see that enough internet users are wise to them and don’t mind leading them up a garden path…

You can always search here on EuroDNS (in the interests of transparency that affiliate link earns 10% of anything you buy after you go there, but it shouldn’t cost you more and it’s the service I use myself) and see what the status is of all of your possible combinations of your name and the country endings or generic endings, as well as check the Whois status of all these countries, both Europe and Asia, all in one place. You will probably find that nobody has blocked your domain at all, and if you are interested in owning the domain you can block it there and then. They are ethical and I never had a problem with them that the owner didn’t solve within a week. If they are not contactable one day you can usually get them the next day. Continue reading “Domain names scam – what to do if affected”

So you want to start a business in the Czech Republic? What do you set up, a Company or a Branch?


The main considerations are grouped under headings

LEGAL

• The scope of business of the branch may not be broader than the scope of business of the foreign entity.

• The branch must publish the financial statements of the foreign company in the registry of documents kept by the Commercial Register, which effectively means getting the whole report of the company the branch is part of and translating it into Czech, and publicising it even if the accounts were not liable to be made public in the jurisdiction of the Company.

ACCOUNTING

• In general the same statutory obligations apply for both branch and legal entity from accounting and financial reporting point of view, i.e. every corporate entity doing business in Czech Republic must keep the books in Czech language and must file the financial statements to the Commercial Register.

• The only difference we can see is that the statutory financial statements of branch are to be incorporated into the statutory accounts of the founder whereas in case of legal entity financial statements stands alone and the financial asset (i.e. investment in the subsidiary) is to be shown in the accounts of the parent company.  Branches do not really have separate equity, as they are not legal persons, but in order for the balance sheet to balance the capital employed needs to be shown as if they were, on a pro-forma basis. Likewise purchases of goods by the branch from the company it is part of is legal nonsense, as there is no tranfer of ownership to a branch, but still in order to give a picture of the performance of the branch as well as to be above board with regard to international transfer pricing, again branch accounts should be done with these intra-company “sales” and “purchases” included as pro forma. Remember that the branch has its own tax life in the country where it is.

AUDIT

• The same statutory obligations apply for both branch and legal entity to have its accounts audited.

• The general rules are as follows:

1) joint stock companies One of the following criterions is met for two consecutive accounting periods: a) gross assets of 40.000K CZK b) revenues of 80.000K CZK c) average number of employees over 50.

2) other legal entities (limited liability companies, branches, etc.) Two of three above criterions are met for two consecutive accounting periods.

 TAX

• From the Czech corporate taxation point of view the branch must register for corporate income tax only if having taxable income in the Czech Republic through a permanent establishment, the legal entity must register in any case.

• In case of the branch the income and costs need to be allocated to branch activities, however keeping in mind transfer pricing and substance-over-form principle that are applicable under both structures, i.e. under both branch and legal entity constructs.

• Profits/losses will be included in profits of the founder of the branch taking into consideration double taxation reliefs.

• From the VAT perspective in case of the branch the VAT payer is actually the headquarter that has Czech VAT registration while in case of the legal entity it is actually the entity itself being Czech VAT payer.

• Profit repatriation in the case of the legal entity must be taken into account, however, if the parent company being an EU entity with more than 10% shareholding for more than 12 months dividend payments are tax exempt.

  Subsidiary Branch
Tax registration obligatory Only if taxable income from sources in the Czech Republic
Tax at operational level 19% CIT 19% CIT
Tax at parent/headquarter level in respect of subsidiary’/branch’s profits Participation exemption or tax credit (in cases of dividend distribution) Tax rate of the headquarter (note: double taxation relief ® participation exemption or tax credit)
Withholding tax (dividend, interest, royalties) Often (note: EC Directives and tax treaties) Rarely
Loss settlement with foreign parent company/headquarter In principle no Yes (unless exempt under headquarters’ domestic tax law)
Liability debt (claims) at operational level Local operating company (=subsidiary) Headquarter

The above was based on the amiable co-operation of TGC Corporate Lawyers and Baker Tilly sro in Prague and Brno.

Poland – New Anti-Smoking Law At Long Last!


On 15 November 2010 an amendment to the Law on Health Protection against the Consequences of Tobacco Products comes into force. The amendment introduces a total ban on smoking, i.e. in hospitals and health clinics, schools and colleges, cultural and recreation sites, pubs and restaurants, sports facilities, public transport and workplaces. Owners or property managers (e.g. hotels, schools, workplaces) may designate smoking rooms on their territory, which means separate facilities that meet certain standards of construction and air ventilation.

Implications for employers

To date smoking in the workplace was also prohibited, but employers with at least 20 staff were obliged to establish a smoking room, regardless of the number of smoking employees. Specific standards in terms of space and ventilation of smoking rooms are governed by general health and safety (BHP) regulations.

After 15 November 2010 the decision on establishment of a smoking room will belong to the owner or administrator of the building. The existing smoking rooms may continue to operate if they meet the standards required by BHP regulations. In addition, the owner or property manager is obliged to put up in visible places clear information about the ban on smoking tobacco in the building. Employees smoking outside designated sites may be punished by a disciplinary penalty, and the employer may be given a mandate.

While considering the establishment of a smoking room in the office, the employer should take into account many aspects. Creation of a smoking room generates costs, but lacking a smoking room will not result in smokers resigning their habit or improving work efficiency. The need to go outside the office premises to smoke results in a loss of working time, and the sight of groups of smokers and cigarette-ends outside the office entrance does not improve company image. Certainly, more effective would be the prevention of psychosocial hazards and the promotion of healthy behaviour by the employer.

Traditional vs. electronic cigarette

For several years e-cigarettes have been available on the market, which are electronic devices that provide inhaled doses of nicotine. The electronic cigarette is a small device – resembling a traditional cigarette – which is electric or battery powered. The “smoke” from an e-cigarette is almost odourless and much less burdensome for non-smokers.

The e-cigarette is a new product and therefore its legal status is varied. In some countries its sale is forbidden, and in some completely legal or permitted under certain conditions. Poland has not yet developed any regulations on the sale and use of e-cigarettes. Recent legal changes have not covered this issue as well, although the Ministry of Health is considering a prohibition of the sale of e-cigarettes in the near future.

The National Labour Inspectorate (PIP) receives more and more inquiries from employers and employees regarding the terms of use of e-cigarettes in the workplace. In particular, non-smoking employees are worried whether smoking e-cigarettes in the office does not cause similar effects to passive smoking. Because there is no conclusive research yet on the effects of e-cigarettes for their users and the environment, it seems possible that within their obligation to ensure all employees safe and healthy working conditions the employers introduce a ban on smoking e-cigarettes in the workplace (similar to traditional tobacco products).

To find out more

If you need a detailed interpretation of the new regulations or consultation on creating healthy work environment, please contact the  experts at TGC who are briefing businesses and individuals on this area:

Agnieszka Janowska
Director of the Labour Law Department
Tel.: +48 22 653 3862
Email: ajanowska@tgc.eu

Dorota Strzelec
Consultant/ Occupational Psychologist
HR Management Department
T:  +48 22 653 3866
E: dstrzelec@tgc.eu

TGC Corporate Lawyers
ul. Królewska 27
00-060 Warsaw, Poland
T: +48 22 653 3644
F: +48 22 827 6915
E: tgc@tgc.eu
W: http://www.tgc.eu