Author: ts_admin

On 4 March 2015, the Regional Court in Warsaw issued an interesting decision by regarding the complaint of the Chairman of the Public Procurement Office submitted against the Decision of the National Board of Appeal. The NBA dismissed the appeal due to the incorrect power of attorney submitted by the appealing Contractor. Let’s look at the case from the very beginning …

Decision of the National Board of Appeal

On 21 November 2014, the National Board of Appeal decided to dismiss the appeal submitted by the Contractor who attached an incorrect power of attorney to its appeal application. The power of attorney did not confirm the authority of the person who had signed the appeal. In the opinion of the NBA, the appealing party could not be called to amend / supplement the power of attorney. The appealing party is only allowed to provide a missing power of attorney, but cannot amend it if it is incorrect.

The Chairman of the Public Procurement Office objected to this Decision and filed a complaint against it. The Chairman stated that an incorrect power of attorney could be amended or supplemented as if it had not been submitted in the first place.

Decision of the Regional Court

The position of the Chairman of the Public Procurement Office was upheld by the Regional Court in Warsaw. The Court stated that the NBA had been wrong in dismissing the appeal.

In the opinion of the judge, the NBA, while investigating the appeal in formal terms, is required to verify if the signatory of the appeal is duly authorised to submit the same. The lack of power of attorney is tantamount to submitting an incorrect power of attorney and indicates the lack of authority of the person submitting it. The NBA is required to call the appellant to remove such a deficiency by submitting a correct power of attorney.

In my opinion…

This decision of the Regional Court is important for two reasons.

Firstly, it provides the appealing entrepreneur with the opportunity to replace the incorrect power of attorney submitted with the appeal lodged with the NBA. So far, this has raised quite considerable controversy due to the ambiguity of the regulation regarding removal of formal deficiencies of the appeal.

Secondly, this decision confirms the importance of the complaint procedure initiated by the Chairman of the Public Procurement Office, which influences the practice of appeal proceedings in public procurement contracts.

Therefore, the activity of the Chairman of the Public Procurement Office should be perceived as a positive phenomenon when it comes to lodging complaints against controversial decisions of the National Board of Appeal. Keep up the good work, Mr Chairman!

The constitution of a family business is a relatively new document among Polish entrepreneurs. The first document of this type was issued at the end of 2010 – the constitution of the Roleski family business (see also: www.fundacjaroleskich.pl).

Ideas and components of the constitution of a family business

It should not be surprising that a family business, created and developed for many years, gives rise to a strong attachment of the founders to their family business. However, with each successive generation, this attachment may become weaker. In addition, expansion of the family increases the likelihood of possible difficulties, e.g. related to the successful management of the company. Therefore, the collapse of the company must be prevented even before the first problems or crisis symptoms appear. In order to avoid them, family entrepreneurs need to create a document clearly defining the objectives and the values of the family, its vision and guidance in terms of managing the business, decision-making and dispute resolution.

Creation of a family business constitution seems to be a good solution.

Among the many reasons why a family business constitution is worth drafting, we should mention the regulation of the relationship between the family and the business, and the guaranteed existence of the business in the future. Moreover, the constitution allows for integration of the family around the business, it promotes its coherence and integrity, as well as defines common tasks and plans by supporting communication between family members. Another important element is the possibility to create the so-called governing bodies in the family – performing similar functions to those exercised by managing or supervisory bodies in companies.

As far as the practical aspect of such constitution is concerned, this document may determine the manner of profit sharing in the family, the principles of employment of individual family members, the principles of share disposal or introducing amendments to the constitution.

It should be noted here that each constitution is directly related to a specific family and a specific business. Due to discrepancy in objectives and values, creation of a single, generally applicable specimen constitution is not possible. Such documents are developed for each family on an individual basis. Furthermore, the constitution of a family business does not have a binding force and therefore should be harmonised with other documents, e.g. articles of association/company deed.

The studies conducted in Germany in 2011 indicated that that in 80% of the surveyed family businesses, the expectations related to the constitution had been fully met and the effects of its creation had exceeded the expectations (source: www.firmyrodzinne.org).

The constitution of a family business offers intergenerational stability to family businesses.

In my opinion, a constitution of a family business is an excellent choice to ensure continuity of the business. At the same time, it is a great way to regulate the relationships between individual family members, and between the family and the business itself. I recommend this solution to those entrepreneurs who are interested in maintaining both the identity and ownership of their family business.

A very interesting ruling was announced by the Regional Court in Gdansk on 10 July 2015 (file reference number I C 2/15).

Ambiguous definition of the method of calculating the price in the Terms of Reference.

The Contracting Authority placed a notice of a public procurement procedure for the provision of certain services. In the contents of the Terms of Reference, it defined the method of calculating the price for the service. However, the method was so imprecise and unclear that each of the three bidders calculated the price in a different manner.

The Contracting Authority rejected the offers of two bidders due to the incorrect calculation of the service price, and selected the offer submitted by the third bidder.

The Chairman of the Public Procurement Office decided that this situation was unlawful and brought an action for annulment of the concluded contract.

Contractors cannot suffer negative consequences of errors in the Terms of Reference.

The Court upheld the decision of the Chairman of the Public Procurement Office, and indicated that the contents and provisions of the Terms of Reference should be clear and precise, and should not raise any interpretation doubts.

Most importantly, the Court prescribed that in the case of any doubts or unclear provisions in the Terms of Reference “they should be decided in favour of contractors who may not suffer negative effects of their incompliance with unclear and wrongly formulated provisions of the Terms of Reference”.

In the justification of its ruling, the Court stated that a bid may not be rejected due to improper calculation of the price if the same was attributable solely to the Contracting Authority and the manner of preparation of the Terms of Reference allowing for errors in the price calculation.

The Court expressly upheld the opinion demonstrated by the Chairman of the Public Procurement Office by stating that given the fact that all the offers had been prepared on the basis of the Terms of Reference, and each of them was in compliance with one of the price calculation interpretation options – there were no grounds for rejecting two of the three offers.

Interpretation doubts should be ruled in favour of contractors.

This ruling is a clear statement that imprecise and ambiguous Terms of Reference constitute a flagrant violation of laws, and result in consequences which may not be accepted from the point of view of public procurement.

By issuing the ruling, the Court has further supported the opinion that Contractors should be treated as a less privileged party in relationship with the Contracting Authority in the public procurement process, and therefore any doubts arising from Terms of Reference should be ruled in their favour.

It is difficult to clearly estimate how many people are engaged in conducting individual businesses (self-employment). Certainly, this is a very large group, and according to various reports and data, in Poland there are two million self-employed entrepreneurs.

However, a few of them probably wonder if, when and how to assign their business to their children, wives or other family members, i.e. succession?

Methods of individual business succession

We should note that there are three main methods of assigning a business conducted in the form of self-employment.

The first method involves concluding an agreement with the successor (e.g. children) on the sale of the business. If one of the assets of such business is real estate, the agreement has to be concluded in notarial deed form. Otherwise, a standard agreement would be sufficient.

Another option is donation of the business. The donor and the donee make individual statements before a notary public, and thus execute a free-of-charge transfer of a benefit to the donee.

The last and the least known method of succession is inheritance: statutory or testamentary – provided that the testator has prepared his/her last will. What is important here is the fact that the succession is only effective upon the death of the testator, and thus, he/she may run the business throughout his/her life.

What is the most efficient method of succession?

Undoubtedly, each entrepreneur wants his/her business to operate, develop and generate profits for as long as possible. The above options allow for taking care of the future of the family and the business itself before the death of the entrepreneur. Of course, they do not guarantee the continuation of the business in the coming years, but significantly reduce the risk of its bankruptcy once its founder has ceased managing it.

My personal recommendation is succession by disposal or donation. Such methods guarantee the execution of the will of the entrepreneur, in terms of succession, without any disputes. On the other hand, in the case of inheritance, there may be disputes between individual successors.

Furthermore, in the case of failure to prepare or improper preparation of the succession process, after the death of the business owner, there may be significant obstacles to the further existence of the business.

The Parliamentary Commission of Economy is working on the draft bill of the act under the name of the Business Law (printout 3807). This draft is to be a “constitution for entrepreneurs”, including a catalogue of basis rights and guarantees for entrepreneurs. This seems to be a very favourable solution.

Let’s take a look at a few fundamental standards of this act according to which entrepreneurs will conduct their businesses:

1. The principle that “Whatever is not forbidden by law is permitted by law” – henceforth, in the areas which are not regulated by law, entrepreneurs will be able to make free choices and select their own measures, provided that the same shall not infringe on the rights and freedom other entities.

2. The principle of friendly interpretation of regulations by public administration authorities – in the case of interpretation doubts which cannot be removed (and also in the case of multiple interpretation options), authorities should settle the matter in a way that does not deteriorate the situation of the entrepreneur.

3. The principle of presumed honesty of the entrepreneur – in the case of interpretation doubts which cannot be removed, they should be ruled in favour of the entrepreneur.

4. The principle of reasonable deadlines for entrepreneurs – the draft provides for facilitation of matters related to business activity, the public administration authority will be required to designate such deadlines which will allow the entrepreneur to sufficiently and thoroughly perform a given action.

5. The principle of legitimate expectations of the entrepreneur – according to which, public authorities will have to take action with regard to the entrepreneur in accordance with the well-established practice and a clear guidance as to how to settle the matter.

6. Extension of the maximum permissible suspension period in business activity up to 36 months.

Will such basic principles of free economic operation become effective? We will see … However, the mere fact of initiating a discussion on how to facilitate economic activity in Poland was necessary! This draft act indicates that the regulator is ready to meet the expectations of entrepreneurs! A very good start indeed…

Following the work of the Polish Parliament, the newly adopted act (of 10 September 2015) on the amendment of the Tax Ordinance Law introduces significant tax changes for entrepreneurs.

The general aim of this amendment is to simplify tax procedures and improve the tax collection system.

The most important changes are as follows:

1. Register of General Powers of Attorney

Introduction of a general power of attorney – in addition to the specific power of attorney for individual matters – based on which the taxpayer may be represented in all tax matters. Such powers of attorney will be submitted electronically to the central register, and exempt from tax duty.

In our opinion, a central register of general powers of attorney is a solution that will enable the taxpayer to act through its professional attorney, without the necessity of furnishing copies of the power of attorney in each individual case.

2. Changes in calculating late payment interest

Calculation of late payment interest will be carried out in accordance with two additional rates:

• Reduced rate (50% of the late payment interest) – in order to promote self-correction of errors in declarations submitted by taxpayers

• Increased rate (150% of the late payment interest) – in order to prevent tax avoidance in high risk areas, such as VAT, excise duty, customs duty

You could say that finally, the taxpayer who corrects the declaration on its own initiative will be treated more favourably than those ‘caught’ by the tax office. A good solution for reliable taxpayers!

3. “Group” tax interpretation

The changes involve also the introduction of a group application for legal interpretation of tax provisions. Thus, apart from the individual interpretation, the tax authority will also issue group interpretations applicable to a bigger number of taxpayers with similar factual status. This change should be regarded as a milestone!

We do hope that such positive proposals for taxpayers will be put into practice.

The Act is to enter into force as of 1 January 2016. The draft is still waiting to be signed by the President.

While reviewing the current case-law of Regional Courts in cases involving complaints lodged against the decisions of the National Board of Appeal, I came across a very interesting ruling of the Regional Court in Kalisz of 26 March 2015. The ruling was issued upon the complaint of the Chairman of the Public Procurement Office against the decision of the National Board of Appeal of 5 November 2014.

Wrongful exclusion of the Contractor

In the case in question, the Contracting Authority excluded the Contractor from public tendering after calling the Contractor to supplement relevant (original) documents in paper form. The Contractor furnished the documents by fax and email with a secure electronic signature verified by a valid qualified certificate.

The National Board of Appeal upheld the position of the Contracting Authority and dismissed the appeal by the Contractor – in its justification, the NBA stated that the Contracting Authority was entitled to limit the form in which the required documents were to be submitted.

The Contracting Authority is not entitled to determine the form of supplemented documents

This decision was objected by the Regional Court in Kalisz. In its ruling, the Court emphasised the fact that the Contracting Authority, in calling the Contractor to supplement the documents confirming fulfilment of conditions for participation in the tendering procedure, may not limit the form of such documents to hard copies (paper form). What is more, the Contractor may submit such documents in electronic form. Thus, the exclusion of the Contractor by the Contracting Authority and the position of the National Board of Appeal have no justification.

Moreover, the Regional Court confirmed that the Contracting Authority was entitled to demand the original document or a notarised copy thereof only if the copy submitted by the Contractor was illegible or there were doubts as it its authenticity. However, such requirement may be placed by the Contracting Authority only after it has reviewed the submitted copy and not prior to its submission by the Contractor.

The Contractor shall decide on the form of supplemented documents.

In accordance with the contents of § 7 of the Regulation of the Prime Minister of 19 February 2013 on the types of documents submitted, the Contractor is entitled to decide on the form of documents supplemented by it upon the request of the Contracting Authority, with regard to documents confirming fulfilment of conditions for participation in the tendering procedure. The Contractor may submit such documents in paper or electronic form and the Contracting Authority is not authorised to limit such form.

For reference, in accordance with § 7 of the abovementioned Regulation, documents may be submitted in the original or in the form of copies authenticated by the Contractor. And in the case of electronically submitted documents, they have to be accompanied by a secure electronic signature verified by a valid qualified certificate.