Poland: Insolvency/Bankruptcy

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In a recent judgment, the Polish Supreme Court resolved an important question concerning the rights of a creditor to bring legal proceedings after the initiation of bankruptcy proceedings by a debtor.

In recent years, Poland has seen a significant rise in restructuring proceedings.

According to article 11 of Poland’s Bankruptcy and reorganisation law as of 28 February 2003 (Journal of laws 2009, No. 175, position 1361, as amended), a debtor who is a legal person (including, in particular, a limited liability company) is considered to be insolvent when the value of its liabilities exceeds the value of its assets, even if the debtor continues to pay its liabilities (balance sheet insolvency).

Continuing with an examination of insolvency regulations in Poland, one could ask a tricky question: it is obvious that an entity will be deemed insolvent if it fails to satisfy (discharge) its due and payable obligations, but could an entity that does perform its obligations duly and in a timely manner be deemed insolvent as well?

From 1 January 2012, foreign entity performing business in Poland through a branch office will be required to complete a liquidation procedure, in accordance with the provisions of the Polish commercial companies code concerning the liquidation of a limited liability company, to close down its Polish branch.