Suspension of the business of a capital company

The management board of a capital company is competent to decide on the suspension of the company’s business. Suspension of business is nothing more than a temporary cessation of business as defined in Article 22 of the Entrepreneurs Act (Journal of Laws 2021.162, i.e. 2021.01.26).

More and more limited liability companies are accessing the opportunities offered by the above provision of the Business Law, and this is mainly in order to avoid many costs, obligations and to use the time needed to take corrective action.

This raises a basic question: what is the procedure for suspending a capital company?

Article 23 (2) of the Business Law stipulates that an entrepreneur entered in the register of entrepreneurs of the National Court Register may suspend the performance of business for a period from 30 days to 24 months. Pursuant to Article 24 (3) of the Business Law in the case of an entrepreneur entered in the register of entrepreneurs of the National Court Register, the period of suspension of business starts from the day specified in the application for the entry of information on the suspension of business, not earlier than on the day the application was submitted, and lasts until the day specified in the application for the entry of information on the resumption of business, which may not be earlier than the day the application was submitted.

At the very beginning, however, before starting the procedure of suspending the company’s business, the management board has to terminate all employment contracts with employees. This is because, in accordance with current legislation, a company may suspend its operations on the condition that it
does not employ employees under a contract of employment, by appointment, election, appointment or under a cooperative employment contract. Before suspending the business, the employed persons and their family members must also be de-registered with the Social Security.

The procedure itself for the suspension of a capital company is not highly complicated. Commercial law companies file an application to suspend their business with the National Court Register. As of 1 July 2021, this is only possible electronically via the Court Register Portal on the KRS-Z62 form, in which the date of commencement of the business suspension is mentioned.

In order to effectively suspend the company’s business, an account must be created on the Court Register Portal through the tab ,,KRS e-forms”. Then, after logging in, you can prepare a suspension application and attach the required documents to it. Necessary documents to attach are: resolution of the Management Board on the suspension of the company’s activity – the resolution should contain the following data: KRS registration number, NIP (taxpayer identification number), the company’s address, information on the period for which the company is to be suspended. Another required document is a declaration of the Management Board that the company does not employ any employees. The application is signed by the entire Management Board of the company.

Submitting the form online via the Court Register Portal is the only way to provide documents, filing the application in the traditional way will result in rejection. There is no fee for submitting the application. Information on the suspension of the company’s activity is not announced in the Monitor Sądowy i Gospodarczy, but it is placed in section ,,6” of the register of entrepreneurs.

It must be emphasised that the suspension of business does not affect the legal existence of the entity, the company retains its legal capacity and remains a party to all legal relations, although business is suspended.

However, during the period of suspension, an entity entered in the National Court Register should not undertake any business-related activities, with the exception of any activities undertaken in order to preserve or secure a source of income.

It is worth remembering that the suspension of the company’s business also entails certain obligations. These include, inter alia, participating in all administrative, court and tax proceedings related to the activity carried out before the period of suspension, performing duties prescribed by law, participating in inspections provided for entrepreneurs carrying out business, submitting annual financial statements, keeping accounts, paying public and legal dues such as real estate tax, tax on means of transport, environmental fees, etc.

Summary

In Polish law, a limited liability company may suspend its business. Suspension of business activity by a limited liability company is a process that allows the company to temporarily stop conducting business. During this period, the company is temporarily blocked and does not carry out normal business. Under suspension, the company remains a formally existing entity but, as noted above, it suspends its business for a limited period. Suspension can be useful in crisis or restructuring, thus providing the company with the necessary time to take corrective action. During the suspension, the company does not incur some of its tax and financial obligations. The suspension procedure must be followed in accordance with the rules governing the suspension of the business of a capital company. The procedure can be complex and its improper execution may lead to adverse legal consequences.

Authors:

Zuzanna Włoczko, legal assistant

Jarosław Rudy, Attorney at Law

Sources:

1. Act of 6 March 2018 – (consolidated text Dz. U. – Journal of Laws of 2023, item 221, as amended).
2. A. Jaworski, 2.6.5.1. Istota i przesłanki zawieszenia działalności gospodarczej [in:] Krajowy Rejestr Sądowy i postępowanie rejestrowe, ed. A. Komenda, Warsaw 2021. A. Komenda, Warszawa 2021.
3. https://www.biznes.gov.pl/pl/portal/0079
4. https://finhack.pl/jak-zawiesic-spolke-np-spolke-z-o-o/
5. https://podatki-katowice.pl/jak-zawiesic-dzialalnosc-spolki-z-o-o/