Key legal changes in 2019 for the factoring industry

As we do every year, below is a subjective summary of the most important legal changes for the factoring industry in 2021 - both already enacted, in force and planned. We have already written about some of them more extensively on the blog, and we are yet to write about some of them, especially when the final drafts and contents of the adopted regulations are known.

1. b2sb - sole traders partly like consumers

This is undoubtedly the most important change for the industry of 2021. On 1.01.2021, a landmark amendment came into force, creating a new group of customers, i.e. business-individuals treated partly like consumers (b2sb), in addition to businesses (b2b) and consumers (b2c). This generates the need, among other things, to remodel existing contract templates (contracts, regulations, general terms and conditions, price lists) and strip them of prohibited (abusive) clauses. We wrote about the change here on the general blog. It is still too early to write about the practical effects of the introduced change. Certainly, it can already be said that the client in the person of a sole proprietor and partner in a partnership has become a higher-risk client.

2. New rules for complaints

The draft law on handling complaints and disputes of customers of financial market entities and the Financial Education Fund envisages transferring the current powers of the Financial Ombudsman to the President of the OCCP. We have written about the draft here. The Public Finance Committee referred the bill for further work in the standing subcommittee on financial institutions. The status of the work can be followed here. The regulation, which was supposed to come into force at the beginning of 2021 as you can see, has been pushed back; however, it is expected to be voted on later in 2021.

3. "Consumer Bills of Exchange".

A promissory note surety as collateral for a factoring agreement may lose its importance. All because of a pending amendment concerning so-called consumer bills of exchange. On 23.09.2020, a draft bill amending the CPC and certain other laws - including the Bill of Exchange Law - was published on the RCL website. The proposed regulation provides for, among other things, examination of the compliance of an agreement creating a promissory note obligation with the law in terms of abusive clauses, attaching to the lawsuit an agreement or a statement as to whether the claim asserted in the lawsuit arose in connection with an agreement concluded with a consumer (a fine of up to PLN 3,000 will be imposed for making a false statement), a ban on the indorsement of consumer bills of exchange, an upper limit on the court fee for filing charges against a payment order in cases in which the defendant is a consumer (max. 750 zlotys), extended deadline for objections. The above-described draft amendment may also limit the use of promissory note sureties of individuals (consumers). Therefore, the amendment will primarily affect entities that use this type of method of securing their claims, among others, the factoring industry, where the guarantor of the promissory note is the person who provides the surety as a consumer (e.g., the spouse of a factoring-sole trader). We will write more extensively about the draft when it takes final form and is put to a vote. The status of the work can be followed here.

4. Law on payment congestion

On 1.01.2021, a regulation went into effect for the largest businesses to prepare reports on their payment practices. According to the regulations, the first report - for 2020. - entrepreneurs had to submit by 1.02.2021, which was possible through an electronic form available on the business.gov.pl portal. The turn of the year 2020/2021 also marked the activity of the Authorities in terms of control proceedings related to violations of the Act.

5. Law on the National Register of Debtors (KRZ).

We wrote about the change in detail here. The data contained in the NCR will be widely available and public. They will be used by individuals or financial institutions, including factoring companies. This will make it possible to verify factoring companies, their body members, partners or guarantors. It will make it possible to determine whether such persons are/were subject to restructuring or bankruptcy proceedings, or whether a ban on business activity has been issued, or whether enforcement proceedings have been discontinued due to ineffectiveness of enforcement, or whether the debtor has been in arrears with alimony payments for more than 3 months. The database itself is not to be launched until the latest day of 1.07.2021 r. On 9.02.2021, the RCL website published the Draft Regulation of the Minister of Justice on the manner of posting data in the National Register of Debtors, the manner of processing and disclosure of data contained in the Register, as well as the mode and manner of processing and transferring data collected in the Register for scientific research and statistical purposes. The principle is that data in the Registry will be posted through the ICT System.

6. SLIM VAT 2 and e-invoicing consultation ends

On 18.02.2021. The Ministry of Finance has unveiled a new draft of the SLIM VAT 2 law. Until the end of last month, the MF was accepting comments and opinions on the changes. The package aims to simplify the invoicing procedure, reduce paperwork and improve liquidity for companies using MPP. Most of the planned solutions are scheduled to take effect on October 1, 2021. The Finance Ministry also recently completed consultations on legislation that will introduce voluntary e-invoicing. Taxpayers who settle this way will receive their VAT refunds faster. The deadline for them will be shortened to 40 (from 60). The ministry hopes that these changes will also take effect on October 1, 2021. Meanwhile, e-invoicing is expected to become mandatory from 2023.

7. Prosta Joint Stock Company

On 1.07.2021, an amendment to the Commercial Companies Code introducing the following should finally come into force a new type of company - a simple joint stock company (PSA), which is an interesting form of activity dedicated to so-called start-ups providing, among other things, for a minimum share capital of PLN 1.00, very high flexibility in terms of: share trading, contribution, formation of company bodies, preference of shares. Therefore, it should be expected that sooner or later this type of entity may appear as a factoring applicant or recipient. These types of companies especially intensively may begin to operate in the IT sector. Initially, such companies may enjoy limited confidence.

8. AML amendment

On 30.03.2021 the President of the Republic of Poland was sent for signature Law on amending the Law on Counteracting Money Laundering and Financing of Terrorism and some other laws. The law expands the catalog of obligated institutions. In doing so, the definition of a beneficial owner has been clarified, among other things. Once the planned changes take effect, obligated institutions will have to make sure that they have recognized all of their client's beneficial owners. The draft expands the catalog of entities obliged to disclose their beneficiary to the CRBR. In addition to certain commercial law companies listed in the law so far, this obligation will also apply to: trusts (limited to those whose trustees reside or establish business relations or acquire real estate in Poland, on behalf of or for the benefit of the trust), partnerships, European companies and cooperatives, European economic interest groupings, associations subject to registration in the National Court Register, and foundations.

9. Dematerialization of SA and SKA shares

SA and SKA shares became dematerialized as of 1.03.2021 - they ceased to be in documentary form, resulting in the complete removal of paper shares from business trading and their replacement with shares in digital form. This change, in conjunction with the CRBR, will increase the transparency of SAs and SKAs - these companies will be easier to verify in terms of the beneficiaries of real and actual shareholders. It will thus be easier to verify the relationship between the factor and the recipient.

10. Change in the way entries are made in the KRS

The deadline for the full electronification of the KRS application system has already been pushed back several times. For the time being, as of 1.07.2021, applications to the KRS and the documents attached to them are to be submitted only in electronic form. Submission will require the use of a qualified signature or an ePUAP trusted profile, or the use of a professional attorney. As of this date, it will not be possible to submit applications for entry in traditional paper form. Correspondence between the applicant and the registry court will also be conducted electronically.

What about the KRS paper files that are a mine of knowledge for financial institutions?

As of the effective date of the regulations, the files will be maintained exclusively in the ICT system. However, any existing documents in paper form will continue to be made available for inspection at the Registry Court's reading room. Register files maintained in paper form will not be converted into files maintained in the ICT system. A document in paper form relating to an entity entered in the Register of Entrepreneurs, which is the basis for ex officio action by the court, shall be processed into electronic form. To sum up - in terms of familiarizing ourselves with the files and analyzing the company's legal and financial situation, we will still be moving in a hybrid model for at least a dozen-something months.

11. Amendments to the banking law (CRD V).

On March 29, 2021. The President of the Republic of Poland was handed a bill amending the Banking Law and certain other laws for signature. The bill provides for amendments to five laws relevant to the banking sector:

• Law of 14.03.2003 on the Bank of National Economy,
• Law of 21.07.2006 on supervision of the financial market,
• Act of 29.07.2005 on trading in financial instruments,
• Act of 29.08.1997. - Banking Law and
• Law of 5.08.2015 on macroprudential supervision and crisis management in the financial system

The effective dates of the planned amendments are set forth in Article 26 of the proposed law. In principle, this is to occur 14 days after the date of the law's promulgation, although some modifications to the Banking Law and the Law on Trading in Financial Instruments are scheduled for the end of June 2021. In addition, yet other modifications to these laws and the Law on Macroprudential Supervision and Crisis Management in the Financial System are not expected to take place until January 1, 2023.

12. Q&A to the UKNF Announcement of 23.01.2020 on information processing in cloud computing

At the end of March this year UKNF, published questions and answers, which cover selected aspects of the use of Kommunication from the Office of the Financial Supervision Authority dated January 23, 2020 regarding the processing of information by supervised entities in public or hybrid cloud computing. The Communiqué itself is not a piece of legislation, but in it the FSC explains its understanding of the requirements set forth in the regulations to ensure the security of data processing by supervised entities using cloud services. The first Q&A to the communiqué was developed in December 2020. Another was issued recently, and it will find answers to 45 questions on, among other things, the subject of the application of the communiqué to insurance agents and branches of insurance companies, the scope of responsibility of so-called insourcers, and the issue of how to safely remove data from the cloud.

13. Digitization of the judiciary during the COVID period

The first piece of legislation adopted in the era of pandemonium in targeting the electronic circulation of documents in administration and business is the Law on Electronic Delivery of November 18, 2020. It aims to ensure that, as a rule, correspondence is sent and received by public entities only in electronic form. The introduction of electronic delivery will be able to be applied to most administrative procedures, court-administrative procedures and in civil-legal proceedings. However, the law is general in nature, it provides for a number of phases of changes in specific areas, and the entire process of its entry into force is not expected to end until January 1, 2029.

At the same time, major changes to the CCP and the March 2, 2020 shield related to the digitization of the judiciary are being worked on in the Sejm. Initially, the Ministry of Justice's draft stipulated that pleadings should be sent to a professional attorney's business email address and considered delivered on the next business day from the moment they are "entered by the court into the means of electronic communication." The draft provoked considerable opposition, and as a result, an amendment was passed in the Sejm, according to which e-writings are to be served through the courts' information portal. The effect of such service will be after 14 days.

The change was also supported by the Ministry of Justice itself. The MS is now even advocating that the Common Courts Information Portal be replaced by the Common Courts Portal. The new system would ultimately serve to completely digitize court files. For the time being, however, the bill only moves in the direction of introducing e-delivery of pleadings

In addition, the draft provides for the introduction of ebailiff auctions of real estate. Tendering in this form is to take place only at the request of the creditor, following which the bailiff will make the auction notice available on the website of the National Council of Bailiffs.

14. Liability of collective entities

Back in 2019, a draft of the Ministry of Justice's new regulation on the liability of collective entities emerged, providing for whistleblower protection and minimum requirements for compliance units. However, the proposed legislation proved highly controversial and stalled in the Sejm. Currently, the Ministry of Justice is working on another draft amendment. Its text has not yet been released, but it is expected to be based on the liability model that was adopted in the draft sent to the Parliament in January 2019. It is likely that there will be a restriction of the new law's subjective scope to large companies only, as well as a tightening of the severity of sanctions. It is also expected that the draft law will implement the EU's directive on the protection of whistleblowers, which came into force in December 2019.

15. Anti-Corruption Code

The Law on Openness of Public Life remains "frozen" as of 2018. The draft law was intended to require public finance entities and entities that are at least medium-sized businesses (including factoring companies) to take organizational, personnel, technical measures to counteract the creation of an environment conducive to the commission of corruption offenses, including the use of internal anti-corruption procedures. The draft of this law also planned to regulate whistleblowers. However, as can be seen, the vision of creating and implementing full compliance systems in Poland is not yet fully formed by the Polish legislator.