As indicated in the report by the Central Economic Information Center, as of July 31, 2023, 2,543 initiation of restructuring proceedings and 236 bankruptcies of companies were announced. In total, in the Court and Economic Monitor and the National Register of Debtors, 71,720 announcements related to ongoing bankruptcy proceedings have been published. In the entire year of 2022, there were 84,624, and in 2021, 53,312. The financial problems of one entrepreneur can affect the situation of many of its contractors. Therefore, it is crucial to check who you are dealing with before entering into business cooperation, what they actually do, their financial situation, and reputation. Especially now, in the face of the war in Ukraine, where cooperation with entities listed on the Polish or European Union blacklists, as well as trading in specific goods and services, can result in high sanctions. How to check a business partner from Poland?
Exercising due diligence when verifying a contractor
In today’s times, starting a company is very easy. In many countries, you can do it without leaving your home, via the internet. Therefore, you can never be sure who is really behind the created name and entry in the registry until you check it. Verification involves actions commonly used in economic intelligence, primarily focusing on checking the credibility and currency of the contractor’s documentation, such as the National Court Register (KRS), Tax Identification Number (NIP), Statistical Identification Number (REGON), as well as the permits and certificates necessary for conducting a specific type of business.
Verification can be done by obtaining information from the relevant individuals and institutions, such as registry courts, the Social Insurance Institution (ZUS), tax offices, or national and international chambers of commerce. It is worth gaining knowledge about the history of the business and its owners, including feedback about the company, by searching the internet or asking other entrepreneurs and contractors of this entity, as well as directly from the interested party. It should be remembered that failing to exercise due diligence in selecting a contractor carries legal consequences, such as being accused of knowingly participating in irregularities, resulting in further tax and legal sanctions.
Poland is the largest country in Central and Eastern Europe and the sixth-largest in all of Europe. Poland’s economy has been growing steadily for over 25 years and is the sixth-largest economy in the European Union. Currently, the main drivers of economic growth are exports and domestic consumption. According to data from the Polish Investment and Trade Agency from 2020, Poland’s GDP was $565.85 billion (current prices, GDP growth of 4% year-on-year); annual inflation at that time was +2.3% (around 11% in July 2023); trade turnover/balance: exports $235.8 billion EUR, imports $234 billion EUR, balance $1.8 billion EUR, public debt/GDP: 46.5% (at the end of the year), unemployment rate: 5.2% (at the end of the year).
Poland’s economy has been modernized since 1989, becoming increasingly integrated with the global economy. Polish companies are strongly integrated into European production chains. The global economic downturn that occurred due to the COVID-19 pandemic in 2020 had a negative impact on Poland’s economy, although to a much lesser extent than on most other countries. We export the most to Germany (28.90% in 2020), the Czech Republic (5.83%), the United Kingdom (5.72%), and France (5.60%).
Poland’s economy is divided into three main sectors: agriculture, industry, and services. Agricultural land, including arable land, meadows and pastures, plantations and orchards, as well as allotment and backyard gardens, account for approximately 60% of the country’s land area. The transition to a market economy in 1989 required domestic industrial enterprises to become profitable. Therefore, restructuring and privatization of these enterprises were carried out. A significant boost came from foreign capital inflow, attracted in part by the creation of 14 Special Economic Zones. The best-performing industries in Poland are the raw materials and energy sector, which drives the entire economy (e.g., PGE, Tauron, Energa, KGHM). Among the manufacturing industries, the production of transportation equipment and household appliances is thriving. Many Polish products find their way to foreign markets. Besides the aforementioned, Poland also exports copper, chemicals, furniture, and food. Among the fastest-growing service sectors in terms of employment, trade is predominant, but it will decrease due to the development of online trade. The largest service companies in Poland are banks, large-area retail chains, and mobile phone operators, and private transport companies are also performing well. Large employment is maintained in the public sector.
Although the economy is strong, the conditions for doing business in Poland are not very favorable. As indicated in the periodic report of the Union of Entrepreneurs and Employers, in 2023, the biggest obstacles for Polish entrepreneurs in conducting business are high taxes, legal instability, and high labor costs. Legal instability has been a growing barrier for companies in Poland since 2019. At that time, 36% of surveyed entrepreneurs pointed it out, and today, it’s 51%. Entrepreneurs also highlight formalism, procedural problems, complex economic and tax law, as well as high employment costs.
The existence of the problem is demonstrated by the numbers. In 2022, 84,624 announcements related to ongoing bankruptcy proceedings were published in the Court and Economic Monitor and the National Register of Debtors, in 2021, there were 53,312, in 2020, 41,874, in 2019, 35,777, and in 2018, 29,218. Only by the end of July 2023, there were already 71,720 announcements regarding initiated bankruptcy proceedings. These numbers show a strong upward trend in financial liquidity problems in Poland, and 2023 seems to be a record year in this regard. It is not a secret that payment problems of one entrepreneur affect the financial situation and liquidity of its contractors, who, in the case of significant and prolonged payment delays, can themselves become the subject of bankruptcy or restructuring proceedings. Therefore, it is advisable to check your business partners.
National and EU sanctions
Since the outbreak of the war in Ukraine, Polish companies have been even more cautious when it comes to collaborating with other entrepreneurs. In light of the war, the European Union imposed 11 sets of sanctions on Russia on June 23, 2023. Poland has also imposed additional sanctions. These sanctions target key individuals in Russia, as well as companies from both Russia and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs who violate this prohibition could face a financial penalty of up to PLN 20 million and even up to 15 years of imprisonment. However, Russian and Belarusian entrepreneurs have learned to circumvent international restrictions by utilizing complex holding structures established in other countries, where it is difficult to detect the true ownership structure.
Detailed information about the type of economic transactions covered by the EU ban with Belarus and Russia can be found on the European Council’s websites: https://www.consilium.europa.eu/. In the Official Journal of the EU, at the following address: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721, there is a list of individuals and entities subject to sanctions. The Polish Ministry of Internal Affairs and Administration also maintains an up-to-date register of entities subject to sanctions, where you can check a contractor, their connections, reasons for inclusion in the register, and applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
So, the first step in verifying a contractor can be to check whether they are listed in any of the above-mentioned registers. Useful information can also be found in the Council Regulation (EU) 2022/576 of April 8, 2022, amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s destabilizing actions in Ukraine.
Economic intelligence, or how to verify a Polish contractor?
Verification of a contractor can be entrusted to a professional economic intelligence agency that deals with such tasks on a daily basis. A private detective in Warsaw, Poznań, Wrocław, or other cities will know how to obtain the necessary verifying information about the current or future contractor.
The most crucial way to verify a contractor and their potential connections with Belarus or Russia is to determine the actual beneficiary of the entity and then check if they are listed on the sanctions list maintained by the Polish Ministry of Internal Affairs and Administration. These determinations can be made in the Central Register of Ultimate Beneficial Owners maintained by the Minister of Finance: Central Register of Ultimate Beneficial Owners.
A publicly accessible way to obtain information about a contractor is to search the resources of the internet. You can verify a company, check if it has a website, find out what opinions exist about it, and perhaps come across some publications about it. If you don’t want to do this yourself for certainty, you can entrust this research to a detective agency specializing in professional economic intelligence. There are many more sources of information than just the World Wide Web. National chambers of commerce, for example, can also provide information.
Direct inquiry to the contractor
In case you encounter difficulties in determining the ownership structure of a business partner through available registers, you can use another method of verification as part of economic intelligence, which is to directly ask them to confirm who their ultimate beneficiary is. Of course, to validate the provided response, you can request the entrepreneur to present documents confirming their declarations.
Polish and EU Registries
In the Public Information Bulletin of the Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, they maintain a registry of representations of foreign entrepreneurs. If we find our contractor’s representation in this registry, we can assume that they still exist and are conducting business.
Another registry where you can check a contractor is the European VAT taxpayers’ registry and the EORI registry. Companies and individuals wishing to conduct commercial activities within the European Union must use the EORI number as their identification number in all customs procedures. The VAT Information Exchange System (VIES), operated by the European Commission, allows you to check whether a particular entity is registered as engaging in intra-community transactions. This is essential, among other things, to apply a 0% VAT rate to a transaction. If VIES does not confirm the registration of the contractor, you can request verification from the tax office of the country where they are based. It is also essential to check whether a company has the necessary permits and certificates if they are required in a particular country.
The Insolvent Debtors Registry allows you to check if a particular contractor is not on its list. There are also economic information bureaus that have detailed information about the activities of companies. BIK, the Credit Information Bureau, established by the Polish Bank Association, collects data on the credit history of bank customers, credit unions, and para-banking loan companies.
National Business Registries
The National Court Register is a centralized, computerized database maintained by the Ministry of Justice and registration courts, consisting of three separate registers: the register of entrepreneurs, the register of associations, other social and professional organizations, foundations, and public healthcare institutions, as well as the register of insolvent debtors (since December 1, 2021, replaced by the National Register of Debtors). Access to the National Court Register is free. You can search it based on the following search criteria: the entity’s number in the Register (KRS number), tax identification number (NIP), REGON identification number, the name of the entity, and address details. The following entities are subject to entry in the National Court Register of entrepreneurs: entrepreneurs conducting economic or professional activity in their own name, operating in the form of commercial law partnerships, foundations, and associations, as well as other entities. The Central Registers of Court Operations portal Central Registers of Court Operations allows you to access the National Court Register and the National Register of Debtors. Direct link to the company search engine in the National Court Register: https://wyszukiwarka-krs.ms.gov.pl/ .
The Central Register and Information on Economic Activity (CEIDG) is a register designed for entrepreneurs conducting sole proprietorship, i.e., natural persons and partners in civil law partnerships . Searching is done by NIP, REGON, KRS number, company name, the name and surname of the owner/partner, PKD code (i.e., the type of business activity), and address details. CEIDG Application
The Ministry of Justice’s website Ministry of Justice also provides access to the National Court Register, as well as the Judicial and Economic Monitor and the National Criminal Register: https://ems.ms.gov.pl/krs/wyszukiwaniepodmiotu. MSiG is a nationwide official journal where announcements required by the provisions of the Commercial Companies Code, the Code of Civil Procedure, the Act on the National Court Register, and the Accounting Act are published. On the other hand, KRK collects information about individuals who have committed crimes. In the KRS browser KRS Browser: https://ekrs.ms.gov.pl/, anyone can, among other things, search for and download the financial document of an entity entered into the National Court Register. To search for financial documents, you need to know the KRS number of the entity. Searching for financial documents does not require having an account in the system.
Information about companies listed on the stock exchange can be provided by the Warsaw Stock Exchange information service. https://www.gpw.pl/
It’s better to thoroughly check the contractor
Before making a transaction or entering into cooperation with a new contractor, it’s worth conducting economic intelligence and thoroughly checking them, especially to ensure they are not connected to Belarus or Russia. Violating the restrictions imposed on specific types of trade with these countries and certain individuals and companies can result in a financial penalty of up to 20 million PLN and imprisonment for 3 to 15 years. Furthermore, verifying the contractor and exercising due diligence in their selection is a requirement that always applies when conducting business activities, incumbent on entrepreneurs as professional market participants.
Do you already know how to check a contractor from Poland? If not, or if you need to find more detailed information, we can help. Feel free to contact us.