“Corporation: an ingenious device for obtaining individual profit without individual responsibility.” Ambrose Bierce wrote that definition in his Devil’s Dictionary, and the cynic was right—which is precisely why the corporation became the most powerful wealth-creation instrument in human history.
The Person Who Does Not Exist
Commercial law rests upon a fiction so successful that we have ceased to notice it: the company is a person. Not a human being, but an entity capable of entering contracts, suing and being sued, owning property, and even committing crimes.
This “artificial person”—as common-law jurists termed it—arose not from philosophical reflection but from practical necessity. The merchants of Renaissance Venice and Amsterdam required a structure that would survive a partner’s death, separate the venture’s assets from personal wealth, and permit the pooling of capital from multiple investors.
The House of Lords confirmed this fiction in Salomon v. Salomon & Co. (1897): Mr. Salomon and Salomon & Co. were two distinct legal entities, even though Mr. Salomon held nearly all the shares. The corporate veil separates owner from company.
And it is this veil that constitutes the essence of commercial law: when it protects, when it may be lifted, how to employ it without transgressing the law.
- Further reading: Shielding Directors: Navigating Personal Liability in Times of Financial Turmoil and Insolvency
Legal Forms: A Menu of Possibilities
Polish law offers entrepreneurs a rich selection of business structures:
Limited liability company (spółka z ograniczoną odpowiedzialnością)—the most popular, the most flexible. Partners bear liability only to the extent of their contributions. Minimal capital requirements (5,000 złoty, roughly twelve hundred dollars), considerable freedom in drafting the articles of association.
Joint-stock company (spółka akcyjna)—for larger ventures, with the possibility of listing shares on an exchange. Higher capital requirements (100,000 złoty), more formalized structure, mandatory supervisory board.
Simple joint-stock company (prosta spółka akcyjna)—a recent addition to the Polish system, combining the flexibility of the limited liability company with the capacity to issue shares. Nominal share capital (one złoty), ideal for startups.
Partnerships—general, professional, limited, limited joint-stock. Various configurations of partner liability, various tax consequences.
The choice of legal form is not an aesthetic matter. It is a decision with consequences for taxation, scope of liability, capital-raising capacity, and succession planning. The wrong structure can cost a fortune—in taxes, in disputes among partners, in forfeited flexibility.
Transactions: When Companies Merge, Divide, Transform
Corporate life is rarely static. Mergers, acquisitions, divisions, transformations—these are the moments when commercial law reveals its full complexity.
Acquiring a competitor requires more than price negotiation. It demands due diligence—a detailed legal, financial, and tax examination of the target. It requires antitrust analysis. It necessitates transaction structuring: Do we purchase shares or assets? What warranties do we obtain from the seller? How do we protect ourselves against hidden liabilities?
A corporate division is an equally intricate operation: carving out a business line, allocating assets and liabilities, protecting creditors, addressing employment consequences.
And transformation—changing legal form without liquidation—can serve as a tool for tax optimization, preparation for sale, or response to evolving regulations.
Corporate Governance: Who Rules, Who Controls
Montesquieu wrote of the separation of powers in the state. In the corporation, an analogous system of equilibrium obtains:
The shareholders’ meeting—the legislative authority. It decides the most consequential matters: amendments to the articles of association, distribution of profits, appointment and removal of governing bodies.
The management board—the executive authority. It conducts the company’s affairs and represents it externally.
The supervisory board—the oversight authority (mandatory in joint-stock companies, optional in limited liability companies). It monitors the management board’s activities.
Conflicts among these organs—and especially between majority and minority shareholders—are the daily bread of commercial law. Polish law offers instruments for minority protection: rights to information, challenges to resolutions, actions for exclusion of a shareholder, judicial dissolution of the company.
But the best protection is a well-drafted articles of association—and here the lawyer’s role becomes essential.
Liability: The Limits of Protection
Limited liability is the foundation of corporate law. But the protection is not absolute.
Management board members bear personal liability for the company’s obligations if they fail to file for bankruptcy in time. They are liable for damages caused to the company by actions contrary to law or the articles of association. They answer to creditors, employees, tax authorities.
The corporate veil may be pierced in cases of abuse—when the company is a façade, an instrument of fraud, the alter ego of its shareholder.
For the entrepreneur, this means: legal form protects, but does not exempt one from the obligation to conduct business in accordance with the law.
Our Services
In matters of commercial law, Skarbiec Law Firm offers:
- company formation and selection of optimal legal structure
- ongoing corporate services (resolutions, minutes, amendments to articles)
- M&A transactions—due diligence, negotiations, documentation
- transformations, divisions, and mergers
- resolution of shareholder disputes
- management and supervisory board liability
- company liquidation and insolvency proceedings
- structuring of holding companies and corporate groups
The Fiction That Works
Adam Smith warned against joint-stock companies—he believed that separating ownership from management led to mismanagement and abuse. He was, in a sense, correct: corporate scandals from the South Sea Bubble to Enron have vindicated his concerns.
And yet the corporation remains the most powerful instrument for mobilizing capital that humanity has devised. The fiction of legal personality permits the pooling of resources from thousands of investors, the distribution of risk, the construction of enterprises beyond the capacity of any individual.
Commercial law is the body of rules governing this fiction—rules that determine who gains, who loses, who answers for failure.
Knowledge of these rules is not an academic luxury. It is a condition of survival in the marketplace.
Skarbiec Law Firm—comprehensive legal services for companies, transactions, and corporate transformations.
