POLAND Law and Practice Contributed by: Rafał Celej, Arkadiusz Klejnowski and Karolina Piotrowska-Andryszczyk, Kondracki Celej
(MSOPs or ESOPs) or similar contractual arrangements. These structures aim to align the interests of the management teamwith those of shareholders by providing access to the com - pany’s equity upside, contingent on continued involvement and performance. In Poland, such plans are commonly imple - mented as part of or alongside VC investment rounds. While there is no statutory ESOP regime, tailored contractual frameworks are frequently adopted to reflect vesting schedules, exercise conditions and transfer restrictions. Importantly, in joint-stock companies or simple joint-stock companies, ESOPs can benefit from tax-neutral treatment at the moment of grant or exercise, provided that certain statutory conditions are met. This makes these legal forms particularly conducive to implementing standardised and tax-efficient employee incentive schemes. In most cases, ESOPs are time-based with a standard cliff and a linear schedule over three to four years. Exit-linked acceleration clauses are also common, particularly in later-stage rounds. 5.2 Securities The legal instruments used to implement employee incentive plans in Poland depend heavily on the company’s corporate form, which significantly influences the available structuring options. • In limited liability companies, which consti - tute the vast majority of early-stage Polish start-ups, formal share options are not easily implementable due to rigid capital structure rules. As a result, companies often implement a virtual stock option plan (VSOP). Under such a plan, participants are granted con - tractual rights in the form of phantom options (cash-settled instruments mimicking share
value growth) or contractual bonus entitle - ments (performance- or time-based bonuses linked to company valuation or exit events). These instruments do not constitute actual share ownership and do not entitle par - ticipants to voting rights, dividends or other shareholder privileges, but are designed to replicate the economic effect. • In joint-stock companies or simple joint-stock companies, the legal framework permits more direct equity-linked incentives, such as subscription warrants or options for shares, which entitle employees to acquire shares at a fixed price (strike price) upon meeting cer - tain vesting or performance conditions. These instruments can be structured to reflect vesting and exercise conditions and are more closely aligned with international VC practice. Regardless of form, incentive instruments typi - cally include: • vesting provisions, with time- or milestone- based criteria; • exercise rights, often triggered by liquidity events; and • restrictions on transferability, embedded either in the option documentation or in the SHA. VC investors typically expect the ESOP to be reflected in the fully diluted capital structure and factored into ownership calculations at the time of investment, even if the plan itself is imple - mented post-closing. The agreed-upon option pool (commonly 5–15% of the share capital) is treated as a pre-investment dilution item, effec - tively reducing the founders’ and early share - holders’ equity share upfront.
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