Company Formation in the Financial Sector in Poland: An Overview of Licensing under the KNF

Company formation in Poland in the financial sector involves navigating a complex landscape of legal requirements and regulatory compliance. The Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, KNF) plays a pivotal role in overseeing and regulating this sector, ensuring adherence to national and European Union standards. This article provides a comprehensive guide to forming a financial company in Poland (including but not limited to fintech companies), detailing the available licenses under KNF and the statutory requirements associated with each.

Legal Framework for Company Formation in Poland

The incorporation of a financial company is primarily governed by the Polish Companies Act and the Act on Financial Market Supervision. The first step in financial company formation in Poland involves choosing the appropriate legal form, the most common being a limited liability company (sp. z o.o.) or a joint-stock company (S.A.). These entities offer the benefit of limited liability, essential for the financial sector's inherent risks.

Company Formation Process: 

• Preparation of Articles of Association: This foundational document outlines the company’s operational structure and governance.
• Registration with the National Court Register (KRS): This includes submitting the Articles of Association, information on shareholders (with limitation on obligation to disclose shareholders for certain types of joint-stock companies), the initial capital amount and list of supporting document.
• Tax Registration and Obtaining a REGON number: Essential for fiscal and statistical purposes.
• After the company formation it may obtain other registrations such as VAT, VAT-EU, EORI and other numbers. 

Company Licensing Requirements under KNF

The KNF requires specific licenses for various activities in the financial sector after the company formation in Poland has been processed, ensuring companies meet rigorous standards of operation and management. 

Below are some of the most popular licenses issued by KNF:

Banking License: Required for institutions intending to conduct traditional banking activities, including deposit-taking and lending. This license demands a thorough examination of the bank's capital adequacy, management quality, and operational readiness to undertake significant financial risk. According to Article 34 of the Banking Law, a bank must demonstrate a minimum initial capital, which as per the current stipulations, is set at no less than the equivalent in Polish złoty of EUR 5 million. This capital must be fully paid up in cash. The most common and legally appropriate company form for a bank in Poland is a Joint-Stock Company (Spółka Akcyjna, S.A.).

Electronic Money Institution (EMI): Electronic Money Institutions in Poland are authorized to issue electronic money, which is a digital equivalent of cash stored electronically. EMIs are required to maintain a minimum initial capital, which is set at EUR 350,000. This requirement ensures that EMIs have sufficient financial resources to manage their operations and fulfill their obligations to customers.

Insurance Company License: This is necessary for entities engaged in underwriting life and non-life insurance risks. Applicants must demonstrate sufficient financial resources to cover underwritten risks and comply with consumer protection laws. The minimum guarantee fund for Poland insurance companies, as stipulated by the Polish Financial Supervision Authority (KNF), depends on the type of insurance activities undertaken. For life insurance companies in Poland, the minimum capital requirement is usually higher than for non-life insurance companies. The company must be established as a joint-stock company (Spółka Akcyjna, S.A.) or a mutual insurance company, depending on the business model and objectives. The license obtained after the company formation process is finished. 

Payment Institution (PI) License: Under the Payment Services Act, companies providing payment services such as payment processing or issuing payment instruments must obtain this license. It focuses on the security of payment processes and the safeguarding of user funds.

The specific capital requirements for payment institutions in Poland vary depending on the types of payment services the Poland company intends to provide. Here’s a breakdown of the minimum capital requirements based on service categories:

• For institutions offering services that ensure the execution of payment transactions (which includes services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account): Minimum Initial Capital: EUR 125,000
• For institutions engaged in the execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator: Minimum Initial Capital: EUR 50,000
• For institutions providing services related to the issuance and/or acquiring of payment instruments: Minimum Initial Capital: EUR 20,000
• For institutions involved in money remittance: Minimum Initial Capital: EUR 20,000

These capital requirements are designed to ensure that payment institutions have adequate financial resources to manage risks typically associated with the payment services they offer. The different thresholds reflect the varying levels of financial risk and operational complexity associated with each type of payment service.

Small Payment Institutions (SPI): Unlike payment institutions that may require significant capital based on the services they offer, Small Payment Institutions benefit from much lower or sometimes no specified minimum initial capital requirements. This reduction is intended to lower the barriers for smaller operators in the financial market. Poland company established for SPI or PI services can start  providing mentioned services only after obtaining a license.
Transaction Volume Limits: Small Payment Institutions are subject to limits on the total value of transactions processed. According to Polish regulations, these companies can handle a monthly transaction volume of no more than EUR 1.5 million. This threshold is designed to keep the institution’s operations within a scale that matches their lower capital base and risk management capabilities.
Regulatory Burden: The regulatory requirements for Small Payment Institutions are lighter, particularly concerning the management structure and comprehensive risk assessments, making it more accessible for startups and small enterprises to enter the payment services market.

Virtual Asset Service Provider Registry under KNF: The KNF Virtual Asset Service Provider (VASP) Registry serves to increase transparency, enhance legal compliance, and improve safety for consumers dealing with crypto assets. This registry is part of Poland's efforts to align with the European Union's Fifth Anti-Money Laundering Directive (5AMLD), which extends anti-money laundering (AML) and counter-terrorism financing (CTF) rules to virtual currencies. (KNF) also manages regulatory oversight for emerging financial technologies, including cryptocurrencies. As part of its mandate, the KNF has implemented a Crypto Asset Registry, which is crucial for entities operating within the cryptocurrency sector in Poland.

Also commonly called Crypto License (the VASP license)  registration obtained after a Poland company formation. In Poland, the regulatory framework for cryptocurrency-related activities does not restrict specific types of company forms from registering. Regardless of the company form, entities seeking registration under the Virtual Asset Service Provider Registry need to comply with specific regulatory requirements, including Anti-Money Laundering and Countering Financing of Terrorism obligations.

Compliance and Ongoing Obligations

After the company formation process and license obtaining, financial companies must adhere to ongoing regulatory requirements including:

• Regular Reporting: Companies must submit periodic financial statements and compliance reports to KNF.
• Capital Adequacy Requirements: Entities must maintain adequate financial reserves as stipulated by KNF.
• Consumer Protection Measures: These include clear terms of service, dispute resolution mechanisms, and the protection of client funds and data.

Challenges and Considerations after Company Formation and License Obtaining

Potential entrants into Poland’s financial sector must consider several challenges:

• Navigating Complex Regulations: The Polish legal framework involves intricate regulations that require thorough understanding and strict adherence.
• Capital Requirements: Substantial initial capital is often necessary, especially for banking and insurance licenses.
• Market Competition: New entrants must compete with established domestic and international firms, necessitating significant strategic planning and market analysis.

Establishing a financial company in Poland offers promising opportunities, given the country's regulatory framework and strategic position in Europe. However, success in this sector demands a deep understanding of the regulatory landscape, comprehensive compliance with KNF requirements, and strategic planning to overcome competitive pressures. 

If you seek assistance to navigate the complexities of company formation and regulatory compliance effectively, reach out to our team for more details.