1 © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 15 14 13 12 This work is the product of the staff of the World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. 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Views and opinions expressed in the adaptation are the sole responsibility of the authors of the adaptation and are not endorsed by The World Bank. świętokrzyskie podkarpackie Voivodeship Voivodeship Administration Agreement between the European Commission and the International Bank for Reconstruction and Development on the Part II Europe 2020 Programmatic Single-Donor Trust Fund Trust Fund No. TF072592 EC Contract No. CCI201 Recommendations for Easier Business Registration In The Świętokrzyskie And Podkarpackie Voivodships Acknowledgements This report was prepared by Maciej Drozd (Economist) and Wojciech Sacha (Consultant), with input from Tomasz Kałużny (Senior Consultant). The team is indebted to Arup Banerji (Country Director), Marina Wes (Country Director), Carlos Pinerua (Country Manager), Paulo Correa (Practice Manager, Trade & Competitiveness, Europe and Central Asia-West), Isfandyar Khan (Program Leader), John Nasir (Lead Economist), Paul Kriss (Lead Urban Specialist), Marcel Ionescu-Heroiu (Senior Urban Specialist) for providing guidance. The report benefited from thoughtful comments from peer reviewers Andreja Marušić (Global Lead Business Environment and Senior Private Sector Specialist) and Madalina Papahagi (Senior Private Sector Specialist). Grzegorz Wolszczak (Operations Officer) ensured that all outputs exceeded expectations and were prepared ahead of time. Małgorzata Garlicka (Resource Management Officer), Małgorzata Bargilewicz (Resource Management Assistant) and Małgorzata Michnowska (Program Assistant) provided indispensable support. The team would like to thank Commissioner Corina Crețu for her commitment to sub-national Doing Business in the European Union as well as Minister Jerzy Kwieciński from Poland’s Ministry of Economic Development and Minister Łukasz Piebiak from the Ministry of Justice for their invaluable support. The team would also like to thank the European Commission’s team for outstanding collaboration, especially Mr. Patrick Amblard, Mr. Wolfgang Munch, Ms. Justyna Podralska, Ms. Magdalena Horodyńska, and Ms. Karolina Tilman from the DG REGIO. The team is indebted to all counterparts in the Polish judiciary and national and regional government for the support offered in the elaboration of this study, the timely feedback, the excellent collaboration throughout, and their passion for developing their institutions and regions, especially: from the Podkarpackie Marshal Office: Mr. Bartosz Jadam; from the Świętokrzyskie Marshal Office: Ms. Sylwia Mucha and Ms. Kamila Kępczyńska-Kaleta; from the Ministry of Economic Development: Ms. Joanna Kościcka-Posiewka; from the Ministry of Justice: Ms. Aneta Jakubiak-Mirończuk; from courts in Kielce, Kraków, Rzeszów, and Białystok: Mr. Tomasz Wojciechowski, Ms. Bogumiła Majcher-Gniewek, Mr. Lesław Zawada, Ms. Grażyna Gubernat, Mr. Wojciech Major, Mr. Jan Klocek, Ms. Halina Ciągło, Ms. Anna Rurarz, Ms. Justyna Bartkiewicz-Dąbek, Ms, Katarzyna Dąbrowska-Doroszczyk Ms. Bożena Koncerewicz, Mr. Paweł Hempel, and Ms. Iwona Ciborowska. The report was completed in September 2016. What is the Lagging Regions Initiative The scope of the EU Cohesion Policy is to narrow development gaps and reduce disparities between Member Countries and regions. To this extent, around €454 billion of ESI (European Structural and Investment) Funds have been allocated to help EU regions become more competitive. However, not all EU regions have been able to fully take advantage of the benefits of EU growth, due to the effects of the 2008 economic crisis and due to a host of structural problems. To this end, Corina Crețu, the Commissioner for Regional Policy, together with the Task Force for Better Implementation has started the Lagging Regions Initiative. The aim of the Initiative is to identify what holds back growth in less developed regions, and to provide targeted actions for unlocking their growth potential. Thus, these lagging regions will be assisted to involve a broad range of stakeholders (regional and local administrations, educational institutions, business support institutions, SMEs, entrepreneurs, investors, NGOs, IFIs) to help respond to concrete needs they have and to maximize the impact of regional investments. Two types of lagging regions have been identified: • LOW GROWTH REGIONS, which cover the less developed and transition regions that did not converge to the EU average between the years 2000 and 2013 in Member States with a GDP per Capita (PPS) below the EU average in 2013. These include almost all the less developed and transition regions in Greece, Italy, Spain and Portugal • LOW INCOME REGIONS, covering all the regions with a GDP per Capita (PPS) below 50% of the EU average in 2013. This group covers the less developed regions of Bulgaria, Hungary, Poland and Romania. Lagging Regions in the EU Source: DG REGIO Poland and Romania are the first countries to pilot this initiative, with two regions each – Swietokrzyskie and Podkarpackie in Poland, and North-West and North-East in Romania. In April 2016, Commissioner Crețu together with Marshal Adam Jarubas in Swietokrzyskie and Marshal Wladyslaw Ortyl in Podkarpackie have officially launched the Polish part of the Lagging Regions Initiative called „Catching-up Regions Poland”. The „Catching- up Regions Poland” is an implementation-focused program that aims at providing tailored support to the two Polish regions to boost the impact of EU and private investments in specific areas selected by the two regions. Over a year of joint work, the World Bank provided hands-on technical assistance and helped coordinate five activities that were selected by the Podkarpackie and Swietokrzyskie regions in coordination with the European Commission, Ministry of Economic Development, and the Bank. The five selected activities were: • Improving the commercialization of Research & Development (R&D) results generated by public research facilities and enabling better utilization of existing technology transfer centers in the Podkarpackie region. • Strengthening the vocational education and training system in the Swietokrzyskie region, using best practice examples from around the world and tailoring them to the regional context. • Activating entrepreneurship in deprived areas in the Podkarpackie and Swietokrzyskie regions. • Identifying ways to improve conditions for starting a business in the Podkarpackie and Swietokrzyskie regions. • Supporting the creation of in-house financial instruments in the Podkarpackie region. This report constitutes one of the outputs of the “Catching-up Regions Poland” work. More outputs, including an overview report and reports for individual activities in both English and Polish can be accessed on the World Bank’s website. Contents 1. INTRODUCTION/7 2. ENCOURAGING ONLINE REGISTRATION/11 2.1. Current situation/12 2.2. Recommendations at national and regional levels/13 3. LIMITING RETURNED APPLICATIONS/16 3.1. Current situation/17 3.2. Recommendations at national and regional levels/20 4. EXPEDITING APPLICATION PROCESSING/24 4.1. Current situation/25 4.2. Recommendations at national and regional levels/29 Contents 5 Tables Table 1. Most common grounds for return or rejection of paper applications/18 Table 2. Most common grounds for return or rejection of online applications/19 Table 3. Limiting returned applications – recommendations for the S24 service/20 Table 4. Staff in KRS divisions (number of FTEs)/26 Table 5. Typical workflow for business registration/28 Table 6. Recommended workflow for business registration/31 Figures Figure 1. Number of registered Commercial Code companies /8 Figure 2. Analytical approach for easier business registration/9 Figure 3. Indicative impact of measures to ease business registration/10 Figure 4. Number of LLCs registered in the first half of 2016/25 Figure 5. Case inflow in the KRS division in Białystok/26 Boxes Box 1. S24 promotion at courts – mystery customer survey/12 Box 2. Sample terms of reference for PPC campaign/14 Box 3. Online business registration by foreigners/15 Box 4. Guidance on business registration – GOV.UK/22 Box 5. Guidance provided by court staff – a survey/23 Box 6. Reducing delays resulting from backlogs/30 6 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Activity 3 Recommendations for Easier Business Registration in the Świętokrzyskie and Podkarpackie Voivodships 1 INTRODUCTION 7 This short report presents recommendations incorporated companies continues to ease business registration in two to steadily grow year to year; 1440 Polish voivodships: Podkarpackie and companies were registered in 2014 Świętokrzyskie. It was prepared under a and it can be expected that in 2016 joint initiative of the European Commission, around 2450 new entities will become Poland’s Ministry of Economic operational. The number of business Development, the Podkarpackie and registrations in Podkarpackie is roughly Świętokrzyskie regions, and the World double the number of registrations in Bank. This initiative concentrates on Świętokrzyskie, as Podkarpackie has a Activity 3 focuses supporting the two regions in preparing larger population. on expediting and for the implementation of the 2014-2020 simplifying business European Structural and Investment According to World Bank’s Doing registration on the Funds in a way that fosters economic Business methodology, the ease of basis of the World growth and innovation. Activity 3 of this registering a business is determined by Bank’s 2015 Doing joint undertaking focuses on expediting four indicators: the minimum capital Business in Poland and simplifying business registration on deposited before registration, the study the basis of the World Bank’s 2015 Doing number of procedures required to Business in Poland study,1 a comparison of start and operate a company, the time business environments in 18 Polish cities, required to complete these procedures, Figure 1. Number of registered Commercial Code companies 1800 1600 1400 1200 1000 800 600 400 200 0 2014 2015 2016 Świętokrzyskie Podkarpackie Source: Ministry of Justice including Rzeszów and Kielce, the capitals and the associated cost.2 Most of these of the Podkarpackie and Świętokrzyskie indicators are set at the national level, voivodships. but differences in performance between regions are noticeable. The minimum In 2015, about 2050 commercial capital is fixed for the entire country at code companies were registered in 5000 PLN. It takes usually four steps to Podkarpackie and Świętokrzyskie, register a business. Associated costs are of which 84% were limited liability generally identical across the country, companies (LLCs). The number of but they vary between electronic 1 The Doing Business in Poland 2015 report is based on data gathered in 2014. 2 More details on the methodology behind these metrics is available online: http://www.doingbusiness.org/ methodology/starting-a-business 8 ACTIVITY 3 - EASIER BUSINESS REGISTRATION and paper registration (and also by 3. Expedite the processing of correctly region, depending on the adoption of filled-out applications. e-registration). The biggest difference in the ease of starting a business is Of these measures, encouraging online Encouraging online determined by the required registration registration is the most important step registration is the time. In line with the Doing Business to make business registration easier in most important step methodology, it took 36-37 days to the Podkarpackie and Świętokrzyskie to make business register an LLC in Rzeszów/Kielce, while regions, as it impacts both the cost and registration easier in the leading city of Poznań, an LLC in the time to register a business. The 2015 was registered in eight days through S24, Doing Business in Poland study found that Figure 2. Analytical approach for easier business registration More e-registration E-registration is around 75% faster than paper registration Faster paper processing Time Paper applications in Gdańsk are processed around 40% faster than in Kielce and Rzeszów Easier Fewer returned applications business 20-30% of applications are returned, registration stalling business registration More e-registration Cost E-registration is 50% cheaper than paper registration Source: World Bank staff the electronic registration platform. electronic registration is four times faster For the purposes of this report, the than paper registration, and half as costly. World Bank team has identified two Firms in Podkarpackie and Świętokrzyskie factors – time and cost of registration – can also save time if applications are not that have the most variation between returned and processed faster. Figure 3 Polish regions and the biggest potential presents an estimate of the potential cost for improvement in Podkarpackie and and time savings for firms from all of the Świętokrzyskie voivodships (see Figure 2 above measures, assuming that courts in below).As highlighted in the report on Podkarpackie and Świętokrzyskie close best practices in business registration, the gap to the best performing courts in there are three challenges to reduce the Poland. cost of business registration and shorten the time required to start a company in In the report, each of these areas is these regions: broken down into a set of concrete recommendations based on site visits to the local divisions of the national 1. Encourage online registration; court registry (Krajowy Rejestr Sądowy, 2. Ensure that applications are correctly KRS) in Kielce/Rzeszów and Białystok, a filled out and do not need to be top performer among KRS divisions in returned; Eastern Poland. 1 - Introduction 9 The analysis also reflects input from mandatory. The details of this plan are meetings with the Ministry of Justice (MoJ) still being confirmed. Given the limited about their plans for national regulations use of e-identity forms by Poland’s adult to upgrade and streamline the business population (less than 2% uses e-signatures registrations and IT systems nationwide. or trusted profiles), these changes will In August 2016, the MoJ proposed to result in additional steps, time, and costs substitute simple e-authentication (with for first-time users. It is likely that the applicant’s ID number and address) majority of applicants do not have access with stronger proof of identity (certified to such authentication measures, making e-signature or a trusted profile3) to electronic business registration more avoid frauds. It plans to expand existing complicated for them. IT systems to make e-registration Figure 3. Indicative impact of measures to ease business registration Hypothetical impact1 Priority More e-registration PLN 1,395,000 Cost E-registration is 50% cheaper than paper registration -3,000 PLN x 465 firms 1 More e-registration 13,020 days E-registration is around 75% faster than paper registration -28 days x 465 firms Faster paper processing 2 5,440 days Time Paper applications in Gdańsk are processed around 40% faster than in -8 days x 680 firms Kielce and Rzeszów Fewer returned 3 3,150 days applications 20-30% of applications are returned, -15 days x 210 firms stalling business registration Annual values assuming 67% e-registration, 50% process improvements, DB methodology 1 Source: World Bank staff 3 A certified e-signature is available from five providers in Poland and costs about 200 PLN. Usually contracts with providers of e-signatures are signed in person. A trusted profile is free of charge, but requires the opening of an online account and a one-off visit at a government office to confirm the user’s identity (e.g tax office, or local office of the social insurance institution). 10 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Activity 3 Recommendations for Easier Business Registration in the Świętokrzyskie and Podkarpackie Voivodships 2 ENCOURAGING ONLINE REGISTRATION 11 2.1 Current situation The use of electronic registration is Electronic business registration is below its potential. Online applications not actively advertised to the public. are cheaper, faster and less likely to be Implementation of the service requires returned or rejected, and yet in 2016 a large scale, continuous information half of applications in Podkarpackie and campaign to overcome persistent habits. Świętokrzyskie regions were filed on E-application has obvious advantages paper. over the paper-based process, but these advantages are not clearly communicated Limited adoption of online registration to potential applicants. Information about is caused by three factors: (i) low the S24 electronic registration platform awareness among business entrepreneurs is posted on government websites but and lawyers, (ii) unsatisfactory user is hard to find. E-registration is also not experience with the S24 electronic sufficiently promoted in court offices registration system, and (iii) limited (see Box 1) and by business associations/ applicability of the standard company business support institutions. agreement template required for e-registration. Details of each are described Lawyers, whom most frequently below. register companies, have not fully adopted online registration. There has Box 1 S24 promotion at courts – mystery customer survey been limited communication or training about online registration for attorneys The S24 system is not advertised at the regional offices of the court registry. Pro- and legal counsels in Świętokrzyskie or spective applicants are not likely to learn about it when contacting the informa- Podkarpackie. Trainings about the online tion desk or visiting the district court in Rzeszów or Kielce. When entrepreneurs enquire about business registration, they are automatically given a paper form. registration system, is a part of bar training Court staff does not understand the S24 interface and, thus, cannot provide the organized by the District Chamber of Legal entrepreneur with any guidance on filling out an electronic application. Courts Counsels in Rzeszów, but it only includes are also not prepared to issue trusted profiles to provide applicants with strong in-training of young lawyers. Other authentication when registering a business online. reasons for sub-optimum adoption among Question Kielce Rzeszów lawyers include poor user experience and current limitations of the S24 system. When at court register or court information desk, will a client encounter any visual information about the S24 (posters, leaflets, No No Improved user experience could announcements)? encourage broader use of S24. Currently, the level of user experience of When a client asks the court staff about (i) how to register a company and (ii) where he/she can the S24 service is relatively low compared obtain paper forms to register a company, will No/No No/No to, for example, online banking services the client be actively informed about online in Poland. The S24’s confusing layout and registration by the court staff? cumbersome forms discourage users If a client asks the court staff directly about the with limited digital competencies. Users advantages of online registration, will the client Yes/Yes/ Yes/Yes/ are not offered appropriate guidance learn that this solution is (i) cheaper (ii) faster (iii) No Yes when filling out the application form more likely to be successful? (such as an extended FAQ section, hints/ When asked directly, will the court staff provide tooltips for the most challenging boxes, guidance about the S24: (i) website address for No/No No/Yes and other interactive features). The form online registration? (ii) can the S24 can be used is also particularly difficult to comprehend by foreigners? for non-lawyers; applicants are assumed Source: World Bank staff to have a legal background or to be represented by a legal professional, even though applications can be filed directly by entrepreneurs. 12 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Reliance on online registration is use the paper procedure (especially for further discouraged by the limitations companies with multiple partners), even of the S24 company agreement if they are familiar with S24. Another template. Lawyers from Kielce and strategy is to register online to avoid Rzeszów complain that the S24 company the weeks-long paper procedure, and agreement includes only basic clauses then start the paper-based amendment and cannot be customized to specific procedure immediately after the online needs. As a result, many lawyers still registration is complete. 2.2 Recommendations at the national and regional level Promoting online registration among A robust online advertising campaign entrepreneurs to reach potential applicants. Online registration should be promoted via Information about S24 and its various online marketing tools. With advantages should be presented on a display advertising and pay-per-click single government website. It is critical (PPC) campaigns, communication can to promote e-registration on government be targeted at would-be entrepreneurs sites, which should offer cost-free reliable that are looking for information about and practical information on business registering a company and direct users to registration. Currently, the information the registration website. The campaign on the government’s go-to portal for can be geographically targeted to businesses www.biznes.gov.pl is hard the Świętokrzyskie and Podkarpackie to find and does not encourage online regions. See Box 2 for sample terms of registration. The website should be the reference for the campaign and an cost gateway to comprehensive information projections. about company registration and include references to the S24 platform. When visiting a district court, an To encourage more e-registration, the entrepreneur should have easy visitor should be informed that the online access to information about online process is half the cost, four times faster, registration. More assistance in this and at least twice as likely to be approved, respect could be provided by information as the paper application. desks in district courts, which often serve as the initial information source via phone Entrepreneurs and legal counsels and at the courts. The personnel should should be able to easily find be instructed to always inform people government information on business about registering a company online registration. Internet research is and the advantages of the S24 through often the first source of information simple messages (e.g., “Cheaper, faster, for entrepreneurs. Currently, when more reliable!”). It is recommended that searching phrases such as “how to the staff have practical experience using register a company,” entrepreneurs first the S24 platform, to better assist clients find commercial registration services with it. Also, it would be helpful to install that have no reliable information about terminals at courts to facilitate experiential the process. Search engine optimization learning about online registration, and should be used to ensure that courts should be prepared to issue government information ranks high in trusted profiles to provide applicants web searches. with strong authentication of e-identity. 2 - ENCOURAGING ONLINE REGISTRATION 13 Box 2 Sample terms of reference for PPC campaign Subject of the call for offers: Online marketing campaign aimed at promoting a government service for online registration of companies Campaign budget: PLN 9,000 Campaign duration: 3 months Target audience: potential registrants of limited liability companies - Geotargeting: Świętokrzyskie and Podkarpackie regions - Key message: “Online registration of a company – cheaper, faster, and more reliable.” - Webpage to which web traffic is redirected: https://www.biznes.gov.pl/przedsiebiorcy/biznes-w-polsce/zakladam-firme/rejestracja- dzialalnosci/rejestracja-spolki-z-o-o Projection of monthly costs of online PPC advertising campaign 434 - 530 Unique displays Cost Average position Clicks 15.000-18.300 2.130-2.430 PLN 1,63-1,99 485,81 Podkarpackie Voivodship 52,0% (250,79) Clicks świętokrzyskie Voivodship 48,0% (231,06) Example from PPC offer in response to World Bank request for proposals S24 promotion through business information about the advantages of support institutions and business online registration, and direct people associations. Business support to biznes.gov.pl for further details and institutions and business associations are guidance. The campaign should use often used by start-ups as a first source catchy or provocative phrases to grab “If you would like to of information about the regulatory people’s attention (e.g., “If you would lose time and money, environment. They should be informed like to lose time and money, please take please take the paper about the benefits of e-registration and the paper form. Otherwise, go to biznes. form. Otherwise, promote the S24 service to potential gov.pl to learn about the advantages of go to biznes.gov.pl applicants through word-of-mouth. online registration.”). to learn about the Efforts to promote the S24 should not be advantages of online limited to the Chambers of Commerce Online registration should be registration.” in Kielce and Rzeszów, but also include promoted via different media other institutions such as business channels to reach the diverse pool of incubators and technology parks. applicants. Through local TV and radio stations, district court staff can promote Printed promotional materials the benefits of online registration to in courts and business support local businesses, while enhancing their institutions will also help to generate business-friendly stance. This approach awareness. Posters and leaflets for the also complements the e-marketing S24 awareness campaign should be campaign because it helps overcome displayed and distributed at information potential applicants psychological desks in courts, local business support barriers (e.g. lack of confidence or sense institutions, and business associations. of insecurity) about the online registration The materials should contain basic platform by first-time users. 14 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Encouraging legal counsels and tips popping up next to relevant boxes attorneys to use online registration with guidance in plain language on how to fill out the application form. Design Online registration should be and content should focus on areas with promoted amongst lawyers. As elements, which can help applicants to Poland’s judicial system transfers to avoid the most common errors in business digitization, it is important to reach out to registration, as listed in Table 2 on pages 12- and educate the legal community. Lawyers 13. These changes will reduce the number can be fairly easily reached through of returned applications (see Chapter 3). regional chambers of attorneys and The usability of the S24 system should be legal counsels. Apart from disseminating also improved with foreign entrepreneurs information, these organizations could in mind (see Box 3). also run and organize practical trainings for its members, targeting those with Improved company agreement The applicant should limited digital competencies. Lawyers templates should enable universal be guided by tips are viewed by the business community use of S24. There are many ways as reliable source of information, and will popping up next to to introduce flexibility into company be invaluable for promoting the S24. relevant boxes with agreements used by S24, such as: guidance in plain (i) Several types of templates; language on how to (ii) More optional clauses for the standard template; fill out the application Improving usability of S24 (iii) No template but the option to form. Their design Improved user experience could submit any company agreement. and content should encourage broader use of S24. focus on areas which The S24 homepage should include: To address the limited applicability of can help applicants all information an applicant needs for existing online templates, the MoJ is to avoid the most registration; and definitions of key legal adding some with new clauses. It is errors in business notions and regulations (e.g., explanation advisable to ensure that these solutions registration of legal constraints with regard to are introduced and tested before the S24 company name). While filling in the platform is rolled out as a mandatory tool form, the applicant should be guided by for business registration. Box 3 Online business registration by foreigners Foreigners should be encouraged to use the S24. At present it is possible to register foreign legal or natural persons as partners or members of the board in the S24. Their identity can be verified in the system based on passport details instead of the PESEL number. However, the S24 service and user information are only available in the Polish language, making them inaccessible to foreign users. Also, certain aspects of foreign-related registration, makes it more time-consuming and less successful. Recommendations at the national level: - Foreigners should be required to upload via S24 passport scans and potentially other documents, to enable better verification and a swift criminal record check. According to court clerks, the data provided on application forms by foreigners (e.g., passport number and name, often misspelled when transposed from Russian to Latin alphabet) is insufficient to identify the person and accurately verify their criminal record. More detailed information concerning foreign partners/board members could streamline and expedite the registration process. - There should be accurate and reliable information in foreign languages about company registration in Poland. The contents of the government’s business registration website should be translated for foreigners. Also, the website should provide information relevant to foreign applicants, such as the documents required under Polish regulations (e.g., in connection with docu- menting a foreign legal entity’s rules of representation, or proving that the parent single-partner company is not single-partner owned). At present, even though foreign-related cases constitute only a small portion of total inflow, errors by foreigners are in general one of the most frequent reasons for the return of applications. - The S24 service should be available in other language versions. The S24 should follow the practice of CEIDG service (Central Registry and Information on Business, used primarily by sole proprietor- ships), and the online registration form should be provided in foreign languages as well. Source: World Bank staff 2 - ENCOURAGING ONLINE REGISTRATION 15 Activity 3 Recommendations for Easier Business Registration in the Świętokrzyskie and Podkarpackie Voivodships 3 REDUCING THE NUMBER OF RETURNED APPLICATIONS 16 ACTIVITY 3 - EASIER BUSINESS REGISTRATION 3.1 Current situation The registration process would be ii) Industry classification in the faster if applications were returned application – whether it should be less frequently. Currently, the process identical to the one in the company is undermined by the relatively high agreement; percentage (up to 35%) of returned or rejected applications. For businesses, a iii) Degree of tolerance for obvious failed application doubles or triples the mistakes in a paper application. time needed to register a company. For Inconsistent interpretations are courts, it creates an additional workload made not only between one region and contributes to backlogs. Reducing and another, but sometimes also the number of returned applications between adjudicating staff in the could increase process efficiency and same region. This results in legal predictability. uncertainties for businesses. For many years, the most frequent reason for rejection have been easy- Paper applications to-avoid errors by applicants. The form’s complexity enables applicants Paper applications are often returned to make numerous errors, resulting in on a multitude of grounds (see Table 1). rejection or return. The complex forms are The applications are complex, making it not user-friendly because applicants are difficult to register a company without assumed to have a legal background or prior experience or legal training. Based representative, resulting in application’s on the analysis of the most common rejection or return. At the same time reasons for returns, a guide for paper applications can be also filed directly by applicants could be developed to help entrepreneurs. applicants avoid critical mistakes. It should be available on government Inconsistent jurisprudence creates websites and disseminated among the uncertainty for applicants and causes staff of court information desks. more applications to be returned. Certain provisions are interpreted and enforced differently across regions, which Online applications makes it more difficult for businesses to comply. Online applications usually fail because of a single, trivial mistake A review of over 300 returned or rejected that can be easily avoided (see Table applications showed a divergent 2). S24 reduced the amount of errors approach between courts in Kielce, by using a template agreement and Rzeszów, and Białystok regarding: eliminating multiple appendixes. But, in research, based on the review of rejected i) Company name – as to whether or returned electronic applications, and to what extent it can resemble critical steps were identified where the names of companies in the same S24 system leaves space for errors that region or elsewhere, whether it could be avoided by upgrading S24/ might be misleading about the offering additional guidance to users. company’s activity, etc.; 3 - REDUCING THE NUMBER OF RETURNED APPLICATIONS 17 Table 1. Most common grounds for return or rejection of paper applications Grounds for rejection or return of Description paper applications There are a number of obligatory appendixes to be attached and 1 Failure to attach an obligatory appendix signed by the applicant. Rules of representation incorrect or inconsistent with The relevant box is often filled incorrectly, providing either too 2 the company agreement little, too much, or wrong information. An applicant has to cover court fees in advance (PLN 600),: 3 Unpaid court fees registration fee (PLN 500) and publication fee (PLN 100). The publication fee is often missing. The law requires that the company name should not resemble Company name is already listed in the register or is that of any of its competitors or be misleading as to the field of 4 misleading business activity. However, there seem to be different levels of rigor between Kielce and Rzeszów. In many cases, companies provide the name of the company without the legal form, which is inadmissible. However, sometimes the person responsible for processing would not return 5 Error in company name or name of its branch such an application, but rather fill the missing part with a pencil. In some instances errors are related to the name of the branch (word “branch” missing or no indication of city location, e.g. “in Kielce”). Company has to be registered under specific address, even 6 Incomplete or lacking address of company seat though the company does not have to demonstrate a legitimate legal title to the location. Persons convicted for specific felonies and crimes are precluded 7 Member of the board with criminal record from being appointed to the board. Such applications are rejected, which also results in the loss of court fees. Certain industry classifications (e.g., insurance, social security services) are not available to limited liability companies. When 8 Inadmissible industry classification such activity is listed in company agreement, the application gets rejected. Applications often contain misspelled names, wrong registry Error in the name or details of the partner or board numbers, incomplete or no address for natural or legal persons 9 member listed as partners of members of the board. Such errors cannot be amended. Under the law, the leading industry classification should be indicated on the form at the level of a sub-class (5 digits), and not 10 Error in industry classification on the form more than 9 other areas of operation can be added (class or sub- class level permitted). Paper application has to be submitted within 6 months following the signature of the agreement. In many cases this deadline is 11 Late application not kept due to multiple returns of the application. Under the circumstances, the applicant has to prepare a new agreement, which doubles the notary costs. The court can only register companies that have their seat in court’s district. Misdirected applications are transferred to the 12 Wrong jurisdiction competent court, which generates additional burden and prolongs the procedure. Source: World Bank staff; review of most recent decisions to return or reject a paper application to register a limited liability company at KRS divisions in Kielce and Rzeszów. The table presents causes for rejection or return of application, starting from the most common ones. 18 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Table 2. Most common grounds for return or rejection of online applications Grounds for rejection or return of Description online applications The law requires that the company name should not resemble that of any of its Company name is already listed in the 1 competitors or be misleading as to the field of business activity. However, there register or is misleading seem to be different levels of rigor between Kielce and Rzeszów. The court can only register the companies that have their seat in court’s district. 2 Wrong jurisdiction Misdirected applications are transferred to the competent court, causing further burdens and delays. Often, the name of the company includes the legal form (“spółka z o.o.”), which is already pre-defined. If the application was accepted, the official company Error in company name or name of its name would include legal form twice, which is inadmissible. The system does 3 branch not allow this error to be rectified at a later stage. In some instances, errors concerned the name of the agency (the word “branch” missing or no indication of city location, e.g. “in Kielce”). Applications often contain misspelled names, wrong registry numbers, Error in the name or details of the partner 4 incomplete or no address for natural or legal persons listed on the form, or or board member wrong KRS numbers of companies that are partners. In many instances, the street name was missing while the house number was Incomplete or lacking address of provided. It might indicate that the S24 form sometimes fails to synchronize with 5 company seat TERYT database. This obvious error might not be visible to the applicant before submission and it cannot be corrected at a later stage. Online application has to be submitted within seven days following the 6 Late application signature of the agreement (in case of online template-based agreements). If a company partners with its board member to incorporate another Invalid company agreement – signed company, this board member cannot sign the agreement for both. Under 7 in breach of rules of representation of a such circumstances, Polish law requires that a proxy appointed by all partners parent company represent the company The date of the company agreement execution is the date of the last signature Incorrect date of company agreement 8 of the partners, which is sometimes different than the one put manually on the provided on the form form. Certain industry classifications (e.g., insurance, social security services) are not 9 Inadmissible industry classification available to limited liability companies. When such activity is listed in company agreement, the application gets rejected. There are two types of proxy that can be used before KRS: a professional proxy (legal counsel or attorney) or an unqualified proxy who has an open- 10 Invalid or undocumented proxy ended commission contract with the company. The applicants often use non-professional proxies but fail to document the open-ended nature of the relationship. Member of the board with Persons convicted for specific felonies and crimes are precluded from being 11 criminal record appointed to the board. Such applications are rejected. Foreign companies that want to incorporate a subsidiary often fail to provide necessary documents to present the rules of representation. Additionally, Polish Lack of additional documentation from a 12 law does not permit the establishment of a LLC with a single partner by another parent company abroad LLC with a single partner. Foreign companies that are unaware of this provision usually fail to document the status accordingly. Source: World Bank staff; review of most recent decisions to return or reject online applications to register a limited liability company at KRS divisions in Kielce and Rzeszów. The table presents causes for rejection or return of application, starting from the most common ones. 3 - REDUCING THE NUMBER OF RETURNED APPLICATIONS 19 3.2 Recommendations at the national and regional level information is automatically verified Automatic validation of instead of by court approval. The gold online applications standard for online forms is that the Applicant mistakes can be avoided by system, by design, precludes any invalid upgrading the current S24 service. It is applications from being submitted and helpful to guide users through the online assists the client in completing the form form, but also to limit their choices and correctly. Table 3, below, presents some auto-fill as many elements as possible, in practical recommendations to update order to eliminate potential mistakes. The the S24 system to eliminate applicants’ process should be expedited as more most frequent mistakes. Table 3. Limiting returned applications – recommendations for the S24 service Frequently observed grounds for rejection or How should S24 be upgraded to eliminate the problem? return of S24 application The form should automatically verify if the name is similar or identical to the existing one, Company name is already listed instructing the applicant about relevant legal requirements. Legal requirements concerning a in the register or is misleading company name should be explained in a tooltip next to the box. Wrong jurisdiction S24 should automatically select the jurisdiction that matches company address. The form should provide guidance in a tooltip next to the box, on how to complete the box (it Error in company name or name could include a positive and a negative example). Alternatively, the system could automatically of its branch verify and reject certain phrases (e.g., “spółka z o.o.”) if included in the box. Error in the name or details of Whenever possible, details such as addresses, names, registration numbers of legal entities, etc. the partner or board member should be automatically verified by the S24 system. Incomplete or lacking address of The S24 system should automatically verify whether the full address has been provided, and it company seat should disallow submission of incomplete applications. The system should automatically verify the date of the company agreement signature to prevent Late application late submissions and instruct the applicant how to rectify the situation if this does occur. Invalid company agreement – signed in breach of rules of The S24 system should preclude the situation when the same person represents two partners, representation of a parent i.e. oneself and a parent company (as a board member) by cross-verification of relevant boxes. company Incorrect date of company The system should fill this box automatically, using the date of the last electronic signature of agreement provided on the form the partner. Inadmissible industry The S24 template company agreement should preclude industry classifications for which LLCs classification are not eligible. The relevant box should provide a drop-down menu to pick the type of proxy from available Invalid or undocumented proxy options. Legal requirements for proxies should be explained clearly in a tooltip next to the box. Member of the board with Criminal registry could be verified automatically by the S24 system before submission, to criminal record preclude the submission of ineligible applications to the register. Lack of additional Using the S24, it should be possible for a parent company abroad to attach required documentation from a parent documentation. Legal requirements should be explained in a tooltip next to the box. company abroad Source: World Bank staff 20 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Guidance for business users on how Alignment of divergent interpretations to avoid the most common mistakes within and across the regions Practical guidance on the registration Adjudicating staff should make a procedure will reduce the number conscious effort to try to eliminate of failed application cases. It is inconsistent interpretations of particularly important for expediting the provisions applicable to registration. paper-based process, where multiple Divergent interpretations naturally mistakes are commonly made. However, occur in a decentralized court system. assistance for businesses will also help to They are difficult to overcome, because reduce errors in the online system. registration cases seldom reach the Supreme Court, which could provide a The government website should standardized interpretation. Yet, several provide guidance presented in initiatives could be taken to address this simple language and with a user- issue: friendly layout. The information i) Organize regional and interregional provided should target the questions on meetings of adjudicating staff, to which the applications most frequently review recent cases as well as reconcile fail, as listed in Tables 1-2. The guidance the divergent interpretations of new can take the form of practical FAQ on legislative provisions; key issues, a checklist that names all prerequisites of a successful application ii) Incorporate registration cases into (documents, deadlines), and/or a glossary the curricula of the National School with explanatory definitions of key legal of Judiciary and Public Prosecution terms and relevant legal regulations (e.g., (Krajowa Szkoła Sądownictwa i regarding the name of the company). Prokuratury, KSSiP); Currently, the government website, iii) Issue aide-memoires and www.biznes.gov.pl, attempts to provide instructions by the Ministry of Justice. such support, but the information is incomplete and scattered over multiple webpages which are not interlinked and difficult for users to find. Court information desks play an important role in reducing the number of failed application cases. Direct communication with the applicants who visit or call the court in search of guidance on the registration procedure is an opportunity to avoid returned or failed applications. An easily accessible and competent information desk may significantly reduce the amount of applicants’ mistakes and the workload of the KRS division. It is crucial to ensure that the applicants can receive help from experienced staff who are up to date on legislative developments and local jurisprudence. 3 - REDUCING THE NUMBER OF RETURNED APPLICATIONS 21 Box 4 Guidance on business registration – GOV.UK British www.gov.uk is an example of a good practice in providing guidance on business registration. Graphic layout of GOV.UK is clean and it houses links to all communication materials necessary for registration of a private limited company at one site. Source: https://www.gov.uk/limited-company-formation 22 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Box 5 Guidance provided by court staff – a survey Practical guidance on the registration procedure by experienced court staff will reduce the number of failed applications. In Rzeszów, there is a customer information desk in the main hall of the court, but it does not serve KRS clients. Their calls and visits are redirected to the KRS division, and not all clients are persistent enough to find the division. In Kielce as well, the general information desk in the main building of the court does not serve KRS clients. There is, however, a separate information desk for KRS in the division building. Both in Kielce and in Rzeszów, the court staff was able to correctly answer customer’s questions about parts of the form that are com- monly filled incorrectly. It is important to keep this level of quality of customer service, especially since increasingly all communication with clients is being handled by information desks rather than the KRS division. Answer provided by KRS staff Question Kielce Rzeszów How should I fill in the form in the area of the company Correct answer: Put the full name including the legal form with no name box? Should I include the legal form (spółka abbreviation, as it is written in the company agreement. z ograniczoną odpowiedzialnością) in full or in an abbreviated version (sp. z o.o.) in box 28 of KRS-W3 form? 4 4 Correct answer: The application and all the appendixes should Who should sign the paper application and the be signed in accordance with the representation provided in the appendixes? company agreement. 4 4 How should I fill the appendix on KRS-WM industry Correct answer: Pick maximum 10 items to fill the form. At least classification if my company agreement provides for one of them – the leading industry classification - should be more than 10 items, some at a class level (two digits) and provided at a sub-class level (five digits). some at a sub-class level (five digits)? 4 4 Source: World Bank staff 3 - REDUCING THE NUMBER OF RETURNED APPLICATIONS 23 Activity 3 Recommendations for Easier Business Registration in the Świętokrzyskie and Podkarpackie Voivodships 4 EXPEDITING APPLICATION PROCESSING 24 ACTIVITY 3 - EASIER BUSINESS REGISTRATION 4.1 Current situation updating the registry, collecting financial Workload and resources statements, and deregistering the entities Podkarpackie and Świętokrzyskie that no longer exist. Less than 10% of the voivodships are served by the two caseload in Rzeszów was related to new divisions of the national court companies. In Kielce, first registrations registry with small to medium-size were also less frequent than registry loads of cases. In the first half of 2016, updates and other tasks. around 22,000 LLCs were registered in Figure 4. Number of LLCs registered in the first half of 2016 8,000 2,500 2,000 1,500 1,000 500 0 le ła yn in z a k a in ce ów ów ń a e e aw lin ań dź k zc w ór to aw ic ic ru ńs ia po al ec el zt b Łó zn w liw ho os B G ak cł sz ys sz To da Lu Ki cz O ls sz o- ro to Po ze a ał Ko dg Kr oc O G G Sz ar on sk W Ka Bi R st By W el el zę Bi Zi Source: Ministry of Justice C Poland. Over 70% of these firms were There are backlogs due to seasonal registered in Warsaw and major Polish spikes in the number of cases. Backlogs cities (Kraków, Łódź, Poznań, Gdańsk, take many months to be eliminated and Wrocław). Rzeszów and Kielce are home delay new registrations. This problem is to a small and medium-size KRS division, particularly severe during the summer, which registered about 300 and 750 when staff is on vacation and the inflow LLCs, respectively, in the first six months of cases nearly doubles due to financial of 2016 (see Figure 4 below). reporting obligations of incorporated companies. Figure 5 illustrates this Registration of new firms represents problem based on five-year data from a small share of the workload of the the KRS division in Białystok, a city in KRS divisions. In 2015, the KRS division Eastern Poland. Seasonal variation has in Rzeszów handled approximately been also confirmed during interviews in 25,000 cases. The majority of staff time Kielce and Rzeszów. was spent on existing companies – 4 - EXPEDITING APPLICATION PROCESSING 25 KRS divisions in Kielce and Rzeszów each division has a team of personal and have a similar organizational specialist assistants who are supervised structure, with four occupational by the head secretary. Assistants are groups: judges, judicial clerks, clerk hired on regular employment contracts, assistants, and specialist assistants. but they have no performance targets A judge heads the division, as mandated and are required to complete 40-hour by the Public Courts Act of 2001. Cases workweeks. Clerk assistants are assigned are managed by judicial clerks (who are to judicial clerks and usually do not work trained lawyers) and, issue decisions with more than one clerk. Specialist independently, and report to the head assistants are not assigned to clerks but of their division. Judicial clerks are hired perform shared tasks for the entire division, on regular employment contracts, but e.g. entering data into the registration they have the option of a flexible work system. The heads of the KRS division and schedule, provided they close a certain the head secretary have deputies, who number of cases per month. Additionally, act on their behalf in their absence. Figure 5. Case inflow in the KRS division in Białystok 2,500 2016 2,000 2015 2014 2013 1,500 2012 2011 1,000 500 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: District court in Białystok Table 4. Staff in KRS divisions (active FTE) Kielce Rzeszów Judges 2 (including 1 head judge) 0.5 (= head judge) Judicial clerks 6 8 Clerk assistants 10 (including 1 head secretary) 9 (including 1 head secretary) Specialist assistants 7 5 Source: Interviews in Rzeszów and Kielce district courts 26 ACTIVITY 3 - EASIER BUSINESS REGISTRATION There are differences in the Workflow organization of services shared among court divisions. KRS divisions make use KRS divisions in Kielce and Rzeszów of two shared functions: customer service follow similar 17-step work routines, and reception/document registration. In but there is some variation in the Kielce, KRS specialists at the customer allocation of individual tasks. Table 6 service desk are the employees of the shows the standard protocol for paper KRS division. In Rzeszów, there are no registration. Applications from new KRS specialists at the customer service registrants are first recorded in a case desk, and inquiries are sent directly to management system (CMS) administered KRS division. In Kielce and Rzeszów, by the Ministry of Justice (steps 1-3). In employees at reception and the Kielce, this is done at the document document registration desk are assigned registration desk. In Rzeszów, KRS to an administrative unit supporting all specialist assistants handle registration. court divisions, but in practice the bulk of The head of the division assigns a document registration is still performed at registered case to a judge or a judicial clerk the KRS division. (step 4); this task can be also automated in CMS or delegated to a head secretary. There is a diversity amongst The court assistant supporting the clerk employees in the KRS divisions in in charge of a case prepares a case file Kielce and Rzeszów. Different age (step 5), which contains the application groups are represented and young and supporting documents (e.g., proofs staff members work alongside more of payment). A legal clerk verifies the experienced, older staff. There is gender application, recommends an action, and balance among clerks (though women returns the file to the assistant (step 6), are overrepresented among assistants). who records the clerk’s recommendation Court clerks have different specialties in the CMS (step 7). A specialist assistant and interests, but share similar training, as then enters the data about the new they are recruited from among graduates business into the registration system of the National School of Judiciary and (step 8). Once this step is completed, the Public Prosecution (Krajowa Szkoła clerk’s assistant will send an electronic Sądownictwa i Prokuratury, KSSiP). A query to the Registry of Convicts (step number of recent hires in Kielce and 9) to verify board members’ criminal Rzeszów are top graduates of KSSiP, record. This background check may suggesting that KRS divisions do not take one minute or up to several days, have difficulties in attracting talent. depending on the availability of personal details and complexity of the case. Other Few training opportunities are background checks are also conducted available. While KSSiP and the MoJ (e.g. verifying whether there might be While KSSiP and the regularly offer trainings for district a business already operating under the MoJ regularly offer court employees, they rarely target KRS name proposed in the application). The trainings for district divisions (and when they do, the number clerk’s assistant then drafts the decision court employees, of applicants exceeds the number of and supporting documents for the they rarely target KRS available places). There is also limited decision (step 10). These documents divisions. There is also experience sharing between KRS are signed by the judicial clerk/judge limited experience divisions in different cities of the same (step 11). The clerk’s assistant records the sharing between KRS region and across Poland. Staff meetings decision in the CMS (step 12) and submits divisions in different at local divisions are held regularly (or asks a specialist assistant to submit) the cities of the same and are conducive to the exchange details about the new firm to the central of information on difficult cases, thus database administered by the MoJ (step region and across contributing to mutual learning. 13). The clerk’s assistant then sends the Poland decision by registered post to the applicant (step 14), and records if the decision was received (step 15). Finally, the judicial clerk, the judge, or the head secretary confirms with their signature that the business was registered (step 16), and assistants archive the case file (step 17). 4 - EXPEDITING APPLICATION PROCESSING 27 Table 5. Typical workflow for business registration Task Task owner 1 Application is stamped Registration point Preliminary registration of application (application date and type and business 2 entity category are entered in the CMS, payment of court fees is verified, and a Registration point/specialist assistant case number is assigned) Full registration of application (information about appendixes, applicants, and 3 Registration point/specialist assistant their legal representatives is entered in the CMS) Office head on behalf of the head 4 Case is assigned to a clerk judge/CMS 5 Case file is prepared Clerk assistant 6 Case is analyzed and decision is recommended Judge/judicial clerk 7 Recommendation is recorded in the CMS Clerk assistant 8 Data from the application is entered in the RS Specialist assistant 9 Registry of Convicts and other databases are checked in the CMS Clerk assistant Draft decision and “non-compliance/non-confidence protocols” are prepared 10 in the CMS (formal obstacles to registration are documented, e.g. a wrong ID Clerk assistant number, wrong industry classification, duplicate name, criminal record, etc.) 11 Documents are reviewed and decision is signed Judge/judicial clerk 12 Decision is recorded in the CMS Clerk assistant Data is submitted to the CDB to obtain tax identification number (NIP) and 13 Specialist assistant/clerk assistant REGON number Decision is sent by registered post, a record is made in the CMS, and a proof of 14 Clerk assistant receipt is filed 15 Proof of receipt is recorded in the CMS Clerk assistant 16 Business registration is confirmed Judge/judicial clerk/office head 17 Case file is archived Office head/clerk assistant Note: CMS = case management system, RS = registration system, CDB = central database, NIP = tax ID Workflows are similar for both paper reviewing electronic applications. Both and electronic registrations. This is divisions meet the ministry’s target, but because electronic applications are printed do so at the expense of other cases. by the KRS division. The Ministry of Justice A challenge to address in electronic requires that electronic applications should applications is the manual entering of be processed within three working days. data submitted by firms in the online form The application is then processed using into case management and registration the standard protocol described above. systems. Once a decision is made, a The KRS staff in Rzeszów and Kielce is notification is signed electronically and aware of this requirement, and prioritize sent to applicants by e-mail. 28 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Application processing is expedited by drafts; if a firm is not registered, several process-related innovations, these draft entries are deleted. While namely: this change produces seemingly redundant tasks (entering and • The head of the KRS division in deleting some entries in the RS), Kielce authorized the head secretary it simplifies the workflow: judges/ to assign cases to clerks automatically judicial clerks do not have to review in the CMS, based on a simple an application twice, and the delays algorithm. Cases are reassigned resulting from a frequent exchange manually only in exceptional of documents are minimized. situations, such as a sick leave. • In Białystok, the KRS division • The back office of the KRS division delegates one to two employees to in Rzeszów has merged steps 2 and the customer service desk. They have 3 (entering the data into the CMS) access to the case management with step 8 (entering the data into system and can respond to queries the RS) for electronic applications. from business registrants. As a result, The registration system is populated the head of the division and the with data at the beginning of the office, clerks and their assistants can process. This means that cases which focus on handling cases without end up being returned or rejected being disrupted. are still entered into the system as 4.2 Recommendations at the national and regional level Avoid backlogs with the help of In addition, staff could be temporarily periodic re-assignments transferred to the KRS from non-KRS divisions, pursuant to the labor code. One of the biggest challenges for the Given that judges are entitled to a longer KRS divisions in Kielce, Rzeszów and vacation (up to 38 days) than assistants other cities in Poland is managing (up to 26 days), and the number of the increase in cases during the judges is disproportionally larger in other summer. Once a backlog is created divisions than in KRS, assistants in non- during this time, it takes up to a year to KRS divisions have spare capacity and reduce it and, subsequently, all cases are could be trained to support the KRS delayed. The district court in Białystok division during summer. Transferring addressed this problem by offering paid assistants to divisions with an occasionally internships to young graduates (mostly or seasonally high case volume could also with bachelor degrees) who have their limit delays if there is no spare capacity at first work experience, and it addresses the assistant level (see Box 6). the shortfall in staff capacity. These internships are offered on the basis of the Graduate Internship Act of 2009 and they have been successfully applied to avoid backlogs in other regions of Poland. 4 - EXPEDITING APPLICATION PROCESSING 29 Box 6 Reducing delays resulting from backlogs Consider two divisions of a court with one assistant each. Each division, at 100% capacity, receives and processes one case per day. A backlog is created if the number of new cases exceeds those that are processed. This will happen, for instance, if the number of cases in division B triples and the capacity remains unchanged. This situation is depicted in the table below. Division B has received three cases on Day 1, but with the current resources it is able to process only one case that day and will handle the second case on Day 2 (1 day delay), and the third case on Day 3 (2 days delay). As a result, the case arriving on Day 2 will be dealt with on Day 4, and so on. The spike in cases on Day 1 will lead to a total of three days of waiting time for the cases arriv- ing on that day (and two days for the single case arriving the next day and each of the following days). Division A Division B End- End- Inflow Outflow of-day Inflow Outflow of-day backlog backlog Day 1 1 1 0 3 1 2 Day 2 1 1 0 1 1 2 Day 3 1 1 0 1 1 2 1 day for the 2nd case from Day 1 2 days for the 3rd case from Day 1 Delay 0 days 2 days for case from Day 2 2 days for case from Day 3 TOTAL DELAY: 7 DAYS Can the delay be reduced if the assistant is transferred from Division A to Division B? Such a reassign- ment will inevitably create a backlog in Division A, but it will also help minimize the number of waiting days for the divisions’ clients.” This is shown in the table, below. The total number of delayed days is smaller when two assistants work in the division with the larger inflow of cases than when they work at full capacity in two separate divisions. Division A Division B End- End- Inflow Outflow of-day Inflow Outflow of-day backlog backlog Day 1 1 0 1 3 2 1 Day 2 1 1 1 1 1 1 Day 3 1 1 1 1 1 1 1 day for case from Day 1 1 day for the 3 case from Day 1 rd Delay 1 day for case from Day 2 1 day for case from Day 2 1 day for case from Day 3 1 day for case from Day 3 TOTAL DELAY: 6 DAYS Source: World Bank staff 30 ACTIVITY 3 - EASIER BUSINESS REGISTRATION Pool resources Reduce the complexity of the registration process through system Currently, four types of professionals work integration and process re-engineering in KRS divisions (judges, judicial clerks, clerk assistants, and specialist assistants), An application is currently processed but there are essentially two types of in 17 steps and four IT systems (S24, tasks performed by these employees: CMS, RS, CDB), which are not fully integrated. More steps can lead to more i) entering the data into IT systems errors, and thus likely applications delays. and back office support; Integration of IT systems, therefore, will ii) judicial review of applications. simplify the registration process. Today, the The work of data entered online by registrants is not assistants is divided While it is widely recognized that both uploaded to the IT system used by court into two exclusive judicial clerks and judges can review staff. In addition, similar data is entered job categories, applications, the work of assistants is into the case management system and causing bottlenecks divided into two exclusive job categories, registration system. The systems could also and delays. This causing bottlenecks and delays. be more user-friendly, as KRS assistants fragmentation This fragmentation of staff duties is spend a significant amount of time filling of staff duties particularly problematic when specialist out forms and templates with information is particularly or clerk assistants are on leave. that could be automatically generated.4 problematic when It is recommended that specialist and The recommended workflow for specialist or clerk clerk assistants are trained to perform business registration should rely on assistants are on all types of assistants’ tasks, provide online submissions, and the number leave. back office support throughout the of work steps should be reduced entire business registration process, from 17 to five. Table 7 presents the and are assigned to clerks/cases recommended workflow for business on a rotating basis. The last of these registration. IT system integration can recommendations can be implemented help eliminate as many as seven steps. in phases (for instance, at the beginning, Encouraging the judges and judicial two assistants can be assigned to two clerks to use existing electronic features clerks, then three assistants to three (such as automatic case assignment to clerks, etc.). judicial clerks) and to review applications electronically can eliminate two additional steps. Another two steps can be removed if registration decisions are published online instead of being sent by registered post, and electronically certified confirmations are downloaded on demand. Table 6. Recommended workflow for business registration Automatic validation of registration form (personal ID, industry classification, 1 Integrated IT system duplicate name, convict records etc.) 2 Automatic validation of application (payment, appendixes, etc.) Integrated IT system 3 Formal review of application Assistant 4 Judicial review Judicial clerk 5 Publication in online business registry Assistant Source: World Bank staff 4 For instance, assistants need to handwrite on each of the draft registration decisions that the application was reviewed without hearing. This is an obvious formula in the case of business registration, but inserting it 45,000 times for all newly registered LLCs in Poland wastes 90 workdays. 4 - EXPEDITING APPLICATION PROCESSING 31 The process can be simplified, even In addition, staff can be motivated by without the implementation of an more flexible work hours. Flexible work integrated IT system by the Ministry arrangements respond to their needs of Justice. If the registration process is re- and demonstrate employer interest in engineered so that assistants are trained employee welfare. Currently, judicial to do all formal checks on applications, clerks are entitled to flexible work hours, an additional step will be eliminated and while assistants have fixed schedules. It judicial clerks will not have to do deal is recommended that all staff of the KRS with an application twice and memorize division, irrespective of their job position, (or re-examine) its content. This is feasible have flexible start and end hours. using existing tools and resources. Incentives for staff to process more cases At present, the employees at KRS divisions in Kielce and Rzeszów have limited incentives to perform above expectations. Judicial clerks are given a target number of cases to close during a month, but they are not rewarded for managing more cases than expected. Assistants have no targets and no incentives. Experience from the district court in Białystok shows that performance pay mechanisms can be successfully used in KRS divisions. In Białystok, assistants at the KRS division have specified targets of cases that they have to handle in a month. In addition, they have been offered additional pay (Polish dodatek) if they exceeded these targets. The additional pay is different from the customary reward payments used in the Polish public sector because they are disbursed based on pre-agreed levels and the funds for these extra payments are guaranteed. Staff has been shown to handle more cases on a daily basis for a fraction of the salary of new employees. Staff and management praise this mechanism as a transparent and efficient tool for dealing with a seasonal increase of workload in the KRS divisions. 32 ACTIVITY 3 - EASIER BUSINESS REGISTRATION