corporate | In Principle

Usually, a merger of companies in Poland requires a number of legal steps and preparation of extensive documentation. This can make mergers complicated and costly, in particular if companies with different shareholding structures are involved. But in some cases the regulations allow the parties to simplify the procedure by excluding certain obligations—if certain conditions are met regarding the capital structure of the companies.

Under current regulations in Poland, in post-merger accounting, tax losses of the acquired company cannot be recognised. However, it is possible to settle tax losses of the acquiring company, although this is not always the rule. In determining whether the acquiring company is entitled to settle tax losses, it is necessary to assess whether the company’s actual principal business after the takeover is wholly or partially different from that before the takeover. What, in essence, is covered by the notion of “actual principal business”? When should the principal business be considered to have changed “in part”?

An element of any proposed merger of companies in Poland is determination of the ratio for exchange of shares of the companies participating in the merger and the amount of additional payments, if any, unless there is no exchange of shares. But sometimes the parties do not have to set a share exchange ratio in the merger process.

For companies participating in a reorganisation to continue pursuing their owners’ objectives, permits, licences or other administrative decisions necessary for operation must be secured. Proper preparation for this process requires not only knowledge of the regulations under which the administrative decisions are issued, but also the agencies’ procedural practice.

Converting a company’s liability into capital can be a way to “heal” its balance sheet. This can increase the company’s credibility with counterparties and reduce the risk of insolvency. Conversion can also generate tax benefits, for example by reducing interest expense to below the deductible limit.

The 15 September 2023 amendment to Poland’s Commercial Companies Code introduced a number of changes to the cross-border merger procedure. Such a merger has its peculiarities because it is subject to the laws of more than one EU member state. During a cross-border merger, a number of practical aspects can significantly affect the speed and efficiency of the procedure.

On 15 September 2023, an amendment to the Commercial Companies Code entered into force, introducing into the Polish legal system a previously unknown method of demerging companies: the demerger by spin-off. The parliament was obliged to implement EU directives providing for the demerger by spin-off as well as additional methods for cross-border demerger.

An appraisal of assets in the course of corporate reorganisations is a required element for determining their value when transferred from one company to another as a result of a merger or demerger. But the procedure for reorganising companies is often lengthy, and during the course of the procedure components of the transferred assets or liabilities may change due to ordinary or extraordinary circumstances. Or the appraisal itself may change. This raises a fundamental question of the extent to which the reorganisation documentation must be modified, including the draft terms of merger or demerger, and how these changes can be reflected in the accounting records without having to redo the entire reorganisation procedure.

Poland’s Commercial Companies Code allows for conversion of a joint-stock company (SA) into a limited-liability company (sp. z o.o.), but many formalities are required and not always clearly regulated. Mistakes at any stage of the process may result in the court refusing to register the conversion. In this article, we describe the stages of the process and selected practical issues that may arise.

This issue continues to raise numerous doubts under Polish law. The doubts surround the number of financial statements required by law to be prepared in relation to the conversion, the reporting period covered by each financial statement, and the obligation for the financial statement to be examined by an auditor and approved by the competent body. Of particular importance is the correct determination of the period for which the first annual financial statement of the company post-transformation (the “new” company) must be prepared, which directly affects the method for distribution of profit from the company prior to transformation (the “old” company) and the limitations on distributions.

In previous articles, we have outlined the advantages of establishing a family foundation, the scope of business activities permitted for foundations, and tax issues. Now we turn to the rights and obligations of persons involved in the operation of a family foundation. The foundation operates through its bodies (management board, supervisory board, and assembly of beneficiaries), but it cannot be established and function without the founder and beneficiaries. The Family Foundations Act regulates the tasks and powers of all of these entities, giving the founder relatively wide latitude to set the rules for the foundation’s bodies in the statute. This allows these policies to be tailored flexibly to suit the foundation’s operations and purposes.

The Family Foundations Act, entering into force on 22 May 2023, introduces the family foundation into Polish law as a new legal entity designed for collecting property and managing assets in accordance with the founder’s will and paying benefits to beneficiaries. Therefore, the objectives of a family foundation are different from those of existing foundations, which are non-governmental organisations operating for public benefit and not for profit.