New types of company re-organisations
The Act introduces new provisions for domestic and trans-border company re-organisations (mergers, divisions, and transformations).
The first relevant solution is the introduction of a simplified type of domestic and trans-border merger (merger by acquisition). This simplified merger can be carried out without granting shares in the acquiring company when one shareholder directly or indirectly holds all the shares in the merging companies, or the shareholders of the merging companies hold shares in the same proportion in all the merging companies. With this type of merger, one or more companies, upon their dissolution, without liquidation proceedings, transfer all their assets and liabilities to another existing company (i.e. the acquiring company) without the acquiring company having to grant new shares. Therefore, the simplified merger will not require an increase in the share capital of the acquiring company.
The second new arrangement is the introduction of the possibility of trans-border divisions, and trans-border transformations (until now only a trans-border merger was possible). With respect to the divisions of companies, of particularly note is the introduction of a division by separation (an arrangement that had not previously existed in Polish law) which will be applicable to both domestic and trans-border re-organisations. A division by separation will involve the transfer of a part of the assets and liabilities of the divided company to one or more of the acquiring companies, in exchange for the issue of shares in the newly established company to the divided company. Importantly, the feature that distinguishes a division by separation from the previously existing division by spin-off is the fact that the shareholders of the divided company do not become the shareholders of the acquiring company, but the divided company itself receives the shares in the acquiring company in exchange for the transfer of part of its assets.
Other changes related to re-organisation processes
One further change of note introduced by the Act is the equalisation of the status of a joint-stock partnership and a capital company with respect to both domestic and trans-border re-organisations (including the granting of a joint-stock partnership full merger and division capacity).
The Act also stipulates new regulations as to the formal requirements for carrying out the trans-border re-organisations of companies. The Act introduces, among other things, additional requirements as to: the elements of re-organisation draft terms, modifications in the ways of disclosing documents and information related to trans-border re-organisations, and the introduction of the additional obligation to prepare a report justifying the legal and economic grounds of the re-organisation for the benefit of the employees of the company which is undergoing the re-organisation (with the possibility of preparing either a single report for both the shareholders and the employees, or two separate reports).
Protection of creditors and minority shareholders
The Act introduces additional mechanisms to protect creditors and minority shareholders of companies undergoing a trans-border re-organisation.
Firstly, a creditor of a company that intends to undertake a trans-border re-organisation will be able to ask the relevant authority to provide security for its claims within one month from the date on which the draft terms of the merger, division, or transformation were disclosed or made available.
In addition, in the case of trans-border transformations, creditors whose claims arose before the draft terms of the transformation were disclosed or made available will also be able to bring proceedings against the company in the Member State of the departure (the Member State where the company was registered before the trans-border transformation) within two years of the date of the transformation taking effect.
In addition, the joint and several liability of companies participating in a trans-border division has been introduced for the claims of the company being divided when a creditor's claim has not been satisfied by the company to which liability has been assigned in the draft terms of the trans-border division. This liability is limited to the value of the net assets allocated to each company participating in the division. Analogous solutions have been introduced for mergers as well as for trans-border transformations.
In relation to the protection of minority shareholders, said minority shareholders are granted the right to submit comments on the draft terms for the trans-border re-organisation in question, as well as to exit the company and sell their shares for an appropriate remuneration (shareholders can challenge the remuneration, as estimated by an independent expert, before the competent authority). This right is only provided for those shareholders who voted against the resolution to carry out the re-organisation, or who were unreasonably prevented from attending the general meeting on the adoption of the resolution. Changes have also been made to give shareholders the possibility to challenge the share exchange ratio set out in the trans-border re-organisation draft terms.
Verification of trans-border re-organisation processes
The provisions introduced also refer to the verification of conformity with Polish law of the trans-border re-organisations carried out. In this respect, a certificate of the conformity of a trans-border re-organisation with Polish law has been introduced. The application for the issuance of a certificate of conformity of a given trans-border operation with Polish law must be submitted to the competent registration court. The registration court will issue the certificate within three months (in special situations the deadline might be extended by a further three months) and will include a reference to the trans-border operation in the register.
Significantly, an application for a certificate of conformity of a given trans-border operation with Polish law is submitted together with a request for an opinion from the competent tax authority (the Head of the National Fiscal Administration). The Head of the National Fiscal Administration is authorised to examine whether there is a justified assumption that the implementation of a trans-border transformation, merger, or division of a company can, among other things, be subject to the so-called tax avoidance clause (as specified in Article 119a § 1 of the Tax Ordinance). As a rule, the Head of the National Fiscal Administration issues an opinion as to the conformity of a given operation, or refuses to issue such opinion without any undue delay, but no later than within a month of receiving the request. In cases justified by the complexity of the case, the deadline can be extended by up to three months.
Summary
The presented amendment of the Code of Commercial Partnerships and Companies mainly concerns re-organisation processes. Its overall objective is to facilitate business activities in the EU internal market. The changes are intended to facilitate trans-border transformations, mergers, and divisions, and to enhance integration within the single EU market. The amendment also introduces changes in the area of domestic types of company re-organisations. An important feature of the regulation is the focus on increasing the certainty and security of transactions by, among other things, guaranteeing greater protection for creditors, minority shareholders, and employees, as well as the broader verification of the conformity of trans-border re-organisations.
Authored by Tomasz Żak, Tomasz Pietrzak, and Hubert Kruk.
