The upcoming amendment to the Commercial Companies Code (CCC) allows for the transferring of the registered office of a Polish company to another EU member state. Such a step strengthens the principle of freedom of business activity. The work on the project is getting close to an end. The following article explains the legal basis and the scope of the amendments.
Table of Contents
- The legal basis for transferring a Polish company to another country
- Subjective scope of changes
- Definition of a cross-border conversion
- Consequences of cross-border conversion
- New opportunities related to transferring a Polish company to another country
- Transferring a Polish company to another country – summary
The legal basis for transferring a Polish company to another country
The amendment is based on two EU directives within the so-called company law package:
- Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and division.
- Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law.
The impulse for these changes was the judgment of the CJEU in case C-106/16 (Polbud). The Court emphasized that the need to carry out liquidation proceedings in order to transfer the company’s registered office from one Member State to another violates the right to conduct business freely. It also contradicts the well-established EU objectives. These focus on making it easier to conduct business activity in the territory of another Member State on the same terms as nationals of that state.
Subjective scope of changes
The amendment to the CCC concerns the transformation of capital companies established in accordance with the law of Member States and with registered office, management board or main enterprise in the EU, into capital companies governed by the law of another Member State.
In Poland, the changes will affect:
The EU legislator has provided exemptions for a company:
- whose subject of activity is collective investment of capital obtained through public means,
- operating on the basis of risk diversification, the units of which are repurchased or redeemed directly or indirectly from the company’s assets at the request of their holders,
- under liquidation that has started to distribute assets to its partners,
- to which the instruments and mechanisms provided for in Title IV of Directive 2014/59/EU have been applied.
Definition of a cross-border conversion
A cross-border conversion means changing the legal form of a company in a departure Member State (e.g. in Poland) into another legal form in another target Member State (e.g. France). The company must at the same time transfer at least its registered office to that state (e.g., from Poland to France). There is no need for dissolution or liquidation proceedings and the converting company preserves its legal personality.
Restrictions on cross-border conversions provide for:
- regulations on partial or full cross-border divisions
- introduction of the definition of the recipient company, i.e. a company newly created in the course of a cross-border division.
Consequences of cross-border conversion
Cross-border conversion takes effect on the date determined by the law of the target Member State, after verifying the admissibility of the conversion. This means that:
- all assets and liabilities of the existing company become assets and liabilities of the converted company,
- shareholders continue to be shareholders of the converted company unless they sell their shares or stocks,
- rights and obligations of the company arising from employment contracts or employment relationships existing on the date on which the cross-border conversion takes effect become rights and obligations of the converted company.
New opportunities related to transferring a Polish company to another country
The amendment to the Commercial Companies Code will introduce the following changes:
- a new type of cross-border merger
- one or more companies, at the time of dissolution without liquidation proceedings, will be able to transfer all their assets and liabilities to another existing company (the acquiring company) without the need to issue or establish new shares by the acquiring company,
- the unity of the shareholder(s) or equality of capital will be the condition.
- the shareholding relationship will remain unchanged,
- it can be used, for example, to concentrate assets and liabilities of companies distributed within a holding structure.
2. removal of the restriction on the transformation of a limited joint-stock partnership
- a limited joint-stock partnership may become the acquiring company or the newly established company.
3. Introducing a division by separation
- it involves transferring part of the assets and liabilities of the divided company to one or more recipient companies in exchange for the issuance of shares in the newly established company in favour of the divided company,
- shares or stocks in the recipient or newly formed companies are taken up by the divided company,
- this is a partial division and does not result in the dissolution of the divided company,
- there is no exchange of shares or stocks
- the division plan must have specified content,
- it does not deprive the companies of the possibility to form subsidiaries in other member states.
4. Protection of creditors
- developing the harmonization of measures for their protection and extending it to cross-border conversions and divisions,
- the right to ask the relevant authority for establishing protection,
- providing the creditors not participating in the merger of the company directly holding all the shares in the acquired company with protection measures.
5. Protection of shareholders, including:
- the right to sell shares or stocks for shareholders voting against a given cross-border operation. (Member States may also grant this right to other shareholders).
- payment of remuneration related to the exercise of the above right by the shareholder under certain conditions,
- the right of the shareholders, who declared the exercise of the right to sell their shares or stocks, to challenge the amount of remuneration proposed by the company before the competent authority or the entity authorized under national law.
6. Protection of employees, including:
- employees’ participation in the appointment of the company’s governing bodies.
7. information requirements concerning the cross-border merger plan
8. Information requirements concerning cross-border divisions
- an indicative schedule,
- a detailed description of the assets and liabilities of the company subject to division and a declaration on how they will be distributed among recipient companies or maintained by the company subject to division in the event of a partial division or division by separation.
Transferring a Polish company to another country – summary
The new company reorganization rules aim to ensure the freedom of business activity within the EU on equal terms. According to the legislator’s intention unifying these rules will improve the security and transparency of business transactions.
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