Polish Commercial Company Law – Purchase of Shares or Stocks in a Polish Company and Company Defects

Does the seller of shares in a Polish limited liability company or stocks in a Polish joint-stock company is liable for the defects of the company itself? Is one liable if the Polish company is in debt and the seller did not inform him about it?

Accounting and legal audit in the case of purchasing shares in a Polish limited liability company or joint stock company – is it needed?

Agreements for the sale of shares in a limited liability company or stocks in Poland are usually simple and not very complicated. Typically, however, they include clauses stating that the shares/stocks exist and are free from any legal defects. Is such a seller’s assurance of the absence of defects a sufficient security for the buyer in a situation where it is said that the Polish company whose share rights it acquires is in debt (or, to be more precise, the enterprise of the Polish company is in debt)?

Unfortunately, according to Polish court jurisprudence, defects in the company’s enterprise do not constitute defects in shares, and the subject of sale in share deals (transactions for the acquisition of share rights) are share rights in the company, not the company’s enterprise (as is the case in asset deals). The seller is therefore liable (pursuant to the provisions on warranty) for the defects of the sold share rights (e.g. for defects in the existence of undisclosed and unfulfilled benefits due to the company from the sold shares), but not for the defects of the enterprise run (in terms of the subject matter pursuant to Art. 551 of the Polish Civil Code) by the company.

This does not mean that in each such case the buyer is completely deprived of the possibility of pursuing claims against the seller of shares in Polish companies. However, it should be remembered that the implementation of the legal remedies available to him is very difficult compared to the regime of liability under the warranty for defects, and the divergences in legal positions in Poland as to the grounds for such liability are significant.

Securing the buyer’s interest therefore requires appropriate shaping of the content of the share sale agreement. There are at least several solutions worth considering, including the use of contractual clauses introducing the seller’s warranty liability or introducing the right to withdraw from the contract or charge contractual penalties, but the starting point is always to properly include the seller’s assurances as to the actual state of the enterprise in the contract. Polish company.

When concluding transactions for the sale of shares in Polish companies, one should also remember to determine a number of other important issues (apart from examining the condition of the company’s business), such as determining whether the conclusion of the contract is dependent on the consent of the company’s governing body, or whether the sale is not limited by the right of pre-emption or priority. acquisition, or whether the company is not the owner or user of agricultural property.

As part of our accounting company PRWT, we deal with accounting and legal audits (due diligence) of acquired Polish companies, and we also assist in the negotiations conducted as part of share deal and asset deal transactions.

If you are interested in conducting such an accounting and legal audit of a Polish company that you intend to acquire (purchase shares in a Polish limited liability company or shares in a Polish joint-stock company), please contact us.

Polish accounting office in Krakow:

PHONE: +48 12 345 21 06
EMAIL: biuro.krakow@prwt.pl

Polish accounting office in Warsaw:

PHONE: +48 22 292 47 21
EMAIL: biuro.warszawa@prwt.pl