Succession planning in a Polish limited liability company.

Succession planning in a Polish limited liability company. Handing over a capital company to successors.

The death of a shareholder in the course of running a business in the form of a limited liability company in Poland, as a rule, does not result in blocking the business. It is the company that acts as a party to commercial relations, it is the addressee of all decisions and it has registration and identification numbers such as NIP, REGON, as well as all licenses, concessions and permits. In theory, therefore, the death of a shareholder should not affect the everyday functioning of the enterprise in this particular legal form.

Such a general conclusion may, however, turn out to be incorrect in certain cases. A limited liability company in Poland, although having legal personality, creating a completely separate entity from its shareholders, may also be affected by sudden changes in the composition of shareholders or in the composition of management bodies – succession planning. After all, it is people who determine the company’s success, and their sudden absence may result in an irreversible disruption to its functioning. There are also legal aspects that must be taken care of to prevent a deadlock in the limited liability company due to the shareholder’s death.

Risks related to sudden personal changes in a Polish limited liability company – succession planning in a Polish limited liability company.

These risks can occur on many levels. In each company, due to the specificity of its activities, they may be different. It may be tempting to try to identify a few of the most common problems that may arise in situations where no action has been taken to prepare the company to be handed over to successors – succession planning.

One of them – in the absence of a last will of the person who was the owner of shares in a Polish limited liability company – may be, for example, protracted inheritance proceedings. As a rule, it includes activities aimed at establishingthe circle of heirs and then dividing the estate between them. When the heirs agree on the details and rules of the division of the property, the takeover of the management of the Polish company should be relatively efficient. However, when there is no agreement or – even worse – when there is no agreement to continue the business, and there is a need to make important decisions about the company, it may turn out that the business will suffer irreversibly.

Another problem that the holders of shares in Polish limited liability companies often do not notice in practice is the transfer of shares in a limited liability company to minors (succession planning). Just as minors cannot make their own legal decisions in many cases, they cannot do it in the exercise of their share rights in a limited liability company. The participation rights on behalf of the minor are exercised by their legal guardians (usually parents). However, the parents are limited in this respect by the activities of ordinary management. When this activity exceeds the scope, it is required to apply to the court for the appropriate consent. It may take time to obtain this decision. So let us imagine that the shares in the company are inherited by a few-year-olds, the company has a chance for a large investment, but needs financial resources for its implementation, which it can obtain from the sale of one of its real estate. The sale requires the consent of the shareholders’ meeting and the minor is the majority shareholder. Minors cannot vote as a partner on their own, and in this case their legal guardians cannot do so on their behalf without the court’s consent.

This means that the decision in this regard will be made by the court, which must be guided by the best interests of the child, who at the same time does not know the Polish company, the specifics of running a business or its business environment.

Another problem may arise when shares in the company are inherited by several people (succession planning). Once the inheritance formalities are completed, the problem of company management may arise. The lack of a properly prepared corporate governance, rules for the appointment or functioning of bodies, and defining the rules for representing the company may lead to complete organizational chaos in such situations and thus effectively disrupt the company’s operations.

A last will is one of the elements that will allow the transfer of shares between generations (succession planning). However, it should not be forgotten that a Polish limited liability company is a separate entity from the person of a shareholder, whose operating principles are determined by relevant corporate documents. Their preparation or appropriate change should not be omitted in the process of planning the succession of a Polish limited liability company.

Read more about succession planning in a Polish limited liability company:

• Proper corporate governance of a Polish limited liability company.

If you need more information on Polish limited liability companies or other aspects of Polish law, please contact our team.

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