TerraLex Cross-Border Guide to Cross-Border Merger & Acquisition Guide

Apart from the issue of possible consent for a concentration, which is not assessed based on the country of origin of an investor, the acquisition of shares (stocks) in Polish companies is a subject of some limitations when the company is an owner or a perpetual usufructuary of real estate located in Poland.

The limitation in question derives from the act of 24 March 1920 on the Acquisition of the Real Estate by Foreigners (the “Foreign Trade Act”), which provides that the acquisition of a controlling stake in a company with its registered office in Poland by a foreigner requires the consent of the Ministry of Interior and Administration to be valid.

Under the Foreign Trade Act, a foreigner is:

1. A natural person who does not hold Polish citizenship;

2. A legal person with its registered office abroad;

3. A company which is an association of the persons listed under sec. 1 or 2, without legal personality, with its registered office abroad, established under the law of a foreign country; as well as

4. A legal person or a company without legal personality with its registered office in Poland and controlled (directly or indirectly) by a person(s) or company(-ies) listed in sec. 1, 2 and 3.

The above limitation does not apply to foreigners from the countries that belong to the European Economic Zone (EEZ) and Switzerland. Also, it does not apply to the cases where:

1. The acquisition of shares (stocks) of the company are admitted to trading in a regulated market; or

2. The company is an owner or a perpetual usufructuary of the real estate consisting of: a) independent residential premises, b) independent commercial premises used as a garage, or c) undeveloped real properties whose total area in the whole country does not exceed 0.4 hectares within town/city areas, unless such real property is located in the frontier zone or is an agricultural property with the area exceeding 1 hectare.

If the real estate is agricultural, the limitations are much broader and extend also to the EEA countries and Switzerland. For example, under the Act of 11 April 2003 on the Formation of the Agricultural System, the National Agricultural Support Center (KOWR) is entitled to a pre-emptive right regarding the purchase of shares (stocks) in a company (or its subsidiary) that owns or holds perpetual usufruct of agricultural land.

However, this restriction does not apply in certain situations explicitly provided by law. These include, for example:

• transactions involving public companies listed on a regulated market,
• transfers between close family members,
• transfers made by or to the State Treasury,
• transfers within specific types of capital groups or to strategic investors involved in key infrastructure projects such as nuclear energy,
• or transfers of shares and stocks intended for redemption.

These exemptions aim to balance the protection of agricultural land with the need for economic flexibility and strategic investments.

Foreign exchange regulations are laid down in the Foreign Exchange Act of 27 July 2002 and secondary legislation made under authority contained therein. Restrictions in foreign exchange turnover provided by this act refer to transactions with third countries, i.e. countries that are not members of the EU or the OECD. These restrictions concern the following areas:

• Transfer of funds designated to finance economic activity, including real estate purchase;
• Transactions in securities with a maturity up to one year;
• Transactions in debt claims; and
• Opening of bank accounts.

It is also noteworthy that a waiver from foreign exchange restrictions may be issued by the Minister of Finance in the form of a regulation (a general foreign exchange permit) or by the President of the National Bank of Poland (NBP) in the form of a decision (an individual foreign exchange permit).

There are many opportunities for investors to obtain financial support for projects in Poland. They come from both European Union Funds (for further information see https://www.funduszeeuropejskie.gov.pl/) and domestic sources. The aid may be granted in different forms, such as: CIT exemption in so-called special economic zones (SEZ), government grants (support from domestic budget), and finally cash grants or loans from EU funds. The source and type of support depends on the subject and scope of the project, whereas the maximum level of aid depends on the size of the company and where in Poland the project is to be located.

Regardless of the form of support, the incentive system as a whole complies with EU legislation and requirements concerning state aid. General provisions on the admissibility of state aid can be found in the Treaty on the Functioning of the European Union, the Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, and the act of 30 April 2004 on Proceedings in State Aid Cases.

Polish legislation provides for employee representatives at supervisory board level in state-owned and privatised enterprises, as well as even greater powers in some state-owned enterprises. However, there is no right to employee representatives on the boards of private companies.

An employment contract can be terminated:

• Upon an agreement between the parties (at any time and regardless of the type of a contract);
• By either party (employer or employee) with notice (the period of which depends on the type of contract, its term as well as the employee’s length of service in a given company); or
• By either party without notice (i.e. with an immediate effect) if a serious cause is given.

A contract concluded for a fixed term expires automatically at the end of the term for which it was concluded (although it can be terminated earlier).

An employment contract can only be terminated by the employer if the conditions set out in the Labour Code have been met. One of these conditions includes a requirement on the part of the employer to give specific, genuine reason for the termination. This reason may be personal-related (e.g. long-term sickness, loss in trust) or business-related (e.g. liquidation of a job position due to economic or organizational changes in the company). The employer must provide a written justification for the termination in cases of both indefinite- and fixed-term contracts, as well as in the event of termination without notice. If a contract is terminated on the employer’s initiative, he/she may sometimes be obliged to make a severance payment (particularly in the case of terminations for reasons for which the employee is not responsible).

Employees who find themselves in a specific situation or who belong to a specific group enjoy special protection against dismissal. These include pregnant women; employees on vacation, childcare leave, maternity leave or unpaid carer’s leave; employees during their justified absence at work (holiday or sick leave with a doctor’s certificate); employees approaching retirement age; members of works council; trade unions or other employees’ representatives.

Employees can challenge their dismissal and ask the court for the invalidation of the employment contract termination, or – if the contract has already been terminated – for reinstatement or re-engagement and/or for compensation.

Group (mass) layoffs (a.k.a. collective redundancies) are regulated under an Act of 13 March 2003 on the Specific Principles of Terminating Labour Relationships not Attribute to the Employees (implementing 98/59/EC Directive). This Act applies to entities that employ at least 20 employees and for business reasons plan to terminate employment contracts with at least:

• 10 employees (when the total number of employees is lower than 100);
• 10% of employees (when the total number of employees is at least 100 but lower than 300);
• 30 employees (when the total number of employees is at least 300).

Before a group layoff, the employer is obliged to:

• Consult its decision with trade unions;
• Provide trade unions with information on reasons for the layoff, number and professions to be laid off, as well as the planned date of the layoff, the criteria of selection for dismissal and its order;
• Provide the same information to the local Employment Office; and
• Award the dismissed employees with a severance pay.

The employer has to reach with the trade unions an agreement regarding the terms of the planned layoff. If there is no trade union in a given company or when the agreement is not possible to be reached, the employer has to regulate the layoff itself.

If the employer fails to fulfill its obligations regarding the layoff, the dismissed employees may bring a case before the court requesting invalidation of the employment contracts termination, or – if the contracts have already been terminated – for reinstatement or re-engagement and/or for compensation.

The seller is required to pay the income tax at the fixed rate of 19% (a reduced 9% rate may apply to small taxpayers earning equivalent to €2 million or less and for taxpayers starting a new business for their first tax year in operation). The taxable base consists of an income earned from the sale, which:

• If the share deal is determined as a difference between the revenue obtained from the sale of the shares (typically being the purchase price) and the revenue-earning costs (which generally include the purchase price plus expenditures directly related to the acquisition of the shares, such as notary fees, brokerage fees, etc.), whereas
• If the asset deal is determined as a difference between the revenue obtained from the sale of an enterprise or an organized part thereof (typically being the purchase price) and the enterprise’s tax value arising from the books.

It is advisable for the purchase price to be determined at the market value and for the parties to prepare an independent valuation confirming the market value just to be on the safe side in the event of a possible dispute with tax authorities.

If the company does not have Polish tax residency, the income from the sale of shares may be taxed in Poland only if the income is deemed to be earned in Poland. The rules for taxation of income earned on the sale of shares by such persons are then analogous to those applicable to persons with Polish tax residency, except as modified by applicable tax treaties.

Both the share deal and the asset deal (with some exemptions) are subject to the tax on civil law transactions (PCC tax). The PCC tax rate depends on the type of asset subject to the transaction, i.e. 2% for real estate and movable property and 1% for other property rights, including shares (stocks). In the case of the share deal, the PCC tax rate is fixed and it amounts to 1%, calculated based on the market value of the shares (which is normally the purchase price). In the case of the asset deal, the PCC tax is calculated based on the market value of all components of the enterprise (or the organized part thereof) subject to the transaction. The taxpayer is the buyer.

The sale of shares in a limited liability company or joint-stock company is generally not subject to goods and services tax (VAT tax). The same applies to the sale of an enterprise or an organized part thereof. However, if the asset deal consists of a sale of a set of individual assets that do not constitute the enterprise or its organized part, such transaction shall be subject to VAT tax (and, as such, it is not subject to the PCC tax mentioned above). Given, however, the discrepancies in the interpretation of the Polish regulations on VAT tax, it might be advisable to request an individual tax ruling as to whether a set of assets subject to the transaction should be considered as an organized part and, as such, should be free from the VAT tax or not.

Taking-up issued shares in exchange for a cash contribution or non-cash (in-kind) contribution other than an enterprise (or organized part thereof) is free from the income tax (both CIT and PIT). In all other cases, i.e. in case of other in-kind contributions, taking-up shares, depending on whether the shareholder contributing is a company or an individual, shall be subject to either CIT tax or PIT tax. The rate of the income tax is fixed at 19%, calculated based on the market value of a contribution, as typically specified in the articles of association (statute) of the company.

A cash contribution is also free from the VAT tax. When it comes to a non-cash contribution, the situation is more complicated and, in some cases, may give rise to the VAT tax obligation calculated based on a nominal value of taken-up shares.

In general, a capital contribution is subject to the PCC tax at the rate of 0.5% (the exception is made when the contribution takes a form of an enterprise or an organized part thereof). The tax base is the nominal value of share capital increase. Therefore, the company shall not pay the PCC tax on part of the non-cash contribution allocated to the supplementary capital.

Under Polish competition law (an act of 16 February 2007 on Competition and Consumer Protection) a transaction has to be notified to the Polish Competition Authority (President of UOKiK) in cases where: - The combined worldwide turnover of undertakings participating in the transaction in the financial year preceding the year of the notification exceeds the equivalent of €1 billion; or

• The combined turnover of undertakings participating in the transaction in the territory of Poland in the financial year preceding the year of the notification exceeds the equivalent of €50 million.

The notification obligation applies to:

• A merger of two or more independent entrepreneurs;
• A takeover, by way of the acquisition or taking up shares, other securities, stocks, or in any other way, direct or indirect control over one or more entrepreneurs by one or more entrepreneurs;
• Establishing a joint undertaking by several entrepreneurs; and
• The acquisition by an entrepreneur of a part of assets of another entrepreneur (the whole part of the enterprise), if the turnover generated by such assets in any of two financial years exceeding the notification exceeded, on the territory of Poland, the equivalent of €10 million.

The turnover relevant to the determination of whether the basic criteria requiring notification have been met includes:

• In the case of a merger of two or more undertakings or creation of a joint undertaking by existing undertakings, the turnover of the capital groups of the undertakings participating in the concentration;
• In the case of acquisition of control, the turnover of the buyer’s capital group and the turnover of the target and its subsidiaries;
• In the case of acquisition of a portion of the property of an undertaking, the turnover generated by the buyer’s group as well as to the turnover generated by the acquired property.

In the case of separate transactions (concentrations) occurring between the same groups of undertakings taking place within two years, the turnover figures of the acquired targets have to be added together.

An intended concentration involving the acquisition of control is not subject to notification if the target’s turnover did not exceed the equivalent of EUR 10 million in either of the two financial years preceding the planned transaction.

The intended transaction is excluded from the notification requirement also in the case of:

• Intra-group transactions;
• Temporary acquisition or taking-up of shares in another undertaking by a financial institution to resell them within one year provided it does not exercise the share rights (except concerning the right to dividends or to prepare for resale of the shares);
• Temporary acquisition or taking-up of shares in another undertaking to secure debts (provided that share rights are not exercised during such time, except for rights enabling the sale of the shares); and
• Concentration occurring within a bankruptcy proceeding (except where the undertaking intending to acquire control or acquiring a portion of the assets) is a competitor or belongs to a capital group that includes competitors of the enterprise which is being acquired or whose assets are being acquired.

Some concentrations, despite meeting thresholds regarding the achieved turnover and other conditions laid down in the Polish competition law, would not be subject to the obligation to notify the President of UOKiK. This refers to the so-called concentrations with the Community dimension. Under the principle of the “one-stop-shop”, referred to in Regulation 139/2004 governing control of concentrations of undertakings by the European Commission (EC), the intention of these concentrations should be notified to the EC only. Therefore, only concentrations not covered by the scope of this regulation are subject to the jurisdiction of the Member States, including the President of UOKiK.

Concentration is of the Community nature if: 1) the total global turnover of all participants exceeds EUR 5 billion, and 2) the total turnover on the EC scale of each of at least two participants is more than EUR 250 million.

The exception is a situation when each participant achieves more than two-thirds of its total turnover on the EC scale within one Member State (the so-called rule of two-thirds). In such a situation, concentration, despite achieving the above thresholds, does not have the Community dimension.

Concentration has also the Community dimension where the following conditions are met jointly: 1) the total global turnover of all participants is more than EUR 2.5 billion; 2) in each of at least three Member States, the total turnover of all participants exceeds EUR 100 million; 3) in each of at least three Member States included for the abovementioned point, the total turnover of each of at least two participants exceeds EUR 25 million, and 4) the total turnover on the EC scale of each of at least two participants is over EUR 100 million.

Similarly in the previous example, also, in this case, the exception is a situation when each participant achieves more than two-thirds of its total turnover on the EC scale within one Member State (the rule of two-thirds). Then, this concentration, despite achieving the above thresholds, also does not have the Community dimension.

Depending on the type of transaction and the nature of the agreement signed before (a framework, conditional, or promissory agreement defining conditions that must be fulfilled before transferring the ownership of the shares, such as, obtaining permission for a concentration or the acquisition of a real estate by a foreigner), the closing meeting would typically involve the parties signing the operative transaction document, such as the sale and purchase agreement (SPA) or the merger agreement, in the form required by governing law, together with enclosures, including updated representations and warranties with an updated list of documents disclosed to the acquirer during due diligence, price adjustment mechanisms, and any related documents under which the title to the target is finally transferred to the buyer, including minutes from the shareholders’ meeting approving the transaction. In the case of the merger, documents produced and executed at signing/closing meetings would also include a merger plan, which after being approved by both parties needs to be submit to the registry court.

The closing meeting will often include the conclusion of an agreement governing the future cooperation of the parties, e.g. a shareholders’ agreement, as well as the amendment to the existing article of association (statute) of the company. It may also be necessary to prepare documents connected with the changeover in the management and/or supervisory board of the target and/or laying down the rules for continuing cooperation with the existing directors or key employees, including resignation letters of the existing directors, new employment or service agreements for key personnel of the target, as well as minutes from the shareholders’ meeting in the company, where new directors are being appointed and minutes from a constituent board(s) meeting.

In the event of the sale of the shares in a limited liability company (sp. z o.o.), the documents produced and executed at signing/closing meetings would also include the notification about the new shareholder(s) which need to be submitted to the target (typically to its management board) and to the registry court.

Besides the abovementioned documents, documents evidencing that the undersigned representatives are authorised to represent the parties shall be presented both during signing and closing.

Yes, Polish law imposes certain jurisdictional restrictions that may affect the signing and/or closing of acquisitions, depending on the nature of the transaction and the parties involved.

Key restrictions and requirements include:

Foreign investment control Under the Act of 24 July 2015 on the control of certain investments, acquisitions involving strategic entities (e.g. in energy, defense, telecommunications) may require prior approval from the Polish competition authority (UOKiK) or the competent minister. This applies especially to investors from outside the EEA or OECD.

Merger control (antitrust clearance) Transactions that meet specific turnover thresholds (e.g. combined worldwide turnover over €1 billion or Polish turnover over €50 million) require prior clearance from UOKiK before closing.

Agricultural land and real estate Acquisition of shares in companies holding agricultural land may trigger pre-emption rights of the National Agricultural Support Center (KOWR). Restrictions may also apply to foreign buyers acquiring Polish real estate.

Sector-specific regulations Additional approvals or notifications may be required in regulated sectors such as banking, insurance, media, and energy.

Employee rights and information In asset deals, in some cases, employee consultations may be required before the transfer.

Advantages of signing or closing in Poland include:

• predictable legal framework based on EU law;
• efficient and experienced regulators (e.g., UOKiK) with established procedures;
• attractive holding regime with participation exemptions on dividends and capital gains under certain conditions;
• favorable tax rulings system, which can provide transaction certainty in advance.

The gap between signing and closing is generally a matter of negotiation between the parties. Typically, it depends on the complexity of the transaction. Although, if the transaction fails under competition law and/or the Foreign Trade Act, the gap might be necessary due to the requirement of obtaining relevant consent(s). The gap might be needed also due to the anticipated arrangement of funds.

If there would a gap, it is advisable to introduce the MAC clause into the acquisition (investment) agreement. MAC stands for material adverse change and provides a completion to be conditional on condition that no material adverse change has occurred by the target company between signing and closing. In the case of the gap, it is also important to secure the value of the target company. That is why the parties to the transaction shall set out rules on prohibited leakage (e.g. dividend payment) and/or permitted leakage (e.g. expenditures necessary to conduct ordinary business activity). In some cases, the parties may use the locked-box mechanism which “freezes” the price for the target company. The parties shall also determine specific rules underlying the management of the target company during the gap period. It may also be useful to introduce a “long-stop date” clause which provides that parties may withdraw from the agreement if certain conditions precedent cannot be satisfied within a specified period. Finally, at the closing the parties shall (and especially the seller) should reiterate representation and warranties given at the signing.

There are no requirements regarding the deposit of monies. This is a matter of negotiation between the parties.

The representatives of Polish companies who are authorized to sign are listed in the company’s entry in the KRS which can be accessed online. In case of representatives of foreign companies, they might be required to provide a certified extract from the relevant national register proving the authorization or, in the lack of thereof, a certified extract from their statute or shareholder (board) resolution providing authorization to execute the documents on behalf of the company.

Individuals signing the documents would typically be required to present their passport, national identity card, or other recognised document proving identity.

In more complex transactions, typically involving third-party financing, a capacity opinion may also be required to prove an identity of the signatories and their authority to sign an agreement.

As for the form, the transfer of the shares in a limited liability company must be made in writing with notarized signatures. Therefore, the sale of shares must always be accompanied by a notary. It is also very common that the signatory initials each page of the agreement.

In the case of a private joint-stock company, the form of transfer of shares depends on their type—registered or bearer shares. For registered shares, the transfer must be made in writing, either by a declaration on the share certificate or in a separate document, and requires the physical delivery of the share certificate to the buyer. For bearer shares, traditionally, the transfer was made simply by delivering the share certificates. However, due to recent legislative changes, all shares of joint-stock companies—both private and public—must now be dematerialized, meaning they no longer take the form of paper certificates. Shares are now represented exclusively by electronic entries in the shareholder register (for private companies) or in securities accounts (for listed companies). For listed joint-stock companies, shares are recorded in securities accounts maintained by brokerage firms, and transfer occurs through book entries in those accounts.

In case of asset deals, the sale of an enterprise must be made in written form with notarised signatures, but if the enterprise includes real estate located in Poland, the agreement must be made in the form of a notarial deed, regardless of the chosen law.

In general, there are no special formalities for the execution of documents by incorporated companies (they may be made in written form or orally), unless the documents must be executed either in the form of the notarial deed or in the written form with notarised signatures, if and as required by the Polish law.

The documents shall be signed by the legal representative of the company or any other person to whom power in this regard has been granted. Typically, each page of the agreement is initialed by all of the signatories.

A company is represented by its statutory representatives (managing directors, procurators, etc.) who are listed in their entry in the relevant national register. These representatives act on behalf of the company and execute all documents/contracts on behalf of the company. If there is no such register or if the register does not provide information about the representation, the company might be required to submit a certified extract from their statute or shareholder (board) resolution providing authorization to execute the documents on behalf of the company.

The statutory representatives may authorize an employee or a third party (such as an attorney) to sign on behalf of the company. Depending on the specific authorization, the representatives may either solely or jointly sign with a second representative to represent the company.

No particular formalities exist for individuals to execute documents, except in situations where a given document has a form of a notarial deed and it is to be signed by a foreigner, in which case the presence of translator is obligatory. Sometimes, a written consent of a spouse may be also required.

In cases where individuals represent companies being parties to the transaction, they have to provide evidence of their authorization.

The formalities for the execution of documents by foreign companies are the same as for domestic companies as long as the signatories can provide evidence of their authorization to represent the company in accordance with the applicable law and its instruments of incorporation, such as the extract from the relevant national register, relevant corporate documentation, and/or power of attorney. In most cases, these documents need to be notarised and apostilled. Since Polish offices make entries in the registers in Polish, sometimes a translation of a document by a sworn translator is required.

Involvement of the notary is required for the execution of the documents for the sale of the business that includes real estate (the sale and purchase agreement must be made in the form of a notarial deed) and for the sale of shares in a limited liability company (the share sale and purchase agreement must be made in written form with notarised signatures).

Other documents which require assistance from the notary include a protocol from the general meeting of shareholders of a company adopting a resolution on the amendment to the article of association (statute) and a statement about the accession of the buyer to the company and taking over their shares.

Notaries are entitled to confirm the identity of the parties and to certify the validity of the documents but have no power to modify the content of those documents. Although, if the terms and conditions of a given document are inconsistent with the applicable law, the notary may refuse to notarize it, while suggesting an appropriate modification. The notary also has a general duty to ensure that the rights and legitimate interests of the parties are safeguarded properly. Therefore, it is required to explain to the parties the subject of a given activity and what implications it will have for each of them. Yet still, as mentioned earlier, the notary is not in a position to change the terms and conditions of the deal.

The notary fee is determined based on the Regulation of the Minister of Justice of 28 June 2004 on the Maximum Rates of the Notary’s Fee. This regulation indicates the maximum rates of the fee for the notarial acts and maximum amounts by which the fee may be increased for the performance of the notarial acts outside the notary office.

As a general rule, the notary fee depends on the type and value of the transaction and it is negotiable. For instance, the maximum rate for drawing up the minutes of a shareholders’ meeting of a limited liability company amounts to PLN 750 (circa EUR 172) and for preparing the minutes of stockholders’ meeting of a joint stock company amounts to PLN 1,100 (circa EUR 252). In case of a transaction with substantial value, a discount should be granted. Some notaries also operate with lump sums for their services.

Notary services are subject to the VAT which currently amounts to 23%.

The notary does not have an impact on the transaction timetable. The timetable may, however, be affected by the notary’s demand to submit documents, e.g. an extract from a relevant register, which has been issued within a specified period before the execution of a given document. Typically, the documents must not be older than 3 months. Apart from that, making an appointment with the notary usually does not pose a problem. Nevertheless, it is recommended to schedule the meeting with reasonable notice, especially when the transaction involves many documents, the execution of which can take long hours.

Typically, the meeting arrangements are made by the legal advisors who constantly cooperate with notary offices. Such an approach allows for more flexibility as far as the schedule is concerned and usually secures the availability of the notary on a date of the signing/closing.

It is also worth adding that if a foreigner who does not have a command of Polish language is a party to a notarial activity, the assistance of a sworn translator is necessary (unless the notary itself has qualifications of the translator of certain language). Arranging the assistance of a sworn translator (especially of a rare language) may take time and ultimately affects the timetable.

Management Board As a general rule, in a limited liability company, members of the management board are appointed through a shareholders’ resolution adopted by an absolute majority of votes (which means that more than 50% of shareholders in attendance must be in favour), whereas in a joint-stock company - a decision in this respect is made by a supervisory board. However, the articles of association (statute) of the company may regulate the appointment and removal process differently. For example, the articles of association (statute) may provide for the decision in this respect to be made by another body, e.g. a supervisory board in the case of a limited liability company, or stockholders in the case of a joint-stock company. It may also introduce stricter conditions to adopt a resolution on removing (replacing) a member of the management board, e.g. a qualified majority of votes, or limit the right to remove (replace) a member of the management board only due to valid reasons. The articles of association (statute) may also grant the right to decide on the composition of the management board to given a shareholder (stockholder).

Supervisory Board

In the case of both a limited liability company and a joint-stock company, members of the supervisory board are appointed through a shareholders’/stockholders’ resolution adopted by an absolute majority of votes (which means that more than 50% of shareholders in attendance must be in favour). However, as in the case of a management board, the articles of association (statute) of the company may regulate the appointment and removal process differently. Although these self-established rules cannot be contrary to the law or undermine the essence of this body, which means that the right to appoint and remove (replace) members of a supervisory board cannot be granted to the management board.

The rule of transferability of shares (stocks) is an important feature of commercial companies, including both a limited liability company and a joint-stock company. Notably, however, the articles of association (statute) of a company may limit transactions regarding the company’s shares (stocks), e.g. by providing shareholders (stockholders) with pre-emption rights or requiring the consent to the transfer of the shares (stocks) from one of the company’s authorities.

As for the form, as already mentioned above, the transfer of the shares in a limited liability company must be made in writing with notarised signatures. The sale of the shares is effective towards the target company upon receipt of the notification about the transaction.

When it comes to a joint-stock company, the form of the transfer of stocks essentially depends on their type. For registered shares, the transfer must be made in writing, either by a declaration on the share certificate or in a separate document, and requires the physical delivery of the share certificate to the buyer. For bearer shares, traditionally, the transfer was made simply by delivering the share certificates. However, due to recent legislative changes, all shares of joint-stock companies—both private and public—must now be dematerialized, meaning they no longer take the form of paper certificates. Shares are now represented exclusively by electronic entries in the shareholder register (for private companies) or in securities accounts (for listed companies). For listed joint-stock companies, shares are recorded in securities accounts maintained by brokerage firms, and transfer occurs through book entries in those accounts.

As a rule, an agreement providing for the transfer of the assets of rights automatically transfers the ownership thereof. However, the parties may decide to first sign an (investment) agreement providing for the transfer of the shares and then sign a dispositive agreement (SPA) under which the transfer is executed.

What is more, after the execution of the transaction, the target company needs to be informed about the transfer of the stocks. Additionally, in the case of the sale of the registered stocks, the management board of the target company has to make the relevant entry in the stock register (book of stockholders). Making that entry is very important because in a joint-stock company, only a person entered in the stock register or having possession of a bearer stocks (subject to provisions on securities trading) is deemed as a stockholder and, as such, is entitled to exercise its corporate rights. The relevant entry in the stock register is made at the request of the buyer, who is required to submit a document to the target company justifying the entry.

Finally, it is worth noting that there is a standard market practice to reserve the ownership of shares (stocks) subject to the transaction until the bank account of the seller is fully credited with the amount of purchase price.

It is generally accepted for both individuals and companies being subject to the transaction to appoint third parties (attorneys-in-fact) to execute documents on their behalf. If the regulations provide for a special form of the document to be signed (for example a simple written form, a written form with notarised signatures, or a notarial deed), the respective power of attorney must be executed with the same level of formality. A failure to observe the required form results in the invalidity of the power of attorney.

In some cases, the power of attorney would also have to be notarized and, depending on the country of signature, apostilled.

Powers of attorney depend on the content of the power of attorney document. As a general rule, a power of attorney holder cannot delegate more powers than he/she has on his/her own. For example, an attorney cannot delegate its powers unless it is expressly authorised to do so under the power of attorney. Besides, the attorney cannot be the other party to an agreement which he or she has been empowered to sign on behalf of the principal, unless the power of attorney states otherwise or, given the content of the agreement, the possibility of infringing the interests of the principal is excluded. This rule applies also when the attorney represents both parties to the transaction.

A power of attorney may be general and made without any time limitation (which makes it valid until cancelation) or limited for a specified period and/or a specific transaction.

Under a power of attorney, one or more representatives may be appointed. If there are several of them, depending on the content of the power of attorney document, they may be entitled to together (jointly) or independently each from other. It is also possible to distinguish two types of acts, i.e. those where they can act independently and those where they are required to act together

Polish civil procedure allows all types of materials to serve as evidence. This includes also faxes and emails. The only limit derives from the ability of the party or its lawyer to convince the court that this type of evidence should be admitted in support of the client’s case.

Digital signatures that are compliant to Polish law (implementing EU Regulation No 910/2014) are treated as equivalent to a handwritten signature. Yet still, digital signatures can be used only in cases where there is no requirement of a special form for a given document (such as a notarial deed for the execution of the agreement for the sale of real estate or w document with notarised signatures for the execution of the sale of the shares of the limited liability company). In those cases, the required form needs to be preserved for a given document to be considered valid.

Documents may be executed in counterparts, meaning that each party to the transaction can sign separate but identical copies of the same documents (or relevant part thereof expressing its intention). The signed copies will together form a single binding agreement.

Polish law does not recognize the concept of undertakings by lawyers as known under common law jurisdictions.

There is no specific mechanism regarding the closing of the transaction. Everything depends on what has been agreed upon between the parties in the acquisition (investment) agreement, which typically lists all formalities and events that have to occur upon the closing.

Following the sale of the shares in the limited liability company, as already mentioned above, one of the parties should notify the target company about the transfer company of the shares, by presenting appropriate evidence, which is a condition for the target company to regard the buyer as the shareholder. This means that the lack of notification affects only the company-shareholder relationship and has no impact on the validity of the transfer of shares.

Furthermore, after the transaction is completed, the management board of the target company shall update the shares register (book of shareholders) and file an updated list of shareholders to the registry court. If changes concern shareholders holding at least 10% of the share capital, these shareholders shall be disclosed in the KRS. Other shareholders (holding below 10% of the share capital) are not required to be disclosed.

For a joint-stock company, as also already mentioned above, the closing formalities depend on the nature of the stocks that are sold and whether the target company is listed on the stock exchange. For example, after the transaction regarding the registered stocks is completed, the buyer needs to be registered in the stock register for the buyer to be considered a stockholder and, as such, a transaction to be considered effective.

The sale of the stocks in a joint-stock company also needs to be reported to the registry court and disclosed in the KRS, but only when the buyer becomes a sole stockholder.

In case of a change of the control of the target company (i.e. the composition of the management and/or supervisory board), regardless as to whether it is a limited liability company or a joint-stock company, this information also needs to be provided to the registry court and revealed in the KRS.

Notably, making the relevant entry to the KRS is only declaratory, which means that the lack thereof does not affect the validity of the transaction. However, one should remember that the target company is responsible for any incorrect data revealed in the KRS and any damage resulting therefrom.

Legal or any other opinions are typically not required in M&A transactions. The exception to this general rule is provided a merger, in case of which the companies involved in the transaction need to prepare a merger plan, which then has to examined by an expert for its correctness and reliability. The expert shall, within a period to be determined by the court but not exceeding two months from the date of its appointment, draw up a detailed opinion in writing and submit it, together with the draft terms of the merger, to the registry court. Notably, if all the shareholders (stockholders) of each of the merging companies have agreed, the merger can take a simplified form, not requiring a review of the merger plan by an expert appointed by the court.

Despite the above statutory mechanisms to protect the interest of the parties, the transaction may be accompanied by private audits and opinions providing additional information about specific legal issues and, thus, securing the proper execution of the agreement. Typically, the opinion would concern the proper representation, incorporation, and/or existence of either of the parties to the transaction. There are no rules concerning the preparation of this type of audits/opinions.

Typical post-closing requirements and filings in Poland depend on the nature of the transaction (share deal vs. asset deal) and the type of entities involved, but commonly include the following:

1. Corporate filings If the acquisition involves changes to a company’s shareholders, management board, supervisory board, or articles of association, an update must be filed with the National Court Register (KRS). These filings are mandatory and should be made without undue delay (typically within 7 days from the event triggering the change).

The changes must also be reported in corporate documents. In the case of a limited liability company (sp. z o.o.), changes in the shareholding structure must also be reflected in the shareholders’ register. For joint-stock companies, updates may also need to be made in the electronic shareholder register maintained by a licensed entity (e.g., brokerage house or bank).

2. Tax filings The transaction may trigger obligation to report to tax authorities, particularly if subject to tax on civil law transactions (PCC), e.g., 1% on share deals involving Polish companies, unless exempt. The buyer must submit the PCC-3 form to the tax office and pay the applicable tax within 14 days of signing.

In some cases, withholding tax declarations, VAT updates, or TP (transfer pricing) documentation obligations may arise, especially in intra-group deals.

3. Foreign investment control filings If applicable, e.g., when acquiring a company from a protected sector (energy, defense, etc.), the acquirer may need to notify or confirm the transaction post-closing, especially where conditions were attached to pre-closing approvals.

4. Employment-related updates In asset deals, the acquirer must inform and potentially consult employees if their employment is transferred under Article 23(1) of the Labour Code of 26 June 1974.

Where employees are transferred, updates must be filed with the Social Insurance Institution (ZUS) and the tax office (US) regarding the new employer’s data.

5. Real estate-related filings If the transaction involved the transfer of real estate, entries in the land and mortgage register (pl. księga wieczysta) must be updated. This also applies to perpetual usufruct rights or long-term leases if material.

A relevant application must be filed with the competent land and mortgage court, typically by a notary or legal representative.

Polish entities registered in the National Court Register (KRS), including limited liability companies (sp. z o.o.), joint-stock companies (S.A.), simple joint-stock companies (PSA), partnerships, and certain trusts or foundations, are required to submit information on their beneficial owners to the Central Register of Beneficial Owners (CRBR), maintained by the Ministry of Finance.

Under Polish law, a beneficial owner is a natural person who ultimately owns or controls a given entity, either directly or indirectly, typically someone holding more than 25% of shares, voting rights, or otherwise exercising decisive influence over the company.

Initial notification must be submitted within 7 days of the entity’s registration in the KRS. Any subsequent changes to beneficial ownership data must also be reported within 7 days from the date of change.

Filings are submitted electronically via the government platform, using a qualified electronic signature or trusted profile (ePUAP) of a person authorized to represent the company.

Failure to comply with CRBR obligations—either by missing deadlines or providing incorrect data—may result in a financial penalty of up to PLN 1,000,000.

There is no specific timetable to be followed for a share sale or an asset deal strictly defined in Polish law. The timetable essentially depends on the size of the target company, the parties, and the complexity of the transaction. Factors that typically prolong the time until the signing include the due diligence analysis and whether unexpected issues raised during the due diligence phase, the complexity of the business being sold, as well as the number of ancillary documents to be agreed and signed, and finally the negotiating behavior of the parties. Factors that prolong the time between signing and closing include the number and types of shareholders (stockholders) as well as the number and types of approvals and consents that need to obtained before the closing.

Non-compete clauses restricting the seller (and its subsidiaries) from operating or being involved in, either directly or indirectly, business activities that would be competitive to those of the target company are recognised and may be enforceable under Polish law. However, their duration, geographical scope, subject matter, and the persons subject to them must not exceed certain reasonable limits.

The European Commission has set forth some general guidelines in this respect. As for the duration, a non-compete clause is generally justified for a period of up to three years following the transaction in cases when the transaction concerns a transfer of both goodwill and knowhow. And when only goodwill is concerned, it is justified for a period of up to two years. However, in exceptional, economically justified circumstances, a longer period may sometimes be acceptable.

Moving on to the geographical scope of a non-compete clause, according to the Commission’s guidelines, it must be limited to the area in which the seller has offered the relevant products or services before the transfer but can be extended to territories which the seller was planning to enter at the time of the transaction, provided that it had already invested in preparing this move.

Concerning the subject matter, a non-compete clause must be limited to products and services forming the economic activity of the business transferred (including those at an advanced stage of development at the time of the transaction, or fully developed but not yet marketed).