You have decided to take the plunge and buy a business in Poland. It would be as well, therefore, to have some idea of the process and the points to remember. And the first point to remember is that what follows discusses buying a business, not shares in a company.
The Polish Civil Code, in article 55¹, helpfully defines an enterprise (that’s business to you and I) as “an organized complex of material and non-material components designed for carrying on economic activity” including in particular: the name, the property (immovable and movable) owned by the business, rights under leases, cash and receivables, concessions and licences, intellectual property rights, confidential business information and the books and records of the business. This is exactly what you might expect so there are no surprises there.
The sale of business must made in writing and the signatures of those signing the business sale agreement must be confirmed by a notary public (yes, these notaries pop up everywhere) or the agreement will be invalid. If the business is being bought from a company, a resolution of shareholders of the seller approving the sale is also required to ensure validity of the sale. So far, so good – but what about liabilities?
In contrast to the position under English law where the purchase of the assets used in the business will not normally result in the buyer assuming any of the seller’s liabilities unless the parties specifically agree, the position in Poland is more complex. By article 554 of Polish Civil Code, the buyer of the business is liable jointly and severally with the seller for the obligations connected with the running of the business unless, at the time of the acquisition, the buyer did not know about those obligations despite performing a due diligence review of the business. The liability of the buyer is limited to the value of the business at the time of the acquisition but the liability may not be excluded or limited without the consent of the person to whom the obligation is owed.
It will come as no surprise, therefore, to be told that the buyer is liable jointly and severally with the seller for any tax arrears connected with the running of the business being sold, except where, despite acting with due diligence and in good faith, the buyer could not have become aware of such tax arrears. The buyer’s liability is limited to the value of the business. It is worth noting that in order to prove due diligence on its part, the buyer may ask the seller to obtain certificates, issued by the relevant tax office, certificates that confirm that there are no taxes owing (something which HMRC in the UK would have difficulty issuing). Therefore, in order to exclude any potential liability with respect to taxes the buyer must have on the day of transaction the certificates confirming that there are no arrears of taxes, which certificates must be dated not later than 30 days prior to the date of execution of the business sale agreement. The same rules apply in relation to arrears of social security obligations.
Where a business is transferred, under the Polish labour code, the buyer becomes a party to the employment relationship existing on the date of the business sale agreement and becomes the new employer in all employment relationships existing on the day of transfer of the seller’s business. Both buyer and seller are jointly and severally liable for all the existing obligations resulting from the employment relationship. There, are of course, various notifications that have to be given to employees and any trade union operating in the business. For anybody used to TUPE in the UK, the Polish regulations are far from onerous.
And those are the main points to remember. With the correct advice and thorough due diligence (and assuming it makes commercial sense) there is no reason to be unduly worried about buying a business in Poland.