In instances provided for in the Commercial Companies Code, it may be necessary to obtain corporate consent to dispose of:
- Shares in a company (limited-liability company or joint-stock company)
- Certain assets of a company
Corporate consent usually means consent to the company’s carrying out a specific transaction, as expressed by the shareholders, or less often by the management board.
Transfer of shares
Under the Commercial Companies Code, the articles of association or statute of the company may include restrictions on a shareholder’s freedom to dispose of its shares—specifically, a requirement to obtain the company’s consent to the transfer.
It should be pointed out that the provisions calling for obtaining the company’s consent to the transfer of shares (Commercial Companies Code Art. 182 for a limited-liability company and Art. 337 for registered shares in a joint-stock company) are optional, and these restrictions will apply only if provided for in the company charter (the articles of association of a limited-liability company or the statute of a joint-stock company).
This does not apply to registered shares which are tied to repetitive cash benefits (Commercial Companies Code Art. 356)—in that case the company’s consent cannot be excluded.
In particular, these limitations consist in a possible requirement for the shareholder to obtain the company’s consent to sale of shares, or—as is often encountered in practice—consent of the supervisory board or shareholders’ meeting.
If disposal of share rights is conditioned on consent of the company, then, unless otherwise provided in the charter, the company’s consent to disposal of shares is given in writing by the management board.
A share sale agreement concluded without the required consent is an ineffective (suspended) transaction, with respect to the company and between the parties. Such an agreement may become effective only when the required consent is provided.
Transfer of assets
M&A transactions, broadly speaking, may involve not only shares but also assets (particularly in the form of an enterprise or organised part of an enterprise, real estate, or individual assets), and thus it is important in every transaction to determine whether there are additional restrictions on disposal of specific types of assets.
These restrictions may be divided into those of mandatory applicability and those of optional applicability (that is, restrictions that may be opted out of, e.g. in the company charter).
The restrictions of mandatory applicability include:
- Sale, tenancy or encumbrance of the enterprise or an organised part of the enterprise (Commercial Companies Code Art. 228(3) or Art. 393(3), applicable to limited-liability companies and joint-stock companies, respectively)
- Acquisition by the company from a founder or shareholder, or a company or cooperative controlled by a founder or shareholder, of any assets for a price exceeding one-tenth of the paid-in share capital, within 2 years after the registration of the company (Commercial Companies Code Art. 394 §11—applicable only to joint-stock companies).
There is a requirement to obtain the consent of the company, but only if the articles of association or statute does not provide otherwise, in the case of:
- Acquisition or disposal of real estate, perpetual usufruct or a share in real estate (Commercial Companies Code Art. 228(4) for a limited-liability company or Art. 393(4) for a joint-stock company)
- Acquisition by the company of (i) real estate, (ii) a share in real estate or (iii) fixed assets at a price exceeding one-fourth of the share capital but no less than PLN 50,000, within 2 years after registration of the company (Commercial Companies Code Art. 229—applicable only to limited-liability companies)
- Disposal of a right or incurring an obligation with a value equal to more than twice the share capital (Commercial Companies Code Art. 230—applicable only to limited-liability companies).
Legal effects of failure to obtain consent
Under Commercial Companies Code Art. 17, the legal effects of failure to obtain corporate consent differ depending on whether the requirement arises from the code or from the company charter.
If the requirement to obtain consent for the given transaction arises directly from the law, carrying out the transaction without the consent results in the invalidity of the transaction. This applies to transactions where consent is mandatorily required (e.g. sale of the enterprise) as well as where the requirement may be opted out of in the articles of association or statute (e.g. with respect to sale of real estate).
However, if the source of the requirement to obtain consent to the transaction is only the company charter (for example, if the articles of association of a limited-liability company impose restrictions on incurring obligations above a certain value), an action carried out without the required consent is valid, but the members of the management board may be liable to the company for violation of the charter.
For the sake of legal certainty, if there is a requirement to obtain corporate consent, the buyer will typically require that the consent be presented prior to the closing. (Corporate consent in this context refers to consent for the company itself to take a specific act as a party to a transaction—a separate concept from the consent of the company, as the subject of a transaction, to disposal of its own shares.) However, under the Commercial Companies Code, as a rule, consent need not be provided prior to the transaction. Under Art. 17 §2, it should be provided no later than 2 months after the company carries out the transaction. However, for obvious reasons, it should not be expected that the other party will enter into the transaction without obtaining prior consent, where lack of consent will impact the validity of the transaction.