Cross-border corporate mergers: Practical aspects | In Principle

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Cross-border corporate mergers: Practical aspects

The 15 September 2023 amendment to Poland’s Commercial Companies Code introduced a number of changes to the cross-border merger procedure. Such a merger has its peculiarities because it is subject to the laws of more than one EU member state. During a cross-border merger, a number of practical aspects can significantly affect the speed and efficiency of the procedure.

In practice, cross-border mergers require close cooperation between companies and their financial and legal advisers. Our own practice has carried them out under the prior provisions, and we filed our last application for a certificate of compliance of a cross-border merger with Polish law a day before the amendment to the Commercial Companies Code in this regard came into force.

It is worth starting by pointing out the most important changes introduced by the recent amendment to the Commercial Companies Code.

The changes in provisions

First of all, we draw attention to the new requirement to obtain an opinion from the relevant tax authority on the merger (specifically, the head of the National Revenue Administration). According to the memorandum to the bill, issuance of such an opinion is intended to exclude the risk of abuse and tax avoidance in the reorganisation process. The authority will have one month to issue an opinion from receipt of the application, and this deadline can be extended for a further three months in particularly justified cases.


  • The range of documents to be enclosed with the application for a certificate of compliance of a cross-border merger with Polish law has been expanded
  • The registry court is given broader powers in the process of issuance of such a certificate (the court will verify whether the merger would effectively abuse, violate or circumvent the law, and the rules for dealing with such suspicions have also been specified)
  • The need to file a cross-border merger plan with the registry court has been added, and the deadline for announcement of the plan has been extended (five weeks rather than one month before the planned merger resolution)
  • The obligation to notify the company’s shareholders twice of the intention to merge (the first notice no later than six weeks before adoption of a resolution on the cross-border merger, the second no less than two weeks after the first notice) is separately regulated
  • After receipt of a certificate of compliance of the cross-border merger with domestic law, the cross-border merger is to be governed by the law applicable to the acquirer’s head office
  • The report of the Polish company’s management board justifying the merger is to consist of two separate parts (for the shareholders and for employees), or the company may prepare a separate report for each group.

With the extended cross-border merger procedure, it is particularly relevant to be aware of the practical aspects that can impact cross-border mergers involving Polish companies.

Requirements for a cross-border merger plan

Cross-border mergers are based on EU provisions implemented into the legal systems of member states to harmonise the procedure in all jurisdictions involved.

But the legal systems of member states differ (e.g. in the legal form of a cross-border merger plan or how it is signed, or even its content, for example requiring the plan to specify the tax law applicable to the procedure). Also, each jurisdiction has certain customary norms under which such documents are prepared. This may significantly affect their content, complexity, form and method of representation at signing, or length. This is particularly evident in a situation where the target has its head office in Poland and the acquirer is a foreign company. Then, it is usually the entity from the other member state that is responsible for drafting the first plan, which will usually apply the provisions and customary content from its jurisdiction.

Therefore, when drawing up a cross-border merger plan, it is essential to ensure that the requirements arising from all jurisdictions involved in the procedure are met. If possible, it is worthwhile to adapt the plan for the procedure in Poland to the structure indicated in the Polish code, to facilitate the registry court’s examination of the document. But in doing so, the same substantive content of the plan must be maintained across each jurisdiction. This is also key when translating plans, to avoid changes in meaning not intended by the drafters of the plan.

Coordination of procedures across jurisdictions

The differences between jurisdictions are not limited to the requirements and methodology for preparing a cross-border merger plan. They also involve deadlines and procedural requirements that must be met to ensure that the merger procedure is lawful and effective.

It is worth preparing a detailed action plan containing the elements from all jurisdictions, to clarify the differences in laws, required deadlines, documents and purely practical steps. This will isolate the risks arising from potential discrepancies between jurisdictions, so they can be addressed well in advance. Preparation of such a preliminary action plan should greatly simplify the subsequent stages of the procedure, so they can be scheduled to take into account all the steps necessary for mutual reconciliation of the procedure, increasing the efficiency of the actions and helping ensure that the procedure is successfully concluded.

Sometimes, the agreed action plan may require additional steps in a jurisdiction, even if no such obligation is provided for by the national law applicable to the company. For example, the absence of an obligation to adopt a merger resolution under the law governing the merged company does not mean that it is not worthwhile to adopt such a resolution anyway, just to be on the safe side, as it will help ensure that the merger decision is adopted in the standard, familiar manner in the given jurisdiction. This is particularly important from the point of view of the registration procedure before the authority of another member state (which may be accustomed to receiving certain documents, and raise doubts if it does not receive them or receives a document with unfamiliar form or content).

Differences in accounting rules

In various member states, the accounting rules and standards must also be borne in mind. Differences could materially affect the documentation, in particular with regard to valuation of the assets and liabilities of the merging companies, but also recognition of the value of contributed assets in the books of the acquiring company.

Under Polish law, the merger plan must include, among other things:

  • Information on the valuation of assets and liabilities transferred to the acquiring or newly formed company as of a certain date in the month preceding filing of the application for announcement of the merger plan
  • The date of closing the books of the companies participating in the merger used to set the terms of the merger, in light of the Accounting Act (and thus the date should be agreed in advance between the companies).

With regard to the valuation requirements and the timing of closing the books, the companies involved in the merger apply their own domestic law, while entry of the target’s assets in the acquirer’s books is carried out under the domestic law of the acquirer. The companies involved in a cross-border merger should agree on and use the same valuation method, to provide a uniform basis for determining the share exchange ratio, but also to facilitate proper accounting entries in the acquirer’s books as of the merger date. This is not so straightforward. For example, while international provisions, as well as the Polish Accounting Act, generally dictate that the assets acquired in a merger should be assessed at fair market value, there may already be differences in the recognition of costs and thus in determination of the result. In this regard, close cooperation between the accountants or financial advisers of the companies involved in the merger is essential.

Examination of the need for merger approvals

An important practical aspect that should be taken into account when planning a cross-border merger is to verify whether the consent of other entities or bodies will be required to carry out the procedure. The companies should:

  • Verify whether they have entered into contracts with change-of-control clauses or other provisions that might entitle the other party to terminate the contract in connection with the merger
  • Check whether the merger will require the approval of state authorities, such as the national competition authority or (in Poland) the National Support Centre for Agriculture (KOWR) (especially in light of new regulations allowing KOWR to reach the shares of not only a company holding agricultural property, but also its parent company)—the need for KOWR approval may apply not only to the merged companies themselves, but also to the shares they hold in other companies that are owners or perpetual usufructuaries of agricultural property
  • Examine the possibility of transferring to the acquirer licences and administrative permits held by the target, and the consequences of such transfer.

Deletion of the target company from the Polish register

In principle, when the acquirer is in another member state, the registry court for the acquirer’s head office should notify the Polish registry court for the target, and this should result in deletion of the acquired company from the National Court Register.

But the practice shows that communications between the courts can be significantly delayed. As a result, a company that no longer exists may continue to appear in the register, which can be misleading to counterparties or state authorities. Thus it is advisable to inform the Polish registry court of registration of the merger abroad. A letter in this regard should include attachments confirming the fact of registration of the merger in the foreign register, e.g. an excerpt from the register. In our experience, this significantly speeds up the deletion of a Polish company from the National Court Register.

Additional remarks

Finally, we draw attention to general problems encountered in interjurisdictional procedures.

Regarding the official foreign documents needed for use in Poland, while exceptions exist to the need for additional authentication of documents (especially those issued by authorities of other member states), the Polish courts and state authorities often expect documents submitted to bear an apostille clause. So to avoid additional complications, it is advisable to obtain such a clause before submitting official foreign documents to the relevant court or office in Poland.

As for documents signed in front of a notary, it should be ensured that the notarial clause sufficiently attests the signatory’s authority to sign the document. For this purpose, the rules of representation of the entity on whose behalf the documents are signed should be checked. This is particularly important for countries where these rules are not explicitly described in the registration documents. In such a case, it may be necessary to obtain additional documents (such as the articles of association or a resolution of a corporate body of the foreign entity). At the same time, it should be remembered that Polish notaries and registry courts may request the production of such documents in order to perform further actions on this basis. Therefore, it is worth preparing in advance for such an eventuality.

In addition, when documents are drawn up before a foreign notary, it should be determined whether the documents are signed in a form meeting the requirements of Polish law. Cases sometimes occur where documents issued under foreign law purporting to correspond to the Polish form do not actually meet the Polish criteria. For example, Spanish notaries issue copies of documents with notarised signatures in a form very similar to a Spanish deed. The lack of what the Polish authorities would regard as proper form poses a risk that the validity of the merger will be questioned.

In short, cross-border reorganisations should take into account not only the provisions of Polish and foreign law, but also the specifics of the documentation and established customs in the jurisdictions of the companies involved in the merger.

Marek Dolatowski, adwokat, Monika Lutomirska, Dr Kinga Ziemnicka, attorney-at-law, M&A and Corporate practice, Wardyński & Partners