Easier to merge or spin off companies
An amendment to the Commercial Companies Code went into effect on 27 October 2011, simplifying and shortening the procedures for corporate mergers and divisions, including cross-border mergers.
The amendment implements into the Polish legal system the rules provided in Directive 2009/109/EC, which amended what are known as the Third and Sixth Company Law Directives on domestic mergers and divisions.
Providing information electronically
The first major change is introduction of the option of providing information about a merger or division using a corporate website. This allows merging companies to publish the plan for the merger or division online, skipping publication in the official journal Monitor Sądowy i Gospodarczy, saving both time and money. The merger or division plan must be available on the company website without interruption until passage of the shareholder resolution approving the merger or division (Commercial Companies Code Art. 500 §2ˡ, Art. 5164 §1 and Art. 535 § 3).
Similarly, documents related to the merger or division may now be provided to shareholders by e-mail, upon their consent, rather than making copies available at the company’s offices. Instead of sending copies by e-mail, the company may also decide to make the documents available free of charge to shareholders on the company website, with an option to print out a hard copy, for at least a month prior to the scheduled date of the shareholders’ meeting to approve the merger or division (Art. 505 §3 and Art. 540 §3).
It is curious, however, that the Parliament did not take this opportunity to unify the deadline for publication of merger and division plans and notification to shareholders of the date of the shareholders’ meeting for approval of the merger or division, which is now one month prior to the shareholders’ meeting in the case of a merger but 6 weeks in the case of a division. There does not appear to be any practical justification for the difference in these deadlines.
Less documentation to prepare
Further simplifications concern the option to skip certain actions in the course of the merger or division.
Previously the shareholders could adopt a unanimous decision to avoid the requirement of auditing the merger or division plan, or in the case of a division also the duty to prepare a statement on the condition of the accounts. Through a change to Commercial Companies Code Art. 503ˡ and Art. 538ˡ, this option has been extended to allow the company to skip the preparation of a management board report justifying the merger or division and providing information about material changes in the assets and liabilities occurring between the date of the merger or division plan and the date of the resolution approving the plan. In the case of a merger, however, it will still be necessary to prepare a statement on the condition of the accounts.
With respect to public companies, the amending act introduced another simplification, allowing the company to avoid preparing information about the state of the accounts as an annex to the merger or division plan, if the company publishes mid-year financial reports and makes them available to shareholders (Art. 499 §4 and Art. 543 §4).
One-month spin-off?
Another liberalisation of the regulations concerns restructuring of single-shareholder companies, which were already significantly simplified under the prior rules but only with respect to mergers. A single-shareholder company may be assumed by its parent company a month after announcement or publication on the company’s website of the merger plan and the enclosures referred to in Art. 505. After a month, it is possible to file a motion with the registry court to register the merger (Art. 516 §6). If the registration procedure goes smoothly in the court, the whole merger may thus be completed in just over a month. A similar rule has now been adopted with respect to a division by acquisition if the acquirer is the 100% owner of the target. In such case, the relevant information must be published or made available a month prior to filing the motion with the court to register the division (Art. 550ˡ). Interestingly, here the Parliament provided for a one-month deadline with respect to this type of spin-off, while for other divisions, as noted above, the publication period is 6 weeks.
Other major changes
Creditors of merging companies who raise their claims within six months after announcement of the merger and prove that there is a threat to satisfaction of their claims may demand security from the court (Commercial Companies Code Art. 496 §2). The previous rules were interpreted to require submission to a court deposit under Civil Code Art. 364 §1. The same solution has also been adopted with respect to creditors of companies of a spun-off company and its acquirer (Commercial Companies Code Art. 546 §2).
The amendment has also clarified the regulations concerning waiver of the requirement for an audit of in-kind contributions to a joint-stock company, which raised doubts particularly with respect to contributions made upon formation of the company. This was because the requirements were addressed to the management board, but the management board could not be appointed at the time the founders prepared their report, and also because of references to an increase in share capital, which prevented the regulations from being applied in this part of the code. As a result, Art. 312ˡ has now been amended and this provision has been rewritten and moved from Art. 536 §3 to Art. 538ˡ §3.
Who can benefit from the amendment?
The amendment is addressed to companies that had not yet published their merger or division plan as of the effective date of the amendment. Companies that had adopted a plan but not yet published it may already follow the new rules. In other cases, the prior regulations continue to apply (Art. 2 of the amending act dated 19 August 2011).
Natalia Kobyłka, Corporate Law practice, Wardyński & Partners