Transformation into a company or a partnership under Polish law – what happens with contracts, permits and licences?
Concluded contracts as well as permits and licences held are often of key importance for the conducted activity. But what happens to them in the event of a transformation?
Concluded contracts as well as permits and licences held are often of key importance for the conducted bussiness activity. But what happens to them in the event of transformation?
Transformation and contracts
According to Polish law, the continuity principle applies in the event of a transformation, whereby the transformed company (partnership) is identical to the company (partnership) being transformed. Therefore, the transformation does not change the content of contracts between the company (partnership) being transformed and its business partners. The above principle also applies where a sole proprietorship is transformed into a company.
It should be emphasised, however, that the content of contracts may imply an obligation to inform the other party about the business transformation or even to obtain its consent. Therefore, before starting the transformation procedure, it is worth analysing all contracts to which the entity being transformed is a party.
Transformation and permits, concessions, licenses
A company established as a result of the transformation of an entrepreneur or another company or partnership becomes, by operation of law, the subject of all concessions, permits, reliefs and rights under administrative decisions. As a rule, therefore, there is no need to reapply for a permit or concession. It will only be necessary to notify the competent authority of the transformation in order to update the data of the beneficiary of the decision.
Different rules may only result from specific legal provisions, so the legal basis of the decision should always be verified. An example would be an international transport licence.
Transforming an entrepreneur – the practice of authorities
In practice, administrative authorities and institutions take different approaches to the continuity of decisions held in the case of the transformation of a sole trader, not always recognising the continuity principle set out in the Commercial Companies Code. This is due to the fact that the transformation of an entrepreneur into a company changes their tax identification number, a fact that is erroneously interpreted by some authorities as the discontinuation of the entrepreneur’s rights and obligations and the creation of a new entity.
Conducting business in a specific form
It should also be borne in mind that certain activities may only be conducted in a specific form prescribed by law (e.g. banking activities may only be conducted in the form of a joint-stock company). The transformation of a company authorised to carry out this type of activity will result in the loss of the possibility of carrying out the activity.