Merging and transforming companies

Merging and transforming companies may be done with any type of company under Polish commercial law.

Legislators have created extensive possibilities for the combining of companies, which is meant to facilitate the operations of companies in a competitive market economy. Companies which are no longer able to or no longer wish to operate independently may merge or acquireother companies. An analogous process of the division of companies is also possible. The transformation of companies is intended to make it possible for them to adopt the most favorable organizational form at given time.

The processes of merging and transforming companies are extensively regulated under the Commercial Code, and also widely permitted. Restrictions are not severe and are based on the specific characteristics of capital companies and partnerships. Most of the restrictions concerning mergers have not an absolute nature. Situations in which two or more companies truly cannot be merged rarely occur . More typically, a situation arises in which appropriate transformations must be undergone before the merger process begins. The restrictions concerning transformations are mainly intended to ensure a certain minimum of formal requirements and the transparency of the process. These primarily regard the transformation of civil partnerships into commercial partnerships. Due to the very limited catalog of formal requirements concerning the operations of a civil partnership, for the purposes of transformation into a commercial partnership other than a general partnership, the civil partnership must carry out this process as if it were a general partnership. Moreover, it is not possible to transform a company which is in the process of liquidation, which has begun the process of division of assets, or which is currently a bankrupt.

Regarding the merger of companies, the basic restriction is the inadmissibility of the acquisition of a capital company by a partnership. In the case when the merger is conducted by creating a new company, the partnership may not the newly formed company.

Both of these conditions are deemed to be met, , if the capital company transforms into a partnership before the merger or the merging partnership and capital company form a new capital company.

Certain restrictions of a fundamental character may however result from legislation other than the regulations of the Commercial Code -banking law or acts on trade in financial instruments. On the basis of these regulations, by the time the company which choose to merge with a bank or public company ,has to transform into a PLC first.

In order to merge two companies, a merger plan must be drawn up. This includes basic information on how the merger will be accomplished, the name of the new company, and detailed information such as the ratio at which shares will be exchanged. The boards of the merging companies, in the case of capital companies, draw up a rationale of the merger and attach to the merger plan itself. Additionally, drafts of the new Letters of Association of the company and of the resolution of the partners on the merger are attached to the plan. The requirements of merging two companies are highly formalized, and demand the fulfilment of a larger number of conditions. The merger plan must be announced in the registry court. An analogous process takes place during the division of companies, although instead of a merger plan, a division plan is drawn up.

The transformation of companies takes place based on four basic rigors the transformation of a partnership into a capital company; of a partnership into another type of partnership; of a capital company into another type of capital company and of a capital company into a partnership. The regulations governing such transformations are intended to prevent the avoidance of regulations during the formation of companies, and define the minimum number of votes necessary to adopt a resolution on transformation.