The acquisition of shares in Polish companies by foreigners is a matter of interest to many foreign investors who recognize the potential of doing business in Poland. While the process is open to investors from abroad, it requires compliance with a range of legal regulations governing the transfer of shares involving foreigners. This article outlines the key aspects of this process.
Definition of a foreigner under Polish law
According to Article 1(2) of the Act of 24 March 1920 on the Acquisition of Real Estate by Foreigners (the “Act“), a foreigner is defined as:
- A natural person without Polish citizenship;
- A legal entity with its registered office abroad;
- A partnership formed under foreign law, having its registered office abroad, that does not have legal personality but is composed of persons listed in points 1 or 2;
- A legal entity or commercial partnership without legal personality, having its registered office in the Republic of Poland, that is directly or indirectly controlled by persons or partnerships listed in points 1, 2, and 3.
In the case of a commercial partnership, control is understood to mean that foreigners hold, directly or indirectly, more than 50% of the votes at the shareholders’ meeting or the general meeting, whether as pledgees, usufructuaries, or based on agreements with other persons, or that they hold a dominant position as defined in Article 4 §1(4)(b), (c), or (e) of the Polish Commercial Companies Code of 15 September 2000.
This definition is relevant not only when such entities acquire real estate in Poland but also when acquiring or subscribing to shares in companies that own or hold perpetual usufruct rights to real estate located in Poland.
Who requires permission to acquire shares?
Article 8(2) of the Act provides an exemption from the obligation to obtain consent for the acquisition of shares in Polish companies by foreigners who are citizens or entrepreneurs from states that are parties to the Agreement on the European Economic Area (EEA) or the Swiss Confederation.
Consequently, obtaining permission is necessary for foreigners based outside the EU and Switzerland, for example, in the United Kingdom, the United States, India, or Norway.
The Process of Acquiring Shares by Foreigners
- Legal analysis and due diligence
Every share acquisition process should begin with a thorough analysis of the company’s legal standing (due diligence). This step assesses legal risks and identifies potential liabilities that could impact the transaction.
- Drafting the agreement
The transaction requires the preparation of a proper agreement transferring ownership of shares. In the case of a limited liability company (sp. z o.o.), the agreement must be in writing and notarized.
- Registering changes in the National Court Register (KRS)
Once the transaction is finalized, changes in the ownership structure must be reported to the National Court Register (KRS). The company’s management board is responsible for submitting the necessary documentation.
Sanctions for acquiring shares without required consent
Failure to obtain the required consent for acquiring shares may result in significant legal consequences. The Act outlines sanctions aimed at ensuring compliance with legal requirements.
- Invalidity of the transaction
The primary sanction is the invalidity of the legal action undertaken without the required consent. This means that the share acquisition agreement is null and void, and the acquirer does not gain valid ownership of the shares.
- Administrative proceedings
Administrative authorities may take measures to restore compliance with the law. In practice, this may involve issuing a decision requiring the foreigner to divest the shares.
- Financial penalties
Non-compliance with the obligation to obtain consent may also result in financial penalties. The amount of the penalty depends on the circumstances of the case and the extent of the violation.
- Criminal liability
In cases of intentional violations, individuals responsible for executing the transaction without consent (e.g., the foreigner or company representatives) may face criminal liability. The Act provides for penalties including fines, restriction of liberty, or imprisonment for up to one year.
Tax obligations and other financial considerations
The acquisition of shares by foreigners involves tax obligations in Poland. Depending on the nature of the transaction, it may be necessary to pay tax on civil law transactions (PCC) or corporate income tax (CIT). Consulting a tax advisor is recommended to optimize transaction costs and avoid potential penalties.
Summary
Poland offers favorable conditions for foreign investors interested in acquiring shares in companies. However, it is essential to ensure that each transaction is appropriately prepared from a legal and formal standpoint. With the assistance of an experienced law firm, the entire process can be carried out efficiently and in compliance with applicable laws.
SKLAW provides comprehensive support to foreign entrepreneurs. Our specialists are ready to assist you in safely and effectively executing your transaction. We guarantee an individual approach to your needs and comprehensive legal support in acquiring shares in a Polish company.