A limited liability company (spółka z o.o.) is one of the most popular forms of business activity, in which the shareholders are usually natural persons. Proper succession planning facilitates the transfer of shares in the event of a shareholder’s death. The issue of share inheritance is complex enough that it should be considered at the stage of establishing the company. In this article, we highlight the importance of introducing appropriate legal mechanisms in advance to safeguard the company and its remaining shareholders in the event of a shareholder’s death.
Shares in a company constitute property rights that are inherited under general legal provisions. However, the mere fact of inheritance does not automatically entitle the heir or heirs to exercise the rights of the deceased shareholder. According to Article 183 § 1 of the Polish Commercial Companies Code (KSH), upon the death of an individual who is a shareholder of a limited liability company, their shares pass to their heirs, unless otherwise stipulated in the company’s articles of association. As a general rule, restrictions or exclusions may apply to both testamentary and statutory heirs, as well as legatees.
Shareholders may limit or exclude the possibility of heirs becoming shareholders by incorporating the following clauses into the company’s articles of association:
- A complete exclusion of heirs from joining the company in place of deceased shareholders.
- A restriction on heirs joining the company, such as excluding heirs engaged in competitive business activities, allowing only heirs from a specific group of individuals, or permitting only heirs who already hold shares in the company.
- A requirement for obtaining approval from the general meeting of shareholders, the supervisory board, or the management board.
- A right of pre-emption for shares subject to inheritance, granted to the remaining shareholders or the company itself.
The above examples of succession regulations for a deceased shareholder aim to protect both the company and its shareholders. The articles of association play a crucial role in the inheritance process. For this reason, shareholders are advised to carefully consider the content of the agreement and update it regularly to prevent potential conflicts.
SKLAW advises its clients on succession processes and assists in selecting appropriate legal solutions to secure the company in the event of a shareholder’s death.
This article is for informational purposes only and should not be considered as legal advice or opinion. To obtain a legal opinion, please contact our law firm.