Cross-border mergers involving a Polish company require compliance with certain legal and regulatory requirements. Let us go through most important steps of such procedure.
As for the date of writing the articles only capital companies (limited liability company, simple joint-stock company and joint-stock company) and limited joint-stock partnership might participate in cross-border merger. Soon it will change due to adoption of Directive (EU 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions.
Before we start let us remind that before proceeding with a cross-border merger, it's important to conduct a thorough due diligence process to evaluate the financial, legal, tax, and other aspects of the cross-border merger. Also, make sure that you are able to obtain all necessary approvals:, as the merger process must be approved by the shareholders and board of directors of both the acquiring and target companies. In addition, approval may be required from regulatory authorities in Poland and the home country of the acquiring company. Also, check if the additional valuation of the company must be prepared and how it should be done.
There are things that should be included in all cross-border mergers involving Polish company. These are:
1. Draft terms of merger: Once the necessary approvals have been obtained, a draft terms of merger must be prepared that outlines the terms of the merger, including the exchange ratio of the companies, the treatment of the employees, and any other relevant terms and conditions. More of it below.
2. Report to justify the merger: The management board of a company shall prepare a written report to justify the merger.
3. Audit: The draft terms of merger should be audited by an expert (unless an exception occurs which allows to proceed with merger without audit)
4. Petition for a conformity of the merger: Once the audit is completed the management board shall file with the registry court a petition for a certificate of conformity of the merger.
5. Register the merger with the Polish Register of Entrepreneurs: The merger must be registered with the Polish Register of Entrepreneurs. This process involves submitting various documents, including certificates of conformity of the cross-border merger with the law governing each of the merging companies with regard to the procedure that is governed by that law, issued by the bodies competent for the merging companies not earlier than six months of the filing,
6. After the merger, comply with tax and accounting requirements: The merger may have tax and accounting implications that must be addressed in compliance with Polish law.
7. Notify stakeholders and others: The merger should be communicated to employees, customers, suppliers, and other stakeholders to ensure a smooth transition.
Draft terms of cross-border merger is a document where everything begins – it must be prepared carefully and should include all the major information that will be necessary along the way. Also, it needs to be compliant with the regulations of all countries involved in the merger, which means that the two legal teams should cooperate in its creation. It should also be bilingual.
As for Polish regulations, the draft terms of cross-border merger shall stipulate at least:
1) the type, business name and statutory seat of each of the merging companies, the name of the register and the registration number of each of the merging companies, method of merger, and, in the case of a merger by the formation of a new company, also the type, business name and statutory seat proposed for that company,
2) the ratio of exchange of the shares of a company being acquired or companies merging by the formation of a new company for shares of the acquiring company or the newly formed company, and the amount of additional payments, if any,
3) the ratio of exchange of other securities of the company being acquired or companies merging by the formation of a new company for securities of the acquiring company or the newly formed company, and the amount of additional payments, if any,
4) other rights granted by the acquiring company or the newly formed company to the shareholders or persons entitled under other securities in the company being acquired or in companies merging by the formation of a new company,
5) other terms concerning the allocation of the shares or other securities in the acquiring company or in the newly formed company,
6) the date as of which the shares give the right to participate in the profits of the acquiring company or the newly formed company, as well as other terms concerning acquisition or exercise of that right if such terms have been stipulated,
7) the date as of which other securities give the right to participate in the profits of the acquiring company or the newly formed company, as well as other terms concerning acquisition or exercise of that right if such terms have been stipulated,
8) special benefits for the auditors engaged in the auditing of the draft terms of merger or to members of the governing bodies of the merging companies, should the applicable laws provide that any such benefits may be granted,
9) the terms for the exercise of the rights of creditors and minority shareholders of each of the merging companies and the address at which full information on these terms may be obtained free of charge,
10) the procedures for elaboration of the rules for involvement of the employees in the determination of their right of participation in the governing bodies of the acquiring company or the newly formed company, in accordance with separate provisions,
11) the likely impact of the merger on the level of employment in the acquiring company or the newly formed company,
12) the date as of which the transactions of the merging companies shall be deemed, for purposes of the accountancy law, to be transactions for the account of the acquiring company or the newly formed company, subject to the provisions of the accountancy law,
13) information on the valuation of assets and liabilities being transferred to the acquiring company or the newly formed company as of a defined day in the month preceding the filing of the application for the draft terms of merger to be announced,
14) the date of closing of the books of the merging companies that were used to establish the terms of the merger, subject to the provisions of the accountancy law
15) draft articles of association or statutes of the acquiring company or the newly formed company.
Petition for a conformity of the merger is also a crucial moment during the cross-border merger process. It ends up with the court issuing the company with a certificate of conformity of the cross-border merger with Polish law with regard to the procedure that is governed by Polish law. This is a permission to proceed with registration of the merger if similar conformity was acquired in other states involved.
To acquire such confirmation the following documents must be enclosed:
1) the draft terms of merger,
2) the management board report justifying the merger,
3) the opinion of the employee representatives, where it was received by the management board in due time,
4) the opinion of the auditor or a copy of the consent of all of the shareholders of the merging companies to dispense with the requirement that the draft terms of merger be audited and that the auditor prepare an opinion,
5) proof that the auditor was appointed, where such auditor was appointed
6) proof that the shareholders were notified of the intention to merge,
7) a copy of the merger resolution,
8) a statement signed by all members of the management board that the merger resolution was not challenged within the prescribed time or that the challenge was finally and bindingly dismissed or rejected, or that the deadline to file an appeal passed or waiver of all those entitled of the right to challenge the merger resolution,
10) a statement signed by all members of the management board as to the manner of satisfaction of the rights of the creditors and shareholders under the law and the merger resolution.
Within a month of the date on which the draft terms of merger were announced, a creditor of a domestic company may request that his claims be secured if he demonstrates with probability that their satisfaction is threatened by the merger.
In case of a dispute, based on a petition by the creditor filed within two months of the announcement of the draft terms of merger, the court having jurisdiction for the seat of the company shall resolve whether or not security should be granted as demanded by the creditor.
===========================
