On 25 July 2019 Supreme Court in a case under review III CZP 19/19 adopted a resolution according to which ‘the merger by acquisition of commercial law companies on the basis of Article 492(1)(1) k.s.h., whose further consequence is the transfer to a holding company, is not the sale of real estate within the meaning of Article 23(1) Act dated 9 March 2017 special rules for the elimination of the legal effects of reprivatisation decisions on Warsaw real estate issued in violation of the law (one text: Journal of Laws of 2018, item 2267)”.
This resolution was adopted by the Supreme Court in response to the following legal issue: ‘Is the merger of companies in a way Article 492(1)(1) a code of commercial companies constitutes a legal activity within the meaning of Article 756[3] Code of Civil Procedure Article 756[4] the code of civil procedure, in particular whether the transfer of shares in the perpetual use law of the immovable property listed in the perpetual book contrary to the prohibition of their disposal as disclosed in this book results in the annulment of the transfer of the perpetual use right to the acquiring company?’
According to the Supreme Court’s view, if the acquired company holds shares in perpetual use, the merger will result in the transfer to the acquiring company in perpetual use.
It should be explained that capital companies can now merge regardless of their entity configuration and nature. The limited liability company may acquire another limited liability company or joint stock company, as may the limited liability company or limited liability company.
Mergers may be subject to uniform companies as regards the legal form and to non-uniform capital companies. Moreover, there are no obstacles to the involvement of partnerships in the merger process in each form, other than capital companies.
The merger process is usually carried out to reorganise capital groups and is usually driven by the need to adapt the existing capital structure to new needs. This action may result from the need to increase the efficiency of the group or reduce the cost of its operation.
The merger process may be carried out by merger by taking over, i.e. by transferring all the assets of the company acquired to the acquiring company at the end of its legal existence first or on the basis of a merger by setting up a new company.
The legal question of the Supreme Court concerning the transfer to the acquiring company of perpetual real estate use as a result of the merger by acquisition was considered in the context of Article 7564k.p.c., according to which the legal activity carried out contrary to the prohibition on the disposal or charge of immovable property which does not have an established perpetual book or whose perpetual book is missing or destroyed is invalid. A legal act contrary to a ban on the sale or charge of immovable property which has an office-held permanent book or a cooperative property right to the premises shall be invalid if an entry in the book of a perpetual warning on the prohibition of the disposal or imposition of those rights has been made.
According to Article 494 k.s.h. the acquiring company or the newly established company enters into all the rights and obligations of the acquired company or the merging companies by the new company. This provision of law provides for universal succession of civil rights and obligations, which means that successful companies, i.e.
acquirers or newly established, enter into all the rights and obligations of the acquired and merged companies on the date of merger. In addition, no additional action is needed for the effects of succession, except in connection proceedings (A. Kidyba, Succession, continuation or perhaps something else?, Mon. Pr. Hand. 2011, No 1, p. 36.
Szerzej K. Flishkiewicz, Protection of creditors of merging companies, Warsaw 2016, p. 92 and n.; so also the WSA in Łódź in judgment dated 25 January 2018, I SA/Łed 1060/17 , LEX No. 2435816). Universal succession therefore essentially involves joining all rights and obligations one the entity by another entity.
Principle of universal legal implications, the substance of the merger procedure, expressed under Article 494(1) k.s.h., significantly simplifies the merger. Succession of civil rights and obligations means that the successor companies, i.e.
acquirers or newly established, enter into all the rights and obligations of the merging and merging companies on the date of merger.
In particular, if the assets of the companies being acquired or merged by the establishment of a new company are debts, the acceptance of the debt by the company resulting from the merger procedure does not require the consent of creditors. Succession follows uno actu on the day of merger.
(Case of the Court of Appeal in Szczecin on 29 June 2015,And ACa 231/15).
It should therefore be indicated that, according to the view expressed by the Supreme Court, if the acquired company has a share in perpetual use, the merger will result in the transfer to the acquiring company in perpetual use.
This process does not at the same time constitute a divestment of the property, since the division by the acquisition does not result in a separate legal act concerning the transfer of property or perpetual use.
The transfer of shares in perpetual use is the result of the succession of universal rights and obligations of the company being acquired into the acquiring company described above, so it is not contrary to the ban on the disposal of the property envisaged under Article 23(1) Act dated 9 March 2017 special rules for the removal of the legal effects of reprivatisation decisions concerning Warsaw real estate issued in violation of the law.
Author: Michał Wasilenko
Lawyer, Senior Associate in the Legal Department, member of the Bar Association in Lublin, graduate of the Faculty of Law and Administration at Maria Curie-Skłodowska University in Lublin. He specializes in commercial and civil law law.