The judgment of the SN explains why, in the case of the conversion of single-member entrepreneurs and civil companies into a commercial company, the procedural benefits of the conversion on the basis of the continuation of operations are denied.
The case concerned the application Article 788(1) k.p.c. in the case of transformations under the provisions of the Commercial Companies Code. Supreme Court third judges in resolution dated 29 November 2017 (reference no. matters III CZP 68/17) replied to a legal question asked by the appeal court in Poznań on the question of application Article 788 k.p.c. in the event that the creditor’s company is transformed into another company in a different way Article 551 k.s.h.
Principle of continuation
The Supreme Court has clearly indicated that in the case of the so-called ‘classical’ transformation of companies, i.e.
where the conversion occurs one companies governed by commercial law to another commercial law company, the principle of continuing the activity of the converted company, which as a result of the transformation process will continue to operate, but in a changed legal form, as if adopting a new "legal table".
The conversion therefore implies a change in the type of company while maintaining an identity in terms of rights and obligations.
The entity identity of the companies means that the converted company does not enter into civil law rights and obligations of the converted company, but on the date of conversion of the converted company all rights and obligations of the converted company (Article 553(1) k.s.h.).
In other words, despite the transformation carried out, the same company is still involved in these rights and obligations. Expressed under Article 553(1) k.s.h. the principle of continuation covers both private rights and obligations (Article 553(1) k.s.h.), as well as public law (Article 553(2) k.s.h.).
It is also covered by the personnel sphere, as the partners of the converted company, participating in the transformation, become shareholders of the converted company (Article 553(3) k.p.c.).
Accordingly, the Supreme Court indicated that the provision Article 788(1) k.p.c. does not apply if a commercial company is converted into another commercial company on the basis of Article 551(1) k.s.h. Recipe Article 788 k.p.c.
concerns the inadequacy of the content of the enforcement title due to the transfer of the rights or obligations recognised therein to another entity (universal or singular succession) after the issue of the title or in the course of judicial proceedings.
It allows a declaration of enforceability to be given to an entity currently entitled or obliged to exercise the rights or obligations recognised in the enforcement title. In this sense Article 788(1) k.p.c. has an identification and protective function.
The above-mentioned position of the Supreme Court deserves approval and, in principle, seeking opposing arguments and countering the application of the principle of continuation in the event of conversion one commercial law companies in another commercial law company should remain in the scientific field rather than in the practical dimension.
Principle of Succession
However, attention should be paid to the view of the Supreme Court regarding other types of transformation, i.e. for transformation processes in the form of: (1) transformation of a civil company into a commercial company and (2) Transforming a single-man entrepreneur into a capital company.
The Supreme Court indicated that it maintained, as previously expressed in the judicature of the Supreme Court, the view that the above two The cases of conversion are based on the structure of succession of rights and obligations for the converted company and are therefore not based on the principle of continuation.
The Supreme Court pointed out that despite the similar wording of the rules governing the effect of the transformation of the legal form of the trader and the transformation of commercial companies, there is not a subjective identity between the trader and the converted company, but a legal consequence which is a variety of universal succession.
At the same time, the content convergence between Article 26(5) dd. 2 k.s.h. and Article 5842(1) k.s.h. indicates, in the opinion of the SN, the will of the legislator to base the transformation of the entrepreneur into a capital company and to transform the civil partnership into a commercial company on the same solutions, i.e.
the passage of rights and duties. Against the background of the regulation adopted under Article 26(5) dd. 2 K.s.h. SN pointed out that the date of the transformation of a civil partnership into a commercial company is the succession of the rights and obligations of the converted company.
The Supreme Court relied on the sentence dated 9 September 2009 reference no. V CSK 35/09, which, however, is quite incomprehensible, because in the ruling dated 9 September 2009 V CSK 35/09 clearly stated that:
„Supreme Court in the Order dated 26 April 2006, V CSK 159/05 (non-publ.) adopted that conversion based on Article 26(4) k.s.h. did not result in automatic (consistent with the principle of continuation) transfer of the assets of a civil partnership to a public company. The Supreme Court held a similar position in the ruling dated 7 July 2004, And CK 79/04 (nopubl.). The Supreme Court also assumed that the public company was not the successor to the civil partnership's shareholders (e.g. the order dated 8 July 2003, IV CK 13/03 , non-publ.; resolution dated 23 June 2004, V CZ 53/04 , nopubl.).
However, the Supreme Court case-law also held a different position, accepting the principle of continuation. Time and Time first The Supreme Court accepted this interpretation Article 26(4) k.s.h.
in its original wording dated 14 January 2005, III CK 177/04 (OSNC 2005, No 12, item 217), then confirmed in the judgment dated 26 October 2005, V CK 285/05 (non-publ.), judgment dated 21 September 2007, V CSK 141/07 (OSNC 2008, No 11, item 131), Judgment dated 9 January 2008, III CSK 196/07 (nopubl.) and judgment dated 4 March 2008, IV CSK 496/07 (non-publ.), and - indirectly - in the justification of the resolution dated 13 March 2008, III CZP 9/08 (OSNC 2009, No 4, item 54).
Supreme Court in this composition (i.e. in the composition which has just issued the judgment dated 9 September 2009 reference no. V CSK 35/09) He's leaning towards it. second posts.’
It can, or even should be argued, with the view of the Supreme Court, that the transformation of a single-man entrepreneur, as well as a civil partnership into a commercial law company, is based on the structure of succession.
Thus, it is possible, or even to be argued, to the view of the Supreme Court expressed in the resolution of 29 November 2017 reference no. III CZP 68/17, that the transformation of a single-man entrepreneur as well as a civil partnership into a commercial law company is based on the structure of succession.
Separating individual cases from the general institution of transformation governed by the same law (k.s.h.) to the transformation of stricto sense, i.e.
one a commercial company in another commercial company to which the principle of continuing business applies, and to the transformation of a single-member undertaking or of the joint-stock of shareholders of a civil partnership (most often a company) to which the principle of continuation and succession no longer applies, is unjustified, non-purpose and impractical for single-member entrepreneurs and members of civil companies who choose to transform into a commercial law company.
In the justification for the application of the principle of continuation in the event of the transformation of a commercial company into another commercial company, it is noted, inter alia, that there is only a change in the legal form and a change in the ‘legal balance’ of the converted company, while maintaining all its activities but in the changed legal form.
Given the above, this is basically the same situation, i.e. only the change in legal form is explicitly indicated in the provision Article 551(5) k.s.h.
as regards the transformation of a natural person conducting an economic activity in his own name: ‘An entrepreneur who is a natural person carrying out an economic activity in his own name within the meaning of Act dated 6 March 2018 – Business law (Journal of Laws, item 646) – (the undertaking being converted) may transform the form of its business into a single-member capital company (the company being converted) (the entrepreneur becoming a capital company).’
It also does not argue that between Article 26(5) dd. 2 k.s.h. and Article 5842(1) k.s.h. there is such a content convergence which indicates the willingness of the legislator to base the transformation of the entrepreneur into a capital company and to transform the civil partnership into a commercial company on the same solutions, i.e. the transition of rights and obligations and thus the principle of succession. It should be pointed out that the content of the above provisions, i.e.
- Article 26(5) k.s.h. (as regards the transformation of a civil partnership into a public company): ‘When the company in question is entered in the register, the company concerned shall: Under section 4, becomes an open company. It shall have all the rights and obligations which constitute the assets of the joint partners’, and
- Article 5842(1) (concerning the transformation of an entrepreneur into a capital company: ‘The transformed company shall have all the rights and obligations of the converted entrepreneur’,
does not deviate from the content of the recipe Article 553(1) k.s.h. referring to the so-called transformation of stricto meaning one a trading company in another: ‘Article 553(1). The converted company shall have all the rights and obligations of the converted company."
Since there are no linguistic and semantic differences in the above-mentioned provisions, it does not seem reasonable to conclude that the provisions Article 26(5) k.s.h. and 5842 section 1 create the principle of succession, while the provision relating to the transformation of the meaning of the strico of a commercial company, i.e. Article 553(1) k.s.h. regulates the principle of continuing operations.
All three the provisions mentioned above (Article 26(5) k.s.h. and 5842 section 1 and Article 553(1) (k.s.h.) is an indication of the continuation of the case and not of the legal implications of the merger or division of companies. The converted company does not enter into other rights, but is still subject to rights and obligations – it has rights and obligations of the recast entity.
It is also difficult to accept the argument that, since there is no continuation of the entity in the case of the transformation of a natural person who is an entrepreneur, and in the case of the transformation of a civil partnership, there is no continuation of the entity, this convinces that there is a principle of succession in the case of such a transformation, rather than the principle of continuation.
Such a view, seemingly correct, separates from the obvious essence of the separateness of a single-person undertaking which operates an undertaking subject to transformation and the separateness of the joint venture as a civil partnership from the shareholders themselves.
The fact that, in the context of the transformation, whether it is a single-man undertaking or a civil company, there is no destruction of persons who are ‘owners’ of those entities as a result of the transformation, and in the event of a simple transformation of a commercial company, the converted company ceases to exist, does not convince that the converted single-man undertaking or civil partnership should not benefit from the continuation principle.
The principle of continuation (continuity) implies not only the assessment of the material and legal aspects of the transformation, but also the resulting procedural consequences.
Equality to the law
The principle of continuation continuity) implies not only the assessment of the material and legal aspects of the transformation, but also the resulting procedural consequences.
In the event of continuation, the conversion shall not result in changes to the parties in the process, and any rulings shall be binding on the converted company without having to obtain a feasibility clause on the basis of Article 788 k.p.c.
To refuse the benefits of continuation in the case of the transformation of a single-person entrepreneur and in the case of a civil partnership, therefore leads to the unauthorised favour of the transformation of stricto .
Illustrating the potential procedural situation as a simple example, in which the principle of continuation of a claim linked without doubt to the undertaking of the transformed undertaking will not apply, and the claim related to the undertaking of the converted commercial company already so, one can conclude that there is no equality with the law.
Although the transformation of the company of a natural person into a company with an o.o.
escapes from the categorical framework of division into the principle of succession and to the principle of continuation, since the converted capital company is neither a successor under the general title nor a continuation of all relations of a single-person entrepreneur, it is, however, closer to the principle of continuation than to the principle of succession.
Consequently, from the essence of the transformation institution, not only does the transformation of the stricto sense take place on the basis of continuation, but also of the transformation of the activity of a single-person entrepreneur, as well as of civil companies into a commercial law company, take place on the same principle although with obvious differences in the way that individuals function further).
Author:
Aleksandra Księżyk
Director of the Legal Department in Warsaw. Legal advisor, from 2013 associated with Russell Bedford. He runs the Legal Department at the Chancellery Russell Bedford.