Legal situation of a natural person operating a single-person business in the event of the death of such an entrepreneur

Upon the death of a natural person carrying on an economic activity, inheritance rules are opened and applicable, so at least the procedure for the determination of the acquisition of the inheritance by the entitled persons should be carried out, as well as often a much more time-consuming succession proceedings.

At that time, at least at least the business of the deceased entrepreneur is interrupted or at all, terminated, resulting in undesirable public and private relations related to such an undertaking.

In the Ministry of Development and Finance, in order to prevent these situations, a draft Act on the Management Board of a Successive Business of a Natural Person was developed.[1]. On 7 June 2018 The parliament accepted this project, and the president signed the bill 25 July 2018 2 .

Introduction

According to Article 431 Civil Code[3] ((c) the entrepreneur is a natural person, a legal person and an organisational unit, carrying out an economic or professional activity on its own behalf. This provision includes two criteria defining the entrepreneur:

((i) the subject-matter criterion, and in this respect the persons who may be an entrepreneur are clearly identified, including, of course, natural persons;

((ii) the criterion in question, i.e. carrying out business or professional activities on its own behalf.

A natural person conducting an economic activity is essentially the owner of all components of the undertaking, undertakes all factual and legal activities concerning the undertaking and assumes full responsibility for the undertaking's obligations as its own. A natural person conducting a single-person economic activity is so complex with his business that the loss of legal existence (death) causes him to automatically vote on the rules on inheritance, and the company as a part of the inheritance is generally treated as part of the inheritance of the deceased entrepreneur, subject to division between the heirs according to the actual and legal situation of the individual concerned.

Most often, the procedure concerning the distribution of inheritance between heirs is time-consuming and subject to the risk of dispute, in particular in the case of assets of considerable value, which prolongs even more time after which it will be finally determined who is entitled to inherit and to what extent, including the succession of the company after the deceased entrepreneur.

Failure to determine immediately how the company operates after a deceased natural person and thus to impair the continuity of the operation of such an undertaking may result in the irreversible loss of counterparties, orders, the possibility to earn from negotiated contracts or contract procedures in progress, as well as the loss of specialised personnel and other assets.

The death of a natural person conducting an economic activity has an extremely important impact on the company left behind, its employees, its contractors, and, in broad terms, on the state. Maintaining the continuity of operation even of medium-sized enterprises guarantees the sustainability of public and private relations, including workers, without unnecessary perturbations accompanying any changes, whether in the field of administrative or commercial obligations.

According to information from the Ministry of Development, Central Records and Information on Economic Activity (hereinafter CEIDG) is entered ok. 2,400,000 entrepreneurs (active and those who have suspended their business activities)[4].

In addition, in the light of the data of the Institute of Family Business, family businesses constitute 36% all Polish companies and manufacture 10% The GDP of our country. According to other studies, in Poland 2014 family businesses were ok.

1-1,200,000 economic operators, of which a large percentage were single-member companies, representing the SME sector, which generated almost 40% Polish GDP and employment ok. 50% Polish workers[5].

It turns out that among the individuals who started business in the early years 90. The 20th century, a large group is approaching or reaching retirement age, increasing the statistical probability of death or serious diseases. Currently, CEIDG is listed above close 200,000 persons who have completed 65. year[6]. In CEIDG revealed is close 103,500 entrepreneurs who are members of civil companies, of which completed 65 She's over 21,000 persons[7].

Successive board after the death of the entrepreneur

These facts, as well as social demands and signals from the case law of the courts[8] the combination of the assets of the company as a whole, even in the case of the death of an entrepreneur who is a natural person, resulted in the legislative initiative of the Minister of Development and Finance, followed by the Ministry of Enterprise and Technology, and successively the Council of Ministers, and a draft new law on the management of a succeeding company of a natural person (hereinafter also referred to as ‘new law on the succession management’ or ‘new law’ or ‘project’).

The draft Act on the Management Board of a successful company of a natural person presents a completely new institution in the Polish legal order, i.e. temporary management of the company after the death of an entrepreneur who carried out business activities on his own behalf (the so-called succession board).

The project assumes that the entrepreneur himself, even before or after his death, the heir, in particular the spouse, may appoint a succession manager to manage and run the business as a whole until the inheritance division between the heirs.

The establishment of a succession administrator by an entrepreneur requires written form under the rigor of invalidity. If an entrepreneur has not applied for entry of a succession manager in life to CEIDG or has not indicated that the proxy concerned will become a succession manager after the death of the entrepreneur, then it is assumed that the succession manager has not been established by the entrepreneur and the right to establish the succession manager is entitled to a spouse or heir.

Namely, after the order to establish the acquisition of inheritance, to register an inheritance certificate or to issue a European inheritance certificate, the succession manager will be able to appoint the owner of the company as inheritance.

In order to appoint a succession manager, the consent of persons who together have a share of the company in the inheritance greater than 85/100. At that time, the appointment of a succession administrator, as well as the consent of persons who together have a greater share than 85/100, require the form of a notarial act to be retained.

According to the project, the right to appoint first the succession administrator expires on expiry two months from: (i) the death of the entrepreneur, (ii) the finding of the body of the entrepreneur or (iii) the finalisation of the order of the court declaring the death. In matters arising from running the company in decline, the succession manager will use the existing business company with the additional designation “in decline”.

Since the establishment of the Successive Board, the Successive Board shall exercise the rights and obligations of the deceased entrepreneur resulting from its business activity, as well as the rights and obligations in matters arising from the establishment of the company in decline.

The succession manager acts on his own behalf, on the account of the owners of the company in decline and cannot be reduced by the management with effect on persons third. The contract rules shall apply mutatis mutandis to relations between the manager and heirs.

The company's owners are held jointly and severally liable for the obligation to operate the company in decline, while the manager may bear compensation for his actions and omissions. An important element to pay particular attention to is that administrative decisions issued to the deceased trader are not automatically executed.

Within time three months from the date of the establishment of the succession board, the succession manager may submit to the public administration authority which issued the decision relating to the undertaking a request for confirmation of the possibility of implementing that decision.

If the conditions for obtaining a decision under the specific laws are not met, the administrator will not provide documents demonstrating compliance with the requirements or will not accept all the conditions of the decision, then the administrative decision cannot be implemented.

Moreover, if the administrator fails to comply with the personal conditions related to the administrative decision, the more this decision cannot continue to be carried out within the undertaking.

The project assumes that the institution of the succession board will also apply as appropriate when the entrepreneur was a partner of a civil partnership. The incentive to take over and continue running the company is to be exempt from inheritance and donation tax, which should be assessed positively.

Effects of the new law on the management of a succession of a natural person

According to the Ministry of Development 9 presented in the Impact Assessment 10 , Since the succession manager will exercise the rights and obligations of the deceased entrepreneur, the number of cases in which business activity was terminated as a result of the death of the entrepreneur will be reduced.

Continuity in the regulation of public legal obligations relating to the conduct of business activities taxes, local charges, other charges, e.g. on concessions) and continuity of employment contracts and thus income from social security contributions of persons employed in the company will be maintained.

The Act does not impose any new obligations on SMEs. The use of the law is fully optional and dependent on the will of the entrepreneur or his successors. According to the Ministry, changes should result in an increase in the participation of family businesses in the Polish economy in the long term and the creation of new, specialized companies with recognised reputation, controlled by members of the immediate family.

Importantly, the proposed regulation will reduce the phenomenon of termination of employment contracts after the death of a natural person conducting an economic activity, due to the beneficial consequences for workers for the establishment of a succession board. The situation of workers whose employment relationship has expired following the death of the employer will also be improved by adopting the principle that, in the event of the establishment of a succession board some time after the opening of the inheritance, the employee will be entitled to return to work on a similar basis as reinstatement.

The continuation of the business activity of a deceased natural person also means that the public aid received under contracts which are in the course of execution will not have to be reimbursed to the financier in full with interest from the date of its transfer. This will keep jobs created in connection with the implementation of a public-funded project.

The need to pass a new law on the management of a successful enterprise of a natural person

According to some entities submitting comments to the Act in the framework of public consultation to the draft Act on the Management Board of a Successive Business of a Natural Person[11] it is not appropriate to introduce a completely new institution into the legal order, since the objectives to be fulfilled by the succession board would be possible to achieve, for example, by introducing the institution of the attorney mortis causa, either by extending the powers and powers of the inheritance curator, or by entrusting the deceased entrepreneur with certain management powers in the event of death. It is alleged that the introduction of the new institution distorts the legal order, while the amendment of the relevant provisions of the Code of Civil Procedure hereinafter: k.p.c.) 12 would be sufficient to fulfil the objectives set out in the new law.

As regards some cases relating to the running of the company, including in particular the mandatory relations on the grounds of K.C., this argument is correct and could indeed have similar effects to those provided for by the Act, by amending the relevant provisions of K.C. and K.P.C. However, it cannot be overlooked that the new law covers not only civil relations but also public law relations, including in particular permits, concessions and licences, as well as tax issues.

It should also be pointed out that the establishment of the institutions of the prosecutor mortis causa with the existence of the institution of the prosecutor as a specific type of power of attorney may raise doubts and ambiguities for traders who are natural persons as to the distinctness of those institutions.

Separates would have to relate to the essence of the prosecution's institution, i.e. in principle, the proxy acts in the name and on behalf of the power provider. However, in the case of the death of a single-person entrepreneur, it would not be possible to act in such a way.

Thus, the prosecution's jurisprudence could not be useful, since otherwise the prosecution's actions should be assessed as a specific proxy acting on behalf of and for the entity, or the succession manager's decisions as a person in managerial, organisational and supervisory functions over the undertaking.

In addition, the question of the name ‘successful manager’ refers directly to a person who has managerial functions and therefore directs, supervises, runs the company on his own behalf. Meanwhile, he is a special proxy, and this is his function widely known in economic relations.

Summary

It appears that the introduction of the new law is justified and deliberate, the separateness of the provisions on the succession board and, at the same time, their clear and transparent content and form makes it not a disrupter of the legal order, but an important possibility to preserve the entire business built throughout life by a single-person business.

However, it is not possible to ignore, at least to some extent, the position of some commentators to the draft new law that the full objectives of the new law would be achieved only if, with the registration of a natural person in CEIDG, it had an obligation and not only an opportunity) to indicate the manager of the succession to its company immediately in case of death.

It may turn out that the mere right of entrepreneurs to appoint a succession manager will not result in them benefiting from this solution, and consequently the Act will not give the expected effects for the future in the form of continuity and the whole business after the death of the entrepreneur. At present, the effects of the new law cannot be predicted and its effects can only be assessed in a few years

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