Under Polish law, it is important to know the difference between a sale of business as a going concern, a sale of assets and a sale of shares, before concluding a sale agreement involving your company. In Poland, there is clear distinction between the sale of business as a going concern, the sale of assets and the sale of shares.
What is a sale of a business or an organized part of business under Polish civil law rules?
Under Polish law, the sale of business as a going concern is different from a sale of assets, or a sale of shares. The sale is called “a sale of business as a going concern” because the business largely continues to run in the hands of the purchaser, as it ordinarily did before the sale. The most significant change is that it has a new owner. This means that the company (the seller) has decided to sell the business and will no longer conduct it.
According to Article 551 of the Polish Civil Code, a business is defined as an organized set of intangible and tangible components designed to run a business. These components include in particular: the name of the company, real estate and movables, acquired rights, claims, cash, licenses, permits, patents, business secrets, accounting records, documents and other components. The above definition explicitly states that these components are intended to run an economic activity.
Similar regulations exist in Poland in relation to the organized part of business. Simply put, an organized part of business is a separated part of the enterprise, which holds own set of intangible and tangible components which is intended to run economic activity.
According to Article 552 of the Polish Civil Code, the agreement for the sale of business as a going concern transfers to the purchaser all components of the existing business, unless the parties agreed otherwise. It does not include the obligations connected with running the business in the past, however, the purchaser of a business bears joint and several liability with the seller with respect to the obligations arising out of the economic activity, unless he did not know about these obligations despite due diligence. His liability is limited to the value of the purchased business at the time of acquisition.
How does a sale of assets work?
A sale of assets is mainly about selling some of the assets the company owns and uses to run an economic activity. For example, machinery, technology or intellectual property. A sale of assets is relevant when only some of the assets are being sold but not all of them. These assets could be even the main assets of the business – the assets that the business relies on to continue functioning, or, it could be some assets that the company no longer needs. The main aim of the transaction is to transfer ownership of a particular asset from the company to the purchaser. The purchaser of the assets can either be an individual or a legal person.
How does a sale of shares work?
A sale of shares is mainly about selling the shares in a company by an existing shareholders to the hands of the purchaser. The change of a shareholder has no bearing on the situation in the business of the company because the ownership of all assets still belongs to the company and the party to all agreements is still the company.
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