Verifying Title to Shares in a Polish Sp. z o.o.

In Polish M&A transactions, verifying title to the shares being acquired is a fundamental step. Theoretically, the National Court Register (Krajowy Rejestr Sądowy - the “KRS”) should provide basic information about the company and its shareholders. However, the KRS alone is not sufficient to establish that the seller is the valid owner of the shares.
 
Under Polish law, ownership of the shares belongs to the person who has a valid legal title to them - in the case of a transfer, the person who validly acquired them from their owner. Therefore, even if a share purchase agreement has been duly executed, with the parties’ signatures certified by a notary, the buyer will not acquire title to the shares if the seller was not their owner. The same applies even if the purchase price has been paid and the buyer has been entered in the KRS as the new shareholder.
 
What, then, is the appropriate approach for a buyer?
 
Unless the shares are being acquired directly from the company’s original founder - or, more precisely, from a person whose title derives directly from the original subscription for the shares - the buyer should critically examine the entire chain of title and verify every previous transfer of the shares.
 
The best approach is to question everything relating to title to the shares and to think independently with your advisors. If there are any doubts, they should be clarified. You should not simply rely on what you have been told.
 
What are the steps to verify title to shares?
 
The steps to verify title to shares are as follows:

• reviewing the KRS and the company’s articles of association;
• tracing the entire historical chain of share transfers;
• reviewing previous share-transfer agreements;
• checking corporate approvals, consent requirements and pre-emption rights; and
• identifying other contractual restrictions.

 
A reliable title review requires more than confirming the current KRS entry - it requires establishing that every link in the chain of title is valid and effective.