Foreign investors who wish to open a company in Poland have the option to buy an existing company instead of setting up a new legal entity. The main reasons for choosing this option have to do with the shorter amount of time in which an investor can actually see the profits of a new investment. While a newly formed company has certain advantages, like bringing a new name and services to the market, there are some aspects that may convince investors to buy a ready-made company.
Our lawyers in Warsaw offer legal representation, assistance, and advice to businesses and individual clients. We are a team of professionals with relevant experience in corporate and business law, contract law, intellectual property and tax law. For individual clients, we offer assistance in matters concerning family law, real estate matters, as well as wills and issues concerning employment.
Advantages of purchasing an existing company in Poland
The most common types of business activities in Poland are the limited liability company and the general partnership.
Some of the most important advantages include the following:
Time: Foreign investors who choose to buy a ready-made company in Poland(Shelf Company) can save time and money needed to set-up a new company.
Workforce: another advantage of purchasing an already existing company in Poland is absorbing the workforce. The investor can choose to keep all or part of the employees working for the company, therefore there will be no need to invest in personnel recruitment and training.
Immediate commencement: the fact that the company already has employees, as well as the needed licenses for engaging in a certain activity will ensure that the new owner can start trading as soon as the sale/purchase process is complete.
Licenses: not only will a company that has been active in a certain filed have the needed licenses, it will also be registered for VAT purposes if applicable for the types of goods and services it provides and if the applicable registration threshold is met.
In case your business will operate in the trading sector, then you should know that you must obtain an EORI numberand our attorneys are ready to help you in this matter. The company that is being sold may or may not have this number. In any case, our team can assist you.
Issues to consider when purchasing an existing company in Poland
For the purpose of company purchase, investors should differentiate between buying a shelf company in Poland and buying an existing business with trading activity. The shelf company is a legal entity that has been incorporated with the sole purpose of being sold once it has reached a certain age. Typically, the longer is has been incorporated for, the valuable it is. Unlike another existing business that is sold by its owners, the shelf company was incorporated but never used for trading. It has a name, constitutive documents and it is registered with the Trade Register, however, it was not used for trading. On the other hand, a business that was used for trading will be sold with its trading history, as well as its employees, if applicable and if agreed upon between the buyer and the seller.
The reasons why a former business owner may choose to sell a Polish company can be diverse, however, in most cases, the owner will wish to retire and use the capital gained after the business sale. Nonetheless, investors who are interested in purchasing a Polish company should always perform a due diligence – a formal verification of the company that is sold, in order to make sure that there are no outstanding debts and that the former owner is indeed selling a company that is not subject to any legal proceedings.
Given the two options, which one is more advisable? The answer depends on the investor’s intentions with the newly purchased company. A shelf company will have a clean trading history, and this may be important in some business fields. On the other hand, when buying an existing business that is sold by its former owner simply because he intends to retire (and not because the business is in financial difficulty or involved in certain legal proceedings), the investor has the advantage of being able to take over an already functioning company. The ownership transfer can be a seamless one and the company does not need to pause its commercial or manufacturing activities while this takes place – thus creating another advantage of being able to maintain a steady production or services provision and ensure that the profit for the financial year in course is not affected.
Our lawyers in Poland can give you more details about the advantages of the shelf company, as well as those of purchasing an already established and functioning commercial company in Poland.
Large companies interested in corporate mergers and acquisitions in the country can contact our team for personalized legal services needed in these more complex cases.
The legal process for buying a company in Poland
Although the amount of time spent for the legal procedures is reduced when purchasing an existing Polish company, foreign investors should know that there are still some important steps to follow in the buying process.
Some of the issues that are checked during the due diligence process with the help of our lawyers are:
Organization and management: the company’s shareholding structure, the board members, other information as the corporate structure involving subsidiaries, if applicable;
Legal: signed agreements, material contracts, any litigation in which the company was involved or if perhaps involved;
Real estate: any properties owned by the company, facilities or warehouses relevant to the business operations, if applicable;
Commercial: information about the company suppliers, other business partners, clients, as well as the marketing plans.
Please keep in mind that this due diligence checklist is only a summary. Other issues will be considered according to business type.
The changes in the company structure will have to be registered with the Polish Trade Registry. Formal registrations of the new management board will also need to be made and the Articles of Association will need to be updated. The new shareholder can also bring additional changes, such as a new company name or new objects of activity. In case you will need to register your company for VAT, our team will be ready to assist you in this procedure too.
After investors purchase a company they will wish to hire employees if the company was a shelf one and did not employ any. We can give them more details about payroll in Poland.
Our Polish lawyers can offer more information about purchasing a company in Poland and assist you throughout the legal process.
Company management in Poland
Once the ownership transfer is complete, the new company owners and directors will be the ones to ensure that the business is compliant with the taxation and reporting rules in force. Some of the main taxes to take into account for those who intent to buy a shelf company or purchase an existing business are the following:
- 19% standard corporate income tax rate;
- 9% reduced corporate income tax;
- 19% withholding tax on dividend payments to a resident individual (the rate for dividend payments made to a resident company is 0%);
- 23% standard value added tax, along with two reduced rates of 5% and 8% and a 0% rate for some types of goods and services.
The team offers quick responses and they always treat each customer according to his/her needs and objectives. The solutions they offer are tailored so that they observe the particularities of the company as well as the business field in which it operates.