A new type of division under the Polish Companies Code: Division by Separation
The Council of Ministers is currently working on a bill amending the Commercial Companies Code and certain other acts of law (“Bill“), which implements Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 to the Polish legal system.
Implementation of division by separation to the Polish law
The bill introduces a new way of division – division by separation – unknown in the Polish legal system to date. This solution will be implemented with respect to cross-border transactions as well as domestic (internal) transactions.
Division by separation will consist of transfer of part of assets of the company being divided to an existing or newly formed company or companies in return for shares of the recipient company/companies or newly formed companies, to be taken up by the company being divided.
The difference between division by separation and a spin-off consists of the fact that shares in the recipient company / recipient companies / newly formed companies are distributed to the company being divided in the former case, while in the latter case – the shares go to the shareholders of the company being divided.
As a result of division by separation, a subsidiary is established whose shares are taken up by the company being divided. This is an alternative to the most frequently used structure where a new company is formed.
Division by separation consists of transfer of part of assets of the company being divided to another company – the recipient company, while the company being divided receives shares in return.
Notably, the situation of an ordinary in-kind contribution should be seen as different from division by separation. In the latter case, what matters is the transfer of assets or part of assets by way of universal succession. It is definitely a more practical and simpler form of making an in-kind contribution.
A recipient company may be either an existing company or a newly formed one.
According to the Bill, the “separation date” is defined as:
- the date of registration of the recipient company (where a new company is formed),
- the date of registering the increased share capital of the recipient company or issuance of new shares by the recipient company (if part of assets of the company being divided is transferred to an existing company).
Entry into force
The planned amendment to the Commercial Companies Code is to take effect on 31 January 2023.
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