When is the sale of a business allowed?

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The concept of an enterprise was defined by the legislator in Art. 551 of the Act of 23 April 1964 Civil Code (Journal of Laws of 2014, item 121, as amended), according to which the enterprise is an organized group of intangible and tangible assets intended for business activity. What if the enterprise is sold? Read on and find out more!

What is an enterprise?

It should be emphasized that according to Art. 551 of the Civil Code, an enterprise is not only a collection of intangible and tangible assets. It is a set of such components, but most importantly, it is organized and designed to run a business. Therefore, what is the set of tangible and intangible components of an enterprise different than the enterprise itself (judgment of the Supreme Court of 20 July 2017, IV CSK 563/16).

It includes in particular:

  1. designation individualising the enterprise or its separate parts (name of the enterprise);

  2. ownership of real estate or movable property, including equipment, materials, goods and products as well as other rights in rem to real estate or movable property;

  3. rights arising from rental and lease agreements for real estate or movable property and rights to use real estate or movable property arising from other legal relationships;

  4. receivables, securities rights and cash;

  5. concessions, licenses and permits;

  6. patents and other industrial property rights;

  7. proprietary copyrights and property related rights;

  8. business secrets;

  9. books and documents related to running a business.

An enterprise may consist of more than one enterprise in the substantive sense. A farm can also be such an element. In other words, a farm may constitute one of the company's enterprises and, consequently, may be traded as a whole (decision of the Supreme Court of 9 December 2010, IV CSK 210/10).

Sale of the enterprise

Pursuant to Art. 552 of the Civil Code, a legal action aimed at an enterprise covers everything that is part of the enterprise, unless otherwise provided for in the content of the legal action or specific provisions. This means that the parties to the contract are free to decide which elements making up the enterprise will be covered by the contract. Some of them may be excluded from sale and remain the property of the seller. The Supreme Court pointed out that this freedom in excluding individual components cannot go so far that the scope of the inclusions would destroy the essence of the enterprise. Therefore, the sale of the enterprise should include at least those components that determine the functions performed by the enterprise (judgment of the Supreme Court of 25 November 2010, I CSK 703/09). Certainly, the contract should cover all those items without which the company cannot function. It should be clarified that in the event of a sale of an enterprise, the sale has an effect on all its intangible and tangible assets, even those not explicitly mentioned in the contract, while each exclusion should be clearly indicated in the contract. Of course, the sale of the business must be made entirely to the same buyers. If the individual items that together make up the enterprise are sold to different buyers, it cannot be considered that the enterprise has been sold.

It should be mentioned that when concluding a sale agreement, the companies retain the validity of the restrictions or exclusions of the admissibility of transferring individual components of this enterprise resulting from the provisions of the Act, contractual reservations or the nature of the obligation (Supreme Court resolution of June 25, 2008, III CZP 45/08).

It is also permissible to sell the enterprise on the basis of several contracts concluded with the same buyer. In particular, such a situation can be encountered when one contract concerns the assets and the other the liabilities of the enterprise. In order to assume that as a result of concluding several agreements, the enterprise has been sold, the following conditions must be met:

  • when concluding individual contracts, the parties aimed at transferring the entire ownership of the enterprise,

  • individual contracts were concluded by the same entities,

  • as a result of concluding several agreements, the entire enterprise was sold.

The sale of the enterprise is permissible under several contracts, also confirmed by the Supreme Administrative Court in the judgment of May 15, 2008, SA / Go 293/08, in which it indicated that "both under public and private law, a situation in which the acquisition of an enterprise also takes place as a result of concluding several contracts ”. The intention of the parties determines whether the enterprise is sold in whole or only its individual components are sold.

Contract form

Pursuant to Art. 751 § 1 of the Civil Code, the sale of the enterprise or its lease or establishment of use on it should be made in writing with signatures certified by a notary. However, this form may not be sufficient if the enterprise includes real estate. Pursuant to § 4 of the aforementioned provision, the provisions providing for the form of legal transactions relating to real estate should also be taken into account. Article 158 provides for the sale of real estate in the form of a notarial deed. Thus, when real estate is a component of the business being sold, the contract of sale of the enterprise should take the form of a notarial deed. It is also permissible to conclude two sale contracts: one for real estate concluded in the form of a notarial deed and the other for the rest of the enterprise, concluded in writing with notarized confirmation of signatures. Despite the fact that the legal doctrine presented a clear conflict on this subject, it seems right to believe that each of the individual agreements aimed at the sale of the enterprise in its entirety should be in writing with notarized signatures, unless one concerns real estate.

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Obligation to enter in the register

Pursuant to Art. 751 § 2 of the Civil Code, the sale of an enterprise belonging to a person entered in the register should be entered in the register. Despite the introduction of this obligation, neither in the register of entrepreneurs kept as part of the National Court Register, nor in the Register of Economic Activity, there is a possibility to enter any mention of the fact of sale of the enterprise by an entity entered in one of these registers. Therefore, the rule imposing such an obligation has become dead.However, the lack of an entry in the register does not affect the effectiveness of the activity within which the enterprise was sold, as it is of a declarative nature.

Pursuant to Art. 554 of the Civil Code, the buyer of an enterprise or farm is jointly and severally liable with the vendor for his obligations related to running the enterprise or farm. This means that a person who buys an enterprise must take into account liability for its obligations arising before the date of acquisition. Even if in the contract the seller of the enterprise assumed sole responsibility for these obligations, the creditors will still have the right to demand payment from the buyer. The sale of the enterprise does not release the current owner from debt. The buyer's liability is limited to the value of the acquired enterprise or farm as of the time of acquisition, and according to the prices at the time the creditor is satisfied. It should be emphasized that the buyer of the enterprise will not be liable for obligations arising in connection with its operation before the date of its acquisition, if, despite exercising due diligence at the time of acquisition, he did not know about these obligations.

On similar principles, the acquirer is liable for the seller's tax obligations related to running the business. Pursuant to Art. 112 of the Act of August 29, 1997, the Tax Ordinance (Journal of Laws No. 137, item 926, as amended), the buyer of the enterprise or its organized part is liable jointly and severally with the taxpayer for all tax arrears arising from the date of purchase related to the conducted activity economic activity, unless, with due diligence, he could not have known about these arrears. The buyer's liability is limited to the value of the acquired enterprise or its organized part. The buyer is not responsible for arrears not shown in the certificate of the amount of tax arrears of the seller, therefore it is in the buyer's interest to obtain such a certificate before signing the contract. On the other hand, the buyer will be responsible for the charges incurred after the certificate has been issued, if 30 days have elapsed from the date of its issue to the date of purchase.

Liability of the new employer after taking over the workplace

Pursuant to Art. 231 § 1 of the Act of June 26, 1974, the Labor Code (Journal of Laws No. 24, item 141, as amended), in the event of transfer of the workplace or part of it to another employer, it becomes a party to the existing employment relationships by operation of law . Pursuant to § 2 of the aforementioned provision, the existing and new employers are jointly and severally liable for the obligations arising from the employment relationship, arising before the transfer of part of the workplace to another employer. The Supreme Court in the judgment of 20 January 2014, II PK 118/13, emphasized that "the provision of Art. 231 § 2 of the Labor Code is a consequence of the transfer of the workplace to a new employer. It may and creates joint and several liability of the existing and new employer only in those cases in which the new employer becomes the employer of the “transferring” employee. However, there is no solidarity of responsibility with regard to obligations that do not relate to workers passing through. '