Death of an entrepreneur and securing business activity
Conducting a sole proprietorship may be associated with a high risk, which primarily applies to the death of the entrepreneur, and with it, various institutions that are a necessary component for the proper functioning of the business expire. Therefore, it is necessary to arrange the affairs of the enterprise in advance in such a way that the succession could take place without prejudice to the company and its heirs, as well as the spouse of the testator. To ensure a positive turnover, there are several institutions that currently allow the interests of the heirs to be protected. There is also a draft of changes relating to succession, which are intended to facilitate these regulations. The entry into force of these changes is only a matter of time, so it is worth referring to them and preparing as early as possible.
Securing the continuity of business processes includes preventive actions by preventing the loss of property and plans to restore it as soon as possible. Prevention includes both legal and business activities, i.e. succession plan, securing the company's financial liquidity, and securing the IT system. Strategic decisions regarding the legal form and business model are of fundamental importance. The consequence of deleting a company from the register of economic activity as a result of the death of its sole owner will be the liquidation of this activity in the legal sense. Therefore, when creating procedures within the framework of business continuity plans in the market, it is first of all necessary to take into account the risk of running a business in the event of death or permanent incapacity of the sole owner.
Succession in the event of the death of the owner of the company is of key importance for its further, proper functioning, not only due to the expiry of all employment contracts, administrative decisions (concessions, permits, licenses, NIP, REGON), civil law contracts - legal, lease agreements are terminated and the leased object is sold, loans are issued immediately by the bank, powers of attorney expire, tax settlements cannot be continued, there is a problem with access to bank accounts, the possibility of using the company is limited, but moreover, heirs often struggle with problems arising from their mutual relations, which are not always good, and in this case constitute an essential element for making key decisions. A partial, but not complete solution is to include in the contracts appropriate provisions securing the heirs in the event of death. Termination of business activity in connection with the death of an entrepreneur may also mean the need to return EU subsidies.
The death of an entrepreneur and the possibility of ensuring the protection of the company's interests
The basic solution is to prepare a succession plan, thanks to which the fate of the enterprise will be determined in a way that corresponds to the entrepreneur's vision. This can take many forms.
The most frequently used solution, and at the same time the simplest, is the gradual introduction of a potential heir to the company's operations, e.g. by expanding his competences at the expense of ownership rights. It is also possible to enrich this procedure with a written contract, which is referred to as the "family constitution", concluded between the testator, successor and the spouse of the owner (it should be remembered that the effects of such an agreement will not apply to third parties). A good solution may also be the gradual isolation of the owner from the affairs of the enterprise by transferring the matters to the successor and establishing an additional separate activity. This allows for a gradual, but very effective implementation of the heir to the company's affairs. However, this means the necessity to enter into the CEIDG and to assign a new NIP and REGON number.
Entrepreneur's death - ordinary bequest and vindication bequest in the will
It is possible to draw up a will and transfer the enterprise to a specific person. However, this solution requires a declaration of inheritance acquisition, and all potential heirs should be participants in the proceedings. A safer form is to make a debt collection entry in a will. It is a provision under which the ownership of the registered enterprise passes to the designated heir upon the death of the entrepreneur. However, the time it takes to complete all the formalities can cripple your business. In addition, there is one more problem, often a concession, license, permit are related to a person running a business. These rights do not pass to the heirs who must reapply for administrative decisions. Thus, testamentary dispositions do not secure the enterprise in the event of death and do not ensure a smooth transition to a successor.
Sale or donation of the enterprise
A good solution is to hand over the company to its successor while it is still alive, but this solution works mainly when no administrative decisions are required to run the business. In the event that the activity requires appropriate permits or is transferred to several successors, other security solutions should be used.
A donation, a will or a debt collection record do not solve the problem of a reserved share, you should secure funds to pay off any claims (a reserved share is half of the amount attributable to statutory inheritance).
Transformation of a sole proprietorship into a commercial company
In such a situation, the company is run by the current owner and his successors within the company, and after the death of the owner, the company will continue to function smoothly, run by the remaining partners. It may be stipulated in the partnership agreement that the heirs of the deceased partner do not enter the partnership, but will receive the equivalent of their share from other partners. It can also be established that future heirs become partners.
To sum up, the safest solution is to secure the company in the event of the owner's death, transforming it into a commercial company, usually a limited liability company. or by contributing the enterprise to a previously established capital company in kind.
This year, new regulations are introduced. The succession manager will guide the company through the period of ownership transformation so that it can survive and keep contracts.
Institution of succession management
Succession management is the temporary management of a company in decline. It should be entrusted to one person, which makes succession management similar to business activities conducted by a natural person. The succession administrator may only be a natural person who has full legal capacity, regardless of whether he is related or not to the testator and regardless of whether he is professionally involved in property management.
He will perform the rights and obligations of the deceased entrepreneur in matters relating to the running of an enterprise in succession. The succession management board includes authorization to perform judicial and extrajudicial actions related to running an inherited enterprise, but also the obligation to, inter alia, in the field of tax law and social security. The succession manager will act on his own behalf, but for the legal successors of the entrepreneur or the entrepreneur's spouse. As part of his function, he will not acquire rights or incur obligations in relation to his personal property, nor will he be personally liable for obligations incurred on behalf of the legal successors and the entrepreneur's spouse in matters arising from running an inherited business. This responsibility will be borne by the "direct beneficiaries" of the actions of the successive administrator - the owners of the company's assets in the estate, i.e. the legal successors and / or the spouse of the entrepreneur. The succession manager will be able to sue and be sued in cases arising from the succession board. He will be entitled to remuneration for his function (unless he decides to act without remuneration), here the provisions on the mandate will apply, i.e. Art. 735 of the Civil Code.
The succession board will not be able to be transferred. The succession manager will, however, be able to appoint a proxy. The Act does not introduce any restrictions as to the scope of authorization of the attorney or the number of attorneys. Upon the establishment of a succession management board, the inherited enterprise will become a VAT payer who continues its activity after the deceased entrepreneur. If this management board is established upon the death of the entrepreneur, the deceased taxpayer will not be deregistered. After the death of the entrepreneur, the succession administrator will be obliged to submit, within 7 days, an update of the registration application of the deceased taxpayer and demonstrate the change of the name of the company.
If the succession board is established after the death of the entrepreneur, the possibility of the legal successor or the entrepreneur's spouse reporting the readiness to act as the administrator of the actual enterprise in the estate will be introduced. Notifications to the tax office should be made within 14 days of the entrepreneur's death.
In the event that the actual administrator's notification is not made, the draft provides for the concept of re-registration with a retroactive date from the entrepreneur's death - provided that the successive administrator appointed later will immediately submit a declaration for the periods before his appointment (obligation to update within 7 days from the date of establishing board).
In legal transactions, in matters arising from running an enterprise in inheritance, the successor administrator should use the current name of the enterprise with an additional designation "in inheritance".
The succession administrator will use the name and surname of the deceased entrepreneur without the separate consent of the heirs. The waiver of the obligation to obtain consent to use the name of the deceased entrepreneur in the company is primarily aimed at ensuring the immediate continuation of the company's operations.
The consequence of the principle that the succession administrator acts on his own behalf, but on behalf of the entrepreneur's legal successors, is to authorize him to participate in administrative and court-administrative proceedings - matters related to the company's operations, both those initiated after the death of the entrepreneur, and to some extent in those pending on the day on which the entrepreneur died.
The continuation of contracts concluded by the entrepreneur in the scope of the activity of his enterprise will be possible in cases where the succession management board is established upon the entrepreneur's death. Unless the parties to the contract agree otherwise, the contractual relationship will continue after the death of the entrepreneur without changing the content of the rights and obligations of the parties (they will be transferred by operation of law to the original legal successors of the entrepreneur, and will be performed by the successor administrator). If the succession administration has not been established at the time of his death - the existing contracts may be confirmed by the succession administrator. Then, the rights and obligations resulting from these contracts are transferred to the legal successors of the entrepreneur (retroactively - from the date of the entrepreneur's death), and during the succession management period they are performed by the succession administrator.
Duration of the succession board
As a rule, the successor administrator will be able to run the enterprise until the inheritance division, no longer than for a period of two years from the date of the death of the entrepreneur.
For important reasons, the court (before the expiry of the succession management board) will be able - at the request of the person for whom the succession administrator acts - to extend the period of succession management for a specified period of time, up to five years from the date of the entrepreneur's death.
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Dismissal, resignation from performing the function of succession administrator, death, loss of full legal capacity, final and binding decision prohibiting business activity
Until the death of the entrepreneur, the dismissal of the succession administrator will be possible at any time by the entrepreneur himself in writing, otherwise null and void.
After the death of the entrepreneur, the succession administrator may be dismissed by a person who participated in his appointment or was entitled to do so, with the consent of the remaining of these persons, in the form of a notarial deed. The appeal will also be possible by the court when the succession administrator commits a gross breach of his obligations. With the dismissal of one succession administrator by the court, it will be possible to appoint another (upon application). The dismissal of a succession administrator after the death of the entrepreneur should be reported to CEIDG by a notary public to whom the declaration on the dismissal of the administrator is submitted.
It will also be possible to resign from the function of the succession administrator through a written declaration by the entrepreneur or before a notary public. The declaration of the succession administrator requires the following form, which was provided for the appointment of the succession administrator. In the event of resignation after the death of the entrepreneur, all known administrators, legal successors and the entrepreneur's spouse should be notified of this fact by a notary (after the resignation, the succession administrator is obliged to act for another month, unless another one has been appointed earlier). The resignation of the successive administrator should be reported to CEIDG by the entrepreneur, and after his death - by the notary to whom the declaration of the administrator's resignation is submitted.
The same effects as resignation from performing the function of the succession administrator are caused by his death, loss of full legal capacity, as well as a final decision against the succession administrator forbidding him to conduct business activity or acting as a succession administrator - the succession manager will lose the ability to act on behalf of legal deputies and / or the entrepreneur's spouse, another succession administrator should be appointed within one month.
Each change requires an entry in the CEIDG. The obligation to report them rests with the entrepreneur, after his death - with a notary or a court, and the death of the CEIDG successive administrator will be automatically notified by the PESEL system.
A debt collection entry covering the enterprise does not exclude the appointment of a succession administrator. In the event that the entrepreneur has provided for a debt collection clause in his will, the legatee is indicated as a person appointed to continue the business with the use of the enterprise and acquires its property upon the opening of the inheritance.
The draft act grants the person who has accepted the debt collection the right to appoint a succession administrator with the consent of the entrepreneur's spouse, in order to continue the company's activity from the date of opening the inheritance until formal confirmation. The succession administrator will be able to be revoked by the debt collection legatee.
Responsibility for obligations related to running an inherited enterprise and responsibility of the successive manager
As a rule, the succession manager will not be personally liable for existing obligations and liabilities incurred as part of running an inherited enterprise. He is liable on general terms for damage caused to heirs, the legatee in debt collection, the entrepreneur's spouse or third parties as a result of improper performance of duties.
The Act introduces the basis for liability for damages of persons who in bad faith appointed the succession administrator or consented to it, even though they were not entitled to do so. They will be jointly and severally liable with the succession administrator appointed in violation of the provisions of the Act, liability for damage caused by him.
To sum up, in accordance with the new regulations, there will be a temporary possibility of using the tax identification number (NIP), REGON number of the deceased owner's enterprise, administrative decisions (including concessions) not related to the entrepreneur's personal characteristics will be maintained, and the same applies to public aid. Employment contracts will not expire, and employees, in the absence of heirs from the will or the law, will receive the right of first refusal of the enterprise. Until the inheritance division, the enterprise will be a taxpayer. After the changes are introduced, entrepreneurs and their legal successors will be able to continue their activities. Their protection will be strengthened and the contractual obligations will be preserved, which, due to the maintenance of the entrepreneur's activity, will be able to be enforced more effectively. The changes will contribute to the improvement of the stability of sole proprietorships, which, in the light of the current regulations, were often doomed to loss of continuity in economic transactions.