Bringing the ownership title to the real estate to the general partnership

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Bringing the ownership of real estate to a general partnership is admissible as an in-kind contribution, because the contribution of a partner in a general partnership may include not only money, but also other types of goods. Therefore, it might seem that making an in-kind contribution of real estate ownership right at the stage of establishing a company should not be troublesome. However, in this context, the partners of a general partnership encounter difficulties precisely in the matter of the general partnership agreement. Hence, the doubts arising on this ground were resolved by the Supreme Court.

Bringing the ownership title to real estate to a general partnership - the problem of the form of a general partnership agreement

The Code of Commercial Companies in Art. 25 indicates that the articles of association of a general partnership should specify, inter alia, contributions by shareholders and their value. Moreover, the provisions of the Code require that the general partnership agreement be concluded in writing under pain of nullity.

On the other hand, the Civil Code reserves the form of a notarial deed for the transfer of real estate. Therefore, if the subject of the contribution is the transfer of ownership of the real estate to a general partnership, the articles of association should be in the form of a notarial deed, which is required for the real estate transfer agreement under pain of nullity.

Interpreting the provisions in the above manner, some partners of general partnerships conclude the articles of association in the form of a notarial deed.

There is also a different practice in which the supporters reject the above interpretation of the provisions governing the requirements for the form of a general partnership agreement. They point out that it is not possible to bring ownership of real estate to a general partnership in the articles of association, because the general partnership is not established upon the conclusion of the contract, but upon entry in the register of entrepreneurs of the National Court Register, which is constitutive. This means that the company does not exist before the entry. Since the general partnership is a partnership, there is no form of a company in organization appropriate for joint-stock companies, which is an entity that can acquire rights and incur liabilities from the moment of concluding the articles of association to the entry in the National Court Register.

According to this interpretation of the regulations, it is not effective to acquire real estate ownership by an entity that does not yet exist at the time the contract is concluded. In this case, we would be dealing with the acquisition of ownership of real estate subject to a deadline or on the condition that a general partnership was registered in the National Court Register, which is not permitted by law.

Hence, opponents of concluding a general partnership agreement in the form of a notarial deed follow the following practice:

  • They specify in the general partnership agreement the partner's obligation to transfer the ownership of the real estate as a contribution.
  • The ownership title to the real estate is brought to the general partnership after the partnership is registered in the National Court Register.

The consequence of this practice is the preparation of a notarial deed twice - first a company agreement containing an obligation to transfer ownership of the real estate, and then an agreement transferring ownership of the real estate to the company after its establishment.

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Bringing the ownership title to real estate to a general partnership - case law of the Supreme Court

The case law of the Supreme Court aims to resolve the doubts arising from the transfer of ownership of real estate to a general partnership, without, however, unequivocally favoring any of the above-mentioned practices.

The Supreme Court issued two decisions in this regard. The first is from January 14, 2015, with the reference number II CSK 85/4, and the second from November 25, 2015, with the reference number: II CSK 723/14. In both decisions, the Supreme Court took the same position.

Important!

In the opinion of the Supreme Court, when the subject of the contribution is the transfer of the ownership title to the real estate to a general partnership, it is possible to conclude the partnership agreement in writing. Then, the contribution in the form of property ownership is made by concluding a notarial deed after the company is registered in the National Court Register.

Moreover, in the justification of the decisions, the Supreme Court considered the views indicating the necessity to conclude a general partnership agreement in the form of a notarial deed or to conclude an additional agreement in the form of a notarial deed as "raising reasonable doubts" after its registration in the National Court Register.

Thus, the case law of the Supreme Court put an end to the current practices, determining the proper way of interpreting the provisions and conduct of partners of general partnerships.