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Admissibility of buying shares in Polish limited liability companies from the private sector by entities from the People's Republic of China.

In order to answer the question whether the sale of shares in a Polish limited liability company to an entity from the People's Republic of China will be permissible, it is necessary to examine several factors. First one should inspect the provisions of the Commercial Companies Code, secondly the terms of articles of association or the specific limited liability company, then special provisions that may contain separate regulations regarding acquisition of shares by foreign entities, as well as international agreements signed between Poland and the People's Republic of China. 

The regulations governing the conduct of business activity in the form of a limited liability company are contained in the Commercial Companies Code. The Commercial Companies Code does not provide statutory restrictions on the sale of shares in Polish limited liability companies from the private sector to natural or legal persons from countries outside the European Union and the EEA area.

Another regulation concerning the functioning of a limited liability company are the articles of association, which may provide restrictions connected with sell of shares to entities outside EU and the EEA. The absence of prohibitions and restrictions on the disposal of shares in the agreement generally means that trading in shares is permitted.

Afterwards, there is necessity to determine whether the limited liability company is the owner or perpetual usufructuary of real estate located in Poland.

If the company whose shares are being sold is the owner of the real estate located in Poland or is perpetual usufructuary of real estates located in Poland, the acquisition or subscription of 100% of shares in this company requires the Minister’s of the internal affairs permit. 

Clarifying the above, it should be added that the permit to perform legal acts in relation to a commercial company with its registered office in Poland being the owner or perpetual usufructuary of real estates located in Poland will be necessary in the following cases:

• when company becomes a controlled company as a result of the acquisition or subscription of shares or stock or any other legal transaction regarding shares. This means that foreigners will take possession of such a number of shares or stocks that will enable them to obtain more than 50% of votes at the general meeting of shareholders of a company or to obtain a dominant position in relation to such a company. [Art. 3e § 1 of the Act on the Acquisition of Real Estate by Foreigners];

• when a company is already a controlled company, thus it is already a foreigner within the meaning of the abovementioned Act, but its shares (or stocks) are taken up or acquired by a foreigner who has not previously been a partner in that company. The necessity to obtain a permit in the latter case concerns only the legal transaction consisting in the acquisition (or subscription) of shares or stocks. Other legal actions concerning these shares may take place without permission. [Art. 3e § 2 Act on the Acquisition of Real Estate by Foreigners].

 It should also be noted that conducting business activity in Poland by foreign persons is regulated by the Act on the rules of participation of foreign entrepreneurs in business transactions. A foreign person within the meaning of the Act is:

-  a natural person who does not have Polish citizenship,

-  a legal person with its registered office abroad,

- an organizational unit, which is not a legal entity but has legal capacity, with headquarters abroad.

With regard to conducting business activity in the form of a limited partnership, limited joint-stock partnership, limited liability company and joint stock company, as well as to join such companies and to subscribe for or acquire their shares or stocks, foreign persons from outside the EU have on principle the right to conduct such activity in Poland without a separate consent, unless international agreements provide otherwise. It should be emphasized that the right to conduct business activity without obtaining a separate consent applies only to the above mentioned legal forms. In the case of citizens and entities registered in the People's Republic of China, such agreements are the Agreement between the Government of the People's Republic of Poland and the Government of the People's Republic of China on mutual support and protection of investments and the Agreement between the Government of the People's Republic of Poland and the Government of the People's Republic of China for the avoidance of double taxation and the prevention of tax evasion with regard to income taxes. 

The analysis of the above-mentioned agreements proves that there is no requirement to obtain consent for a Chinese entity to acquire shares in a Polish private sector limited liability company.