The death of a shareholder is often a source of serious issues for a limited liability company (spółka z o.o.), leading to uncertainty about how the business will operate in the future. Can such complications be avoided by introducing appropriate provisions in the company’s articles of association in advance?
Changes in the ownership structure or the need to pay out heirs may result in difficulties, including financial strain for the company. That’s why the rules for inheritance of shares should be tailored to the needs and capabilities of both the company and its shareholders.
According to the Polish Commercial Companies Code (k.s.h.), unless the articles of association state otherwise, shares are inherited and the heirs of the deceased shareholder enter the company in their place. However, the articles may include clauses excluding or limiting the heirs' entry into the company. The validity of such clauses depends on setting clear terms for compensating the heirs. The Code does not provide specific guidelines on how to determine or execute such payouts, so shareholders are free to decide on the method of calculating compensation — as long as it leads to a fair valuation, typically assumed to be at least equal to the book value of the shares. The repayment deadline should remain within reasonable limits, but the company’s financial condition and its ability to operate without the deceased shareholder must also be considered. It is often beneficial to arrange installment-based payments spread over time. Although the Code does not require the articles to regulate what happens to shares not inherited by the heirs, it is advisable to include such provisions — for example, share redemption or takeover by the remaining shareholders.
Gazeta Prawna, July 11, 2023 – by Legal Counsel Agata Okorowska
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