Partnerships

 
 

The distinction between what Polish law refers to literally as “personal companies”-in other words, certain types of partnerships (other than ordinary partnerships operating under the Civil Code)-and other commercial companies is based on the joint action of the owners of these entities, i.e. the partners. Unlike capital companies, which may have a single shareholder, it is not possible to form a partnership which has only one partner.

A partnership is also characterised by the personal liability of the partners (or least some of them) for the debts of the company, and the partners’ direct handling of the affairs of the partnership, which varies in scope depending on the specific type of partnership and may be governed to a certain extent by the partnership agreement. These partnerships do not have legal personality, but it is clear that they are legal entities in the sense that they have the capacity to acquire certain rights in their own name, including real estate and other property rights, and to incur obligations, as well as the capacity to sue and be sued. These partnerships operate under the partnership name. The partners (in this respect much like the shareholders of a capital company) undertake to pursue a common purpose by making their contributions to the partnership and, as provided by the partnership agreement, by cooperating in other ways.

One common feature of all partnerships is the necessity to include the name of at least one of the partners in the name of the partnership.

Transfer of rights and obligations

A partner may not join a partnership by buying shares or leave the partnership by selling shares, because shares do not exist in a partnership (with the exception of shares of stock in a joint-stock limited partnership). A change in the membership of a partnership essentially consists of transferring the totality of the rights and obligations of a partner. All rights and obligations of a partner in a partnership may be transferred to another person only where the partnership agreement so provide. Unless the agreement of partnership provides otherwise, all rights and obligations of a partner in a partnership may be transferred to another person only after the written consent of all of the remaining partners has been obtained. In case of a professional partnership Commercial Companies Code provides for a requirement that a new partner hold certain professional qualifications.

In the case of assumption of an existing partner’s rights and obligations by a new partner, the new partner is jointly and severally liable with the former partner for the partner’s obligations related to the business of the partnership as well as the obligations of the partnership itself arising prior to the new partner’s joining the partnership.

Purpose and features of specific types of personal companies

1. Registered partnership (s.j.)

A registered partnership is the basic form of the partnership, and the regulations governing the functioning of a registered partnership apply to other types of personal companies as well, if not otherwise provided by specific regulations applicable to the other types.

The partners, who may be either natural, legal persons, or entities with no legal personalities but with the legal capacity granted under provisions of law, enter into a written partnership agreement, which must specify the name and registered office of the partnership, the contribution of each partner and its value, the scope of the partnership’s business, and the duration (if limited).

The partners may make contributions to the partnership in cash or kind, including ownership or usufruct of property. A partner may also contribute his or her labour. No minimum value of contributions is established by law, but the amounts are determined by the partnership agreement. As a rule, even partners who have made the minimum contribution have rights and obligations equal to the other partners and share in the partnership’s profits and losses equally. A partner in a registered partnership may not be deprived of the right to profit.

Each of the partners has the right and duty to conduct the affairs of the registered partnership and to represent the partnership without compensation. These actions may not be assigned to third parties to the exclusion of the partners. The partners of a registered partnership are subsidiary liable for the debts of the partnership. This means that if execution against the assets of the partnership is ineffective, the creditor may execute against the assets of the partner. Each partner participates equally in the profits and losses of the partnership regardless of the value of the partner’s contribution, unless the agreement of the partnership provides otherwise.

If the partnership has been formed for an undefined period, the partnership agreement of a registered partnership may be terminated upon six months’ notice, effective at the end of the financial year. Termination of the partnership agreement leads to the dissolution of the registered partnership, however, the partnership continues among the remaining partners if the partnership agreement so provide or the remaining partners so decide. In such event, a partner leaving the partnership is reimbursed in an amount equivalent to the partner’s capital participation in the partnership.

2. Professional partnership (sp. p.)

A professional partnership may be established only by individuals, for the purpose of practising one of the free professions specified in the Commercial Companies Code, or in a different statute.

Unlike in a registered partnership, the partners of a professional partnership are not liable for the obligations of the partnership connected with practice of the profession by other partners or the employees who are their subordinates. They may provide in the partnership agreement which of the partners shall be liable for the debts of the partnership on the same basis as a partner in a registered partnership.

If not otherwise provided in the partnership agreement, each partner may represent the partnership individually. The partners may also provide in the partnership agreement that the management board of the partnership will conduct the affairs of the partnership and represent the partnership.

As in the case of a registered partnership, leaving a professional partnership requires notice six months prior to the end of the financial year. A partner who has lost the required professional qualifications is required to leave the partnership at the latest at the end of the financial year in which he lost the right to pursue the profession.

In addition to obtaining the consent of all the partners, a new partner must demonstrate that he or she holds the appropriate professional qualifications in order to join the partnership.

In other respects, the regulations concerning registered partnerships apply.

3. Limited partnership (sp. k.)

A limited partnership operates an enterprise in its own name. A limited partnership must include at least one general partner, who bears unlimited liability to the creditors of the partnership, and at least one limited partner, whose liability to the creditors of the partnership is limited to a fixed, agreed amount, sometimes referred to in English as the “commandite sum” or the “commendam sum”. The limited partner’s contribution may be made in a value lower than the commendam sum, unless otherwise provided in the partnership agreement. The limited partner is free of liability to the extent of the value of the contribution contributed to the partnership.

Operating in the form of a limited partnership, in which the partners have a varying range of liability, contributions and authority, allows the general partners to bring new members into the partnership, who as limited partners generally make an investment in the partnership but have limited authority to act for the partnership and also limited liability for the debts of the partnership.

A limited partnership is represented by the general partners. A limited partner basically has no right or duty to conduct the affairs of the partnership, unless otherwise provided in the partnership agreement. The limited partner may represent the partnership under a power of attorney. A limited partner participates in the profits of the partnership in proportion to the actual contribution.

The name of a limited partnership must contain the name of one or more of the general partnership and the suffix “spółka komandytowa” (abbreviation “sp. k.”), identifying the legal form. The partners may be either natural, legal persons, or entities with no legal personalities but with the legal capacity granted under provisions of law. If a general partner is a legal person, its name may be included in the partnership name, together with a designation of its legal form. The partnership name may not contain the names of the limited partners. Inclusion of a partner’s limited name in the name of the partnership means that the persons named will be liable for the partnership’s debts to creditors like general partners, regardless of their actual role under the partnership agreement.

The partnership agreement is concluded in the form of a notarial deed, stating the name and registered office of the partnership, the subject of its business, the duration (if limited), and the contributions made by each of the partners, as well as the commandite sum.

In other respects, a limited partnership is subject to the regulations governing a registered partnership.

4. Joint-stock limited partnership (SKA)

A joint-stock limited partnership is the partnership that has share capital, which enables it to raise capital by selling shares, while the general partners retain control over the partnership. The share capital must be at least PLN 50,000.

A joint-stock limited partnership conducts an enterprise under its own name. In this form of partnership, at least one partner (a general partner) has unlimited liability for the debts of the partnership, and there is at least one partner who is a shareholder. The shareholders are not liable for the debts of the partnership.

The name of a joint-stock limited partnership must contain the name of one or more general partners and the suffix “spółka komandytowo-akcyjna” (abbreviation “S.K.A.”), identifying the legal form. It may not contain the name of a shareholder. Persons whose names are included in the name of the partnership are liable to the creditors like a general partner, regardless of their status in the partnership.

The rules governing a registered partnership apply to the relations of the general partners between one another and to the partnership, the shareholders and third parties.

In other matters, particularly involving share capital, shareholders’ contributions, shares, supervisory board and shareholders’ meeting, the regulations concerning a joint-stock company apply. The statute may provide for establishment of a supervisory board, and it is mandatory if there are more than 25 shareholders.

The general partners have the right and duty to conduct the affairs of a joint-stock limited partnership and represent it externally. The statute may provide that such right is vested in one or more general partners. A shareholder may represent the partnership only on the basis of a power of attorney.

Authority reserved to the shareholders’ meeting is excluded from the authority of the general partners managing the affairs of the partnership, such as:

  • review and approval of the general partners’ report on the business of the partnership and the annual financial report
  • granting a release to the general partners for their management of the affairs of the partnership in the prior year
  • granting a release to the members of the supervisory board.

Some resolutions of the shareholders’ meeting (e.g. concerning distribution of profit attributable to the shareholders, or sale of real estate belonging to the partnership) require the consent of all of the general partners.

General partners and shareholders participate in the profit of the partnership in proportion to their contributions, unless otherwise provided by the statute.

The statute is signed in the form of a notarial deed by the founders, who must include, at a minimum, all of the general partners.

The statute must state:

  • the name and registered office of the partnership
  • the subject of the business
  • the duration (if limited)
  • the contributions made by each general partner
  • the amount of the share capital
  • the number, type and par value of the shares
  • the names and addresses of the general partners
  • the organisation of the shareholders’ meeting, and the supervisory board if provided for in the statute.

Only a general partner has a right to terminate the partnership agreement, and then only if permitted by the statute.

In other respects, the regulations concerning a registered partnership apply.

5.Limited partnership or joint-stock limited partnership with a capital company as a partner

The structure of a limited partnership or joint-stock limited partnership in which the general partner is a limited-liability company or joint-stock company is most often formed through conversion of a capital company into a personal company, with a capital company as the general partner and an individual as the limited partner, where the individual is also a shareholder of the capital company, or by a capital company joining a personal company as a general partner. The purpose of this structure is to achieve limited liability for the partners while maintaining the tax transparency of a partnership.

In a partnership structured in this way, the management board of the company that is the general partner acts for the partnership. The members of the management board of the general partner and the manner in which they represent the general partner are entered in the National Court Register for the partnership, but for certainty concerning the representation of such a partnership, it is recommended to review the National Court Register for both the partnership and the company that is the general partner.