The amendment to the Commercial Code has introduced several changes that affect the reorganisation of related companies.
Expert opinions and their deposition in the Collection of Deeds no longer required in relation to limited liability companies
The good news is that from 1 January 2016, Section 59a of the Commercial Code no longer applies to limited liability companies.
Under Section 59a of the Commercial Code, a company that acquires assets pursuant to an agreement concluded with its founder or a shareholder (a person related to the founder or the shareholder, or a person controlling, or controlled by, the founder or the shareholder) for consideration of at least 10% of the registered capital is required to have the value of the assets determined by an expert opinion. The agreement may not take effect before it is deposited in the Collection of Deeds, along with the expert opinion. If the effect of the agreement requires an entry in a special register (for example, the land register), the agreement and the expert opinion must be deposited in the Collection of Deeds before the entry in the special register.
From 1 January 2016, when purchasing assets from related parties a limited liability company is not obliged to procure an expert valuation, nor will it be required to file an expert opinion together with the purchase contract in the Collection of Deeds with the Commercial Register. This change reduces costs associated with asset transfers. Entrepreneurs will also appreciate that some commercially sensitive information is no longer publicly available.
The obligation continues to apply to joint-stock companies.
Prohibition of refunding contributions
However, relaxed formal requirements for the acquisition of assets by limited liability companies do not pave the way for “tunnelling” companies. In fact, the amendment to the Commercial Code has established – or more precisely, clarifies and emphasises – the rule prohibiting the refund of contributions to shareholders. This prohibition is based on the assumption that shareholders contribute the capital to the company to be used in support of its business activities. Shareholders benefit from their limited liability for the company’s obligations, and dividends distributed by the company. The company is first and foremost obliged to repay its debts to creditors. This does not mean that a shareholder cannot find himself in the position of being one of the company’s creditors, but the shareholder cannot be in a more advantageous position than other creditors.
This is why the Commercial Code has established that any performance by the company to a shareholder, or for the shareholder’s benefit, for which the company does not receive appropriate consideration, regardless of the form or validity of the arrangement, shall be deemed as a return of contribution to the shareholder, which is prohibited. This applies equally to guarantees, accession to the liabilities, liens or other collateral provided to secure commitments by a shareholder, or in the shareholder’s favour.
The law also defines the characteristics of reasonable consideration. It is, therefore, very likely, despite limited liability companies not having an obligation to obtain an expert opinion (as mentioned above), that company directors will, in order to substantiate the reasonableness of payments made by the company, to arrange for various forms of independent, expert opinions.
Mergers, consolidations and de-mergers
And finally, a warning: From 1 January 2016, in the case of mergers or demergers of a company whose equity-to-liabilities ratio is less than 4:100 (6:100 from 2017, and 8:100 from 2018), it is necessary to draw up an independent expert report. In the report, the independent expert will give an opinion on the reasonableness of the share exchange ratio, and, if applicable, additional payments to be provided to shareholders.