Answer ... (a) Commercial/corporate
In general, there are no specific commercial/corporate aspects to consider for targets, unless they conduct activities that are subject to sector-specific requirements and licensing, which must then be considered. Key issues in this regard include verification of:
- the valid existence of the target;
- the validity of the shares; and
- the proper chain of title.
Most of the key commercial information is available from Poland’s National Court Register, which should be supplemented with source documents.
Irrespective of the sector, two additional potential requirements must be considered:
- If the target holds a large area of agricultural land, a permit from the relevant authority may be required or, in case of a share transfer – including the acquisition of newly issued shares – the statutory pre-emption right of the agricultural agency may apply. This pre-emption right also applies to public M&A transactions involving a joint stock company offering shares through a public offer in case of a first listing.
- If the target has certain types of property and the buyer is controlled by an entity from outside the European Economic Area, ministerial consent may be required.
(b) Financial
In general, there are no specific financial-related aspects, unless the target conducts sector-specific regulated activities and/or third-party financing is in place.
(c) Litigation
In general, there are no specific litigation aspects to consider for targets.
In the case of an asset deal, its impact on the position of litigants should be considered.
In addition, if a dispute is transferred to the buyer (through a share or asset deal), the value of the dispute (including all associated costs) should be considered in the purchase price and/or other mechanism and securities – including whether the seller has sufficient sources to cover the costs of the proceedings if the case is lost.
(d) Tax
Tax due diligence is crucial and is usually conducted by a qualified tax adviser.
Tax due diligence should cover key aspects such as:
- determining tax base for income tax purposes;
- identification of tax deductibility of costs and its limitations (e.g. group financing);
- entitlement to exemptions, benefits and/or preferences;
- correctness of VAT and/or excise duty settlements and applicability of a correct rates or exemptions;
- transfer pricing issues and documentation;
- meeting compliance requirements, including timely submission of tax returns and payment of tax liabilities;
- the absence of any tax arrears;
- depending on the location of the parties, whether any tax agreements, advance pricing or currency agreements exist; and
- whether the parties and the target are to be registered as active value added tax payers.
It should also be verified whether any intra-group transactions were concluded at arm’s length and comply with transfer pricing documentation.
(e) Employment
If the target has employees, consideration should be given to whether:
- the employees are members of any employee associations and/or unions;
- any sector-specific regulations apply; and
- the transferred assets constitute a ‘transfer of undertakings’ within the meaning of Polish labour law.
(f) Intellectual property
Issues relating to intellectual property may be more important in certain sectors, depending on the nature of the target’s nature of business and the structure of the assets. A review of relevant IP registers should be conducted (eg, trademark, design rights, patents); and it should be determined whether the target holds all required IP rights (and/or whether such IP rights can be transferred within the asset deal).
(g) Data protection
Compliance with data protection rules has become increasingly important. This includes both Polish and European regulations, including the General Data Protection Regulation (2016/679).
(h) Cybersecurity and IT
The scope of due diligence in this regard is sector-driven – for example, with regard to financial institutions, insurers, and so on.
(i) Real estate
In terms of title to property, the Land and Mortgage Register and the Land and Building Register should be verified to confirm title to, and any encumbrances on, property, as well as the nature of the property.
Depending on the nature of the property – for example, whether it is agricultural land, forest, land with waters, an archaeological area or undeveloped land – additional requirements may apply to the transaction, including statutory pre-emption rights of public entities and agencies. Some of these will be relevant only to asset deals, and others to asset deals and share deals.
Additionally, it is common to consult the relevant authorities to verify whether there are any historical restitution claims.
If necessary, further investigations can be conducted to verify local zoning conditions (including whether any master plan is in place, as well as its terms and conditions) and environmental conditions.