Before the decision to reorganize it is worth checking
Author: Michał Boryczka
Almost every business entity is sooner or later subject to various reorganization activities, such as a merger, division, transformation or sale of a company or its organized part. The reasons for these actions vary, they can be connected with the desire to change business activities, improve its functioning, achieve synergy or tax benefits, or prepare a business for sale. Often a reorganized entity has concessions, permits, licenses, authorizations or other administrative decisions that are necessary for the business, and sometimes even determine it. In a situation like this, it is worth asking the questions: what about the administrative and legal succession. Especially that the principle in administrative law is the inability to transfer rights and obligations arising from administrative decisions as a result of civil law acts.
MERGER, DIVISION AND TRANSFORMATION
In the case of transformation, the rule is that the company resulting from transformation is entitled to all the rights and obligations of the company or entrepreneur that is subject to the transformation. It remains the subject of permits and concessions granted to the transformed entity, unless the law or decision on granting a permit or concession provides otherwise (art. 553 sec. 1 and 2 and art. g842 sec. 1 and 2 of the Code of Commercial Companies (hereinafter: CCC). This is the so-called continuity principle of rights and duties, i.e. a company established as a result of transformation is not the legal successor (as in the case of universal succession), but continues to operate the transformed entity in the revised legal form.
Rights are transferred
A similar situation refers to a merger and division of commercial companies - the acquiring company or newly established company created as a result of a merger or division enters, respectively as at the date of the merger or the date of the division (separation), all rights and obligations of the acquired company, merged companies through the formation of a new company or separated company (art. 494 sec. 1 and 2, art. 531 sec. 1 and 2 of the CCC).
In particular, permits and concessions that were granted to the acquired company or any of the merging companies through the formation of a new company are transferred onto the acquiring company or the newly formed company. The situation is similar with permits and concessions that remain in connection with the assets assigned to a given company in the division plan of the divided company, and which were granted to the divided company. This rule applies unless the law or decision on granting a permit or concession provides otherwise. This is the co-called universal succession, and the company formed as a result of the merger or division becomes the legal successor of the company subject to merger or division.
The aforementioned laws are an exception to the principle of non-transferability of rights and obligations arising from administrative decisions and do not apply only to concessions and permits. The expression “in particular” used by the legislator means that these laws also apply to any administrative decisions, e.g. authorizations, approvals, allowances, licenses, opinions, etc.
Exceptions in laws or decisions
In the case of transformations, mergers and divisions, administrative and legal succession shall not be applicable, if it was explicitly excluded under the rule of laws.
An example of such a regulation is art. 13 sec. 2 of the road transport act which stipulates that the transfer of permit to conduct the occupation of road transport carrier, a community license or a license for passenger transport in the event of a merger, division or transformation requires the decision of an administrative authority issuing a permit or license.
A similar regulation is contained in art. 38a sec. 3 of the act on radio and television, according to which the rights under the concession to transmit TV and radio programmes in the case of a merger, division or other types of transformations of commercial companies may be transferred to another entity only with the consent of the National Radio and Television Broadcasting Council, expressed in the form of a resolution. The provisions of the Code of Commercial Companies on administrative and legal succession also shall not apply if they were explicitly excluded from the content of the administrative decision itself, [frame]
SELLING A COMPANY OR ITS ORGANIZED PART
There is much more legal uncertainty raised by the issue of transferability of authorizations from administrative decisions in the case of selling a company (also an organized part of a company). It may take place on the basis of various legal actions, in particular the contract of sales, gift, exchange, and also placing the company as contribution to a commercial company. According to art. 551 point 5 of the Civil Code (hereinafter: CC) - the company includes, in particular, concessions, licenses and permits. In art. 552 of the CC it was explained that the legal action which provides for the company, covers everything that enters into its composition, unless otherwise stipulated in the legal action or from special provisions.
Case law establishes rules
Analysis of the provisions cited above at first glance may cause the interpretation that in the case of selling a company (like in the case of a merger, division or transformation), the rule is the transferability of rights from administrative decisions (at least those that were explicitly mentioned in art. 551 point 5 of the CC, i.e. concessions, licenses and permits).
Unfortunately, in case law of the administrative courts a different stance has been adopted, according to which the principle is non-transferability of rights arising from administrative decisions.
The justification for this position is, first of all, the individual character of each administrative decision. It grants, on the basis of administrative law, certain special powers of a public nature to a specified entity (addressee of the decision), which should also meet specific conditions in these regulations for doing business. In other words: a decision cannot be granted to any entity conducting business but only to that particular who meets the requirements laid down in law.
Secondly, the justification of such a position is also the protection of public law order. In the grounds of the judgment of the Kielce Voivodeship Administrative Court of 13 February 2014 (ref. no. act II SA/ Ke 1074/1013) it can be read that “a permit, concession or license is an administrative decision constituting an act of public law, the subject of which is granting the public rights, governed by public law, aimed at protecting the public interest. Therefore, protection of public interest lies at the basis of the principle of non-transferability of rights arising from such acts". In support of that judgment, the Voivodeship Administrative Court further claimed that the reservation provided for in art. ss2 of the CC. (“unless otherwise stated in the specific provisions”) means that in order for the transfer of rights arising from an administrative decision onto another entity (i.e. the purchaser of the company or its organized part) to be at all possible, a separate, specific regulation enabling such a transfer is necessary.
Provisions indicate conditions
Therefore, it should be assumed that in the case of sale of the company or its organized part, the administrative decisions shall pass onto the purchaser if the law provides for such a possibility and the conditions of such transfer of rights and obligations is maintained.
An example of a regulation providing for the possibility of transfer of rights and obligations of the administrative decision is based on art. 151 of the act on waste concerning the transfer of rights and obligations arising from the decision approving the instruction for conducting a landfill. This provision contains the conditions, the fulfillment of which is necessary for the transfer of such a decision, as well as states that the transfer of rights and obligations (or refusal) takes the form of an administrative decision. Similarly, the regulation allowing the transfer of rights and obligations of the administrative decision contains art. 63 sec. 5 of the act on spatial planning and development in relation to the zoning decision.
Exclusions also recorded
On the other hand, the laws also contain regulations which explicitly exclude the possibility of transferring rights and obligations, for instance in the case of selling the company or its organized part. According to art. 13 sec. 1 of the road transport act, permits to conduct the occupation of road transport carrier or a license cannot be renounced to third parties nor can rights arising from them be transferred onto a third party.
Similarly, art. 383 sec. 1 of the law on radio and television provides that (with some exceptions) the rights under the license are not transferable.
In starting any process of reorganization, it should be preceded by a thorough analysis of the legal status (so-called due diligence) of the entrepreneur in terms of administrative decisions held. It turns out that, depending on the type of planned activities, various laws apply relating to the transferability of the rights and obligations arising from administrative decisions onto an entity that is newly formed as a result of such actions. Identifying held administrative decisions and determining the legal measures needed to be taken in order to effectively transfer the rights and obligations onto the new entity should allow unimpeded continuation of activities, as well as avoid liability, including criminal liability in connection with the possible conduct of business without the required concessions, permits or other such administrative decisions.