A professional partnership in Polish law is a specific type of partnership, reserved for persons engaged in the so-called free profession. Its regulation in the Code of Commercial Partnerships and Companies is quite short, but it partly refers to the provisions defining the principles of operation of a limited liability company, as well as a general partnership. For this reason, the liquidation procedure sometimes raises doubts. How does the liquidation of a professional partnership proceed and what is worth knowing about it?
What are the reasons for dissolution of a professional partnership?
The reasons for the dissolution of a professional partnership are set out in Article 98 of the Companies Act. These include:
- the occurrence of a reason provided for in the professional partnership agreement (e.g. failure to achieve a certain business result);
- adoption of a unanimous resolution by all partners;
- declaration of bankruptcy by the professional partnership;
- the loss by all partners of their right to exercise a liberal profession;
- a final court decision – e.g. as a result of a partner requesting dissolution of the partnership for important reasons pursuant to Article 63 §1 of the Commercial Companies Code.
It is worth noting the specific regulation provided for in Article 98 §2 of the CCC. If a situation occurs in which only one partner remains in the partnership or only one partner has the right to pursue a liberal profession, the partnership is dissolved no later than one year from the date on which any of these reasons occurs.
Theoretically, therefore, a situation may arise where a one-person partnership will be on the market for a short period of time, and the sole member will actively seek a partner to continue the business in this form, or will eventually decide to liquidate the partnership.
In addition to the reasons for dissolution typical of a partnership, an analogous effect will be produced by:
- the death of the partner or his/her declaration of bankruptcy;
- termination of the partnership agreement by the partner or the partner’s creditor.
However, the dissolution of the partnership itself should not be equated with its liquidation. The fulfilment of the premise of dissolution only triggers the liquidation procedure, but does not in itself lead to the partnership losing its legal existence. When any of the reasons for dissolution of the partnership occurs, it is necessary to institute liquidation proceedings (or, in the case of bankruptcy, bankruptcy proceedings), unless the partners have provided for another possibility to terminate the activity.
It should be mentioned that the partners have the possibility to prevent the commencement of the winding-up proceedings if they adopt a resolution assuming the continuation of the business or if they continue to operate the partnership. However, the effects of a final court decision dissolving the partnership cannot be prevented.
What is the liquidation procedure for a professional partnership under Polish law?
The Commercial Companies Code does not separately regulate the liquidation procedure in the case of a partnership. It is therefore necessary to reach for the provisions on general partnership and apply them accordingly. What should be remembered so that the liquidation of the company proceeds efficiently?
Nomination of liquidators of a partnership and notification of liquidation of a partnership to the court of registration
Liquidation in a professional partnership is carried out by all partners and, if a management board has been appointed, by the members of that body – unless a resolution of the partners indicates otherwise. It is worth remembering that the resolution appointing liquidators should at the same time indicate the custodian of books and documents. Both the opening and termination of liquidation should be notified to the KRS. Currently, notifications to the registry court are made only in favour of the Portal Rejestrów Sądowych.
Upon the opening of liquidation, the proxy expires and no further proxy can be appointed. The company must operate in the market with the addition “in liquidation”.
Conducting liquidation operations in a professional partnership under Polish law
As a rule, liquidation operations are the most time-consuming stage of the entire procedure. Especially in the case of companies that have been active on the market for a long time, this stage can last up to several years. There are four stages of liquidation activities:
- termination of the company’s current interests. In practice, this means termination of the framework agreements binding the partnership, reduction of employment;
- settlement of mature liabilities and securing the performance of unmatured liabilities of which the company was aware;
- recovery of debts – includes all actions aimed at recovering funds owed to the company, from addressing a request for payment to the debtor up to bringing an action before a common court and obtaining a final judgment;
- the partnership assets should be liquidated and distributed among the partners according to their share in the profits.
If the partnership assets are insufficient to cover all liabilities, the partners are liable for them in proportion to their share of the loss or in accordance with the provisions of the partnership agreement. Where not all partners are solvent, the debts attributable to the insolvent partner shall be borne by the other partners.
Completion of liquidation of the professional partnership and deletion of the partnership from the register
Upon completion of liquidation activities, the liquidators report to the National Court Register the fact that liquidation has been completed, together with an application for the deletion of the partnership from the register. The dissolution of the company takes place when the decision of the registration court on striking off the company becomes final.
Liquidators should remember about the obligation to draw up a liquidation balance sheet as at the date of opening and completion of liquidation. If the procedure lasted longer than 1 year, a financial statement should be drawn up at the end of each financial year.
Liquidation of a professional partnership and official formalities in Poland
The partnership should deregister the exempt employees from insurance on the ZUS-ZWUA form within 7 days from the date of termination of the employment relationship. If the taxpayer was entered in the VAT register, a VAT-Z form should be submitted to the tax office competent for the company’s registered office, which is the basis for deregistration from the VAT taxpayer register. Upon the opening of liquidation, the entry in the CRBR register must also be updated.
Liquidation of a professional partnership – Linke Kulicki Law Firm
Liquidation of a partnership is a multi-threaded and quite complex process. It is important to maintain the order of individual actions, therefore, in case of doubts, it is worth using the support of professionals. The Linke Kulicki Law Office provides comprehensive legal assistance to entrepreneurs. We will help to carry out the liquidation procedure step by step, so that it takes as little time as possible.