Rights Transfer in Partnership

Sale of rights in partnership vs sale of shares in the company

Polish Company Code establishes the rules that are governing the transfer of rights and obligations of a partner in a partnership, such as:

• a general partnership (spółka jawna),
• a professional partnership (spółka partnerska) or
• a limited partnership (spółka komandytowa).

Partnership rights transfer rules are are completely different from ones relating to the transfer of shares in commercial companies (i.e. limited liability companies and joint-stock companies). This is because the legal nature of partnerships and companies is distinct. In general the differences between the two types of business entities stem from the fact that a much closer, personal relationship exists between a partnership and its partners, with the partners usually handling the partnership affairs personally, including the provisions of services. Partnerships are designed for business operations carrying lower market risk. Lower risk is reflected in the principles of liability for debts. Unlike company shareholders, partners in a partnership are personally liable with all their assets on joint and several basis for the partnership’s debts. Their liability is triggered when the partnership’s assets are insufficient for the purposes of debt enforcement.

With this in mind, it should be also noted that partners in a partnership do not have shares, unlike company shareholders. Instead, they can dispose of the entirety of the rights and obligations in a partnership.

Can the partner transfer his rights in partnership to someone else ?

The entirety of the rights and obligations of a partner in a partnership can be transferred to another person (joining partner) only if such option is provided for in the partnership agreement.

This means that, unlike in the case of companies, the Polish Law places a general ban on the transfer of rights of a partner in a partnership. Derogations from this rule are possible, however, only if the partnership agreement contains appropriate provisions. In absence of the relevant provisions in the partnership agreement, the replacement of a partner in a partnership is inadmissible by operation of Polish Company Law.

Moreover, the entirety of the rights and obligations of a partner in a partnership can be transferred to another only if all other partners give their consent in writing, unless the partnership agreement provides otherwise.

Liability for debts of the departing partner

If the the rights and obligations of a departing partner are transferred to another person (joining partner), both of them are going to be liable jointly and severally for debts of the partnership.

Post transaction obligations

All changes in the ownership of a partnership must be recorded in the relevant registers and reported to the relevant government bodies, especially:

• the National Court Register,
• the Central Beneficial Owner Register,
• the tax office competent for the company.

Expert DKP Legal

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