In an article on changes in the taxation of limited partnerships, we wrote about possible transformations of this company so that the form of business carried out meets the expectations of the partners and at the same time is the most favorable tax treatment. General partnership and limited liability company deserve special attention.
Currently, the procedure for transforming companies has been simplified to a large extent – in most cases, it is no longer necessary to prepare an opinion on the transformation plan by an auditor (which not only generated large costs, but also prolonged the process of transforming the company) or to conclude a contract of the “new” company.
In order to convert a limited partnership into another commercial company, the following steps are necessary:
1) Preparation of a transformation plan
The plan of transformation is drawn up by the general partners in charge of the company’s affairs. The transformation plan should at least include a determination of the balance sheet value of the limited partnership as of a certain date prior to the submission of the transformation plan to the partners. At the same time, the transformation plan must be accompanied by a draft resolution on the transformation of the partnership, a draft agreement of the partnership into which the limited partnership intends to transform itself, and financial statements prepared as of the same date as that on which the balance sheet value of the partnership is determined.
2) Adoption of a resolution to convert the company
Shareholders must be notified twice of the intention to adopt a resolution, with the first notification being made no later than one month before the planned date of adoption of the resolution, and the second notification being made no less than two weeks after the first notification. During this period, shareholders have the right to inspect documents related to the transformation, in particular the transformation plan.
The resolution on the transformation of the company shall indicate the names of the members of the board of directors in the case of transformation into a limited liability company, or the names of the partners who will represent and manage the affairs of the company, in the case of transformation into a general partnership.
A resolution to convert a limited partnership into a limited liability company requires the consent of the limited partners representing 2/3 of the limited partnership sums and the consent of all the general partners, while a resolution to convert a limited partnership into a general partnership requires the consent of all the partners.
The resolution must be included in the minutes prepared by a notary public.
3) Submission of an application for registration of the converted company in the National Court Register
Once the resolution has been passed, the board of directors of the limited liability company or the partners representing the general partnership are required to apply to the National Court Register for an entry of the transformation and for an announcement in the Court and Commercial Gazette. The effects of the transformation take effect when the new company is entered in the register.
In light of the enacted changes to the taxation of the limited partnership, the change in the legal form of the business may prove beneficial to many entrepreneurs, while preserving the rights and obligations of the limited partnership, as well as properly regulating the scope of the partners’ liability for the partnership’s obligations.
