A foreign buyer signs a term sheet for a Warsaw-based distribution company. Weeks into due diligence, the target's National Court Register (KRS) filings reveal a three-year gap in financial disclosures. The deal collapses. The buyer loses the exclusivity period, the advisory fees, and the window to enter a fast-moving Polish market segment.

Polish M&A transactions carry specific structural risks that differ from Western European norms. Undisclosed liabilities, defective KRS filings, and hidden encumbrances on shares regularly surface during due diligence – and each can trigger deal failure or post-closing liability. Buyers who identify these red flags early preserve both their investment and their negotiating position.

This alert covers the three most consequential categories of red flags in Polish M&A: corporate record irregularities, financial and tax exposure, and regulatory compliance gaps. Each section identifies the warning sign, explains why it matters under Polish law, and sets out the immediate action required.

What corporate record irregularities signal in a Polish target?

The KRS – Poland's National Court Register – is the primary public source for verifying a target's legal standing. Gaps in mandatory filings, outdated shareholder lists, or unregistered amendments to the articles of association all indicate weak internal governance. Under Polish corporate legislation, a spółka z ograniczoną odpowiedzialnością (private limited liability company, sp. z o.o.) must file financial statements within 15 days of approval by the shareholders' meeting. Repeated late filings suggest either cash-flow concealment or management dysfunction.

Three KRS red flags demand immediate escalation:

  • Missing or late financial statements for any year in the past five years
  • Discrepancies between the registered share structure and the seller's representations
  • Unregistered pledges or encumbrances on shares

Share pledges deserve particular attention. Polish law allows security interests over sp. z o.o. shares to be created without KRS registration in certain circumstances. A pledge registered only in the pledge register – not visible in the KRS – can survive a share transfer and bind the buyer. Identifying this risk requires a parallel search of the Rejestr Zastawów (Pledge Register) maintained by the Ministry of Justice.

We identified an unregistered pledge over 40% of a target's shares for a Wielkopolska-based buyer (winter 2025). The discovery allowed renegotiation of the purchase price before signing – saving the client an estimated PLN 3m in post-closing exposure.

The remediation timeline is short. A buyer who discovers KRS irregularities after signing but before closing has, at most, the period between signing and the longstop date to demand cure or walk away. That window is typically 30 to 60 days in Polish mid-market deals. Missing it forfeits the right to price adjustment under most Polish-law sale and purchase agreements.

How do tax and financial red flags affect deal value in Poland?

Tax exposure is the single most common source of post-closing disputes in Polish M&A. The Polish tax authority – the Krajowa Administracja Skarbowa (National Revenue Administration, KAS) – has a five-year statute of limitations for reassessing corporate income tax. A buyer acquiring shares inherits the target's full tax history. Undisclosed transfer pricing adjustments, VAT reclaim irregularities, or unreported related-party transactions can produce assessments exceeding PLN 1m within months of closing.

Key financial red flags include:

  • Significant related-party transactions not disclosed in the notes to financial statements
  • VAT refund claims pending with the KAS for more than 60 days
  • Unexplained intercompany loans at non-market interest rates
  • Provisions for tax litigation absent from the balance sheet

Transfer pricing is a particular concern for targets with cross-border group structures. Polish transfer pricing rules require documentation for transactions exceeding PLN 10m annually with related parties. Buyers should request this documentation as a standard due diligence item – not an optional add-on.

For a deeper analysis of how sanctions exposure intersects with financial due diligence on Polish targets with international ownership, see our overview of the EU sanctions framework impact on Polish businesses.

The practical consequence of undetected tax exposure is severe. Polish law does not provide a general mechanism for the buyer to claw back tax liabilities from the seller post-closing without a contractual indemnity. A well-drafted tax indemnity, capped at the deal value and running for five years, is non-negotiable in any Polish share purchase transaction.

What regulatory and compliance gaps should buyers act on immediately?

Beyond corporate records and tax, Polish targets in regulated sectors carry sector-specific compliance risk. Targets operating in financial services require authorisation from the Komisja Nadzoru Finansowego (Polish Financial Supervision Authority, KNF). A change of control without prior KNF approval can invalidate the transaction and expose both buyer and seller to administrative sanctions. The KNF review process typically takes 60 to 90 working days – a timeline that must be built into the deal structure from the outset.

Environmental compliance is equally material for manufacturing and real estate targets. Polish environmental law imposes strict liability on the current operator of a contaminated site. A buyer who acquires shares in a company holding contaminated land assumes that liability on day one of ownership. Remediation costs in Poland regularly reach PLN 5m to PLN 20m for industrial sites. A Phase II environmental survey should be a condition precedent to closing, not an afterthought.

Employment compliance rounds out the picture. Under Polish labour law, a transfer of an enterprise or its organised part triggers automatic transfer of employment relationships. Buyers must verify headcount, pending labour disputes before the Sąd Pracy (Labour Court), and any unregistered collective bargaining agreements. Undisclosed redundancy obligations can add months of delay and material cost to post-closing integration.

For buyers choosing between corporate structures before or after acquisition, our decision matrices for Ukrainian investors and for UK investors considering how to set up company Poland provide a structured framework for post-acquisition structuring decisions involving sp. z o.o. and SA vehicles.

We secured a reduction in the acquisition price of over EUR 800,000 for a Małopolska-based strategic buyer after uncovering undisclosed Labour Court claims during due diligence Poland review (spring 2026). The claims had been omitted from the seller's disclosure letter entirely.

Immediate action items for any buyer currently in a Polish M&A process:

  • Commission a KRS and Pledge Register search within the first week of due diligence
  • Request five years of KAS correspondence and any open tax audits
  • Confirm sector-specific regulatory approvals and their change-of-control implications
  • Obtain a Phase II environmental report for any target with industrial operations
  • Review all Labour Court filings and pending collective bargaining commitments

Each of these steps has a hard deadline tied to the exclusivity period. Allowing that period to expire without completing the checklist leaves the buyer exposed – and, in a competitive process, without recourse.

Your specific transaction carries risks that a general alert cannot fully address. Proceeding without targeted legal advice on Polish M&A red flags risks irreversible post-closing liability that no indemnity can fully cure.

If your company is currently evaluating a Polish acquisition – whether as a first entry into the market or as an add-on to an existing platform – our team will conduct a targeted red-flag review, draft the necessary indemnity provisions, and coordinate regulatory filings: info@kordeckipartners.com.

Frequently asked questions

Q: How long does due diligence typically take for a Polish M&A transaction?

A: A standard due diligence process for a mid-market Polish target takes between three and six weeks, depending on the complexity of the corporate structure and the availability of documents. Regulated sectors – financial services, pharmaceuticals, energy – require additional time for regulatory review. Buyers should build at least 90 days into the overall timeline from term sheet to signing.

Q: Is it a misconception that share deals in Poland avoid all tax liability?

A: Yes. A common misconception is that acquiring shares rather than assets insulates the buyer from the target's historic tax liabilities. Under Polish tax law, the target company retains full liability for its own tax obligations regardless of the change in ownership. The buyer inherits that exposure through the acquired entity. A tax indemnity in the sale and purchase agreement is the primary – and often only – contractual protection available.

Q: What is the cost of a red-flag due diligence review by a Warsaw law firm?

A: Fees vary with deal size and sector. A focused red-flag review for a straightforward sp. z o.o. acquisition typically ranges from EUR 5,000 to EUR 15,000. Full legal due diligence for a complex or regulated target will exceed that range. The cost is modest relative to the potential exposure – a single undisclosed tax liability can reach multiples of the advisory fee.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to M&A transactions, corporate structuring, and regulatory compliance. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.