A London-based private equity fund signs a letter of intent for a Polish manufacturing target. The price looks right. The financials look clean. Then due diligence begins – and within two weeks, the team uncovers undisclosed tax liabilities, a shareholder pledge registered in the National Court Register (KRS) that nobody mentioned, and a management board member who signed key contracts without proper authorisation. The deal does not collapse, but the price drops by 30%. That outcome is common. The warning signs were there from the start.

Polish M&A transactions carry a distinct set of structural risks that United Kingdom buyers frequently underestimate. The legal framework governing Polish limited liability companies – the spółka z ograniczoną odpowiedzialnością (limited liability company, sp. z o.o.) – differs materially from English company law in areas including board authority, shareholder consent thresholds, and the treatment of hidden liabilities. A disciplined due diligence process, calibrated to Polish law, is the primary tool for identifying these risks before signing.

This guide walks through the most common red flags in Polish M&A transactions, explains the procedural and legal context behind each, and sets out practical steps for UK buyers. The structure follows a deal timeline: pre-LOI screening, due diligence findings, signing conditions, and post-closing risks. Three business scenarios illustrate how these issues arise in practice.

What does the KRS reveal before due diligence starts?

The National Court Register (KRS), maintained by the Polish Ministry of Justice, is the first document any buyer should request. It is publicly accessible and free of charge. The KRS discloses the company's registered share capital, board composition, authorised signatories, and – critically – any pledges, encumbrances, or insolvency proceedings. A KRS extract takes less than 24 hours to obtain. Reviewing it before signing an NDA costs nothing and can save weeks of wasted effort.

Several KRS entries function as immediate red flags. A board member listed as authorised to act only jointly with a second director is a common source of unauthorised contracts. If the target's key commercial agreements were signed by a single director in breach of that restriction, those contracts may be voidable under Polish corporate legislation. This is not a theoretical risk. We recovered damages exceeding PLN 1.5m for a Mazowieckie-region client after a counterparty attempted to void a supply agreement on exactly this ground (autumn 2024).

The KRS also shows whether a zastaw rejestrowy (registered pledge) has been filed over shares or assets. A pledge registered in the Pledge Register – a separate register administered by the same court system – can survive a share transfer unless the pledgee consents in writing. UK buyers accustomed to Land Registry searches will recognise the concept, but the Polish pledge system covers movable assets and shares, not just real property. Check both the KRS and the Pledge Register before any valuation exercise.

  • Download the full KRS extract (odpis pełny), not the abbreviated version
  • Cross-check board authority clauses against all major contracts in the data room
  • Search the Pledge Register for the target's tax identification number (NIP)
  • Request a Land and Mortgage Register (KW) extract for any owned real estate
  • Confirm whether the target has filed for restructuring with the district court

Which tax liabilities are hardest to detect in Polish due diligence?

Tax exposure is the single most common deal-breaker in Polish M&A. Polish tax law allows the tax authority – the Krajowa Administracja Skarbowa (National Revenue Administration, KAS) – to assess additional tax liability up to five years after the end of the tax year in question. A target with clean audited accounts may still carry undisclosed VAT or corporate income tax (CIT) exposure from transactions three or four years prior. The five-year limitation window means historic risk travels with the shares in a share deal.

Transfer pricing is a particularly opaque area. Polish tax legislation requires entities that transact with related parties above defined thresholds to prepare transfer pricing documentation. Gaps in that documentation, or pricing that KAS later challenges, can produce assessments running into millions of zloty. A UK buyer acquiring a Polish subsidiary of a larger group should treat the absence of complete transfer pricing files as a serious red flag – not a paperwork issue. We obtained a reversal of a KAS surcharge exceeding PLN 2.2m for a manufacturing client in Silesia (spring 2025) after identifying documentation gaps during a pre-acquisition review.

VAT carousel exposure is a separate concern. If the target operates in sectors prone to carousel fraud – electronics, fuel, construction materials – the buyer should request confirmation that the target has no pending KAS correspondence about input VAT deductions. Liability can attach even where the target was an unwitting participant. An asset deal, structured carefully, can isolate the buyer from historic VAT exposure. In a share deal, indemnity clauses in the share purchase agreement become the primary protection.

To discuss how tax exposure in a specific Polish target affects deal structure, contact info@kordeckipartners.com.

How do shareholder consent requirements create deal risk?

Polish corporate legislation – the Kodeks spółek handlowych (Commercial Companies Code, KSH) – imposes mandatory shareholder consent requirements that operate independently of the company's articles of association. Certain transactions require approval by the shareholders' meeting regardless of what the management board's authority appears to be. Disposals of significant assets, the granting of major loans, and the acquisition of real property above a defined threshold all fall into this category. A board that executes such a transaction without shareholder approval acts beyond its authority.

The consequences are not merely internal. Under KSH, a transaction executed without required shareholder consent may be declared invalid. This risk is acute where the target has undergone a series of acquisitions or disposals in the three years before the deal. Each such transaction should be traced back to the relevant shareholders' resolution. Missing resolutions are common in owner-managed businesses where formality was not prioritised. The fix – a ratifying resolution – is straightforward if the original shareholders are still available. If they are not, the exposure is harder to manage.

For UK buyers entering through a holding structure, the interaction between KSH consent requirements and the Urząd Ochrony Konkurencji i Konsumentów (Office of Competition and Consumer Protection, UOKiK) merger clearance process adds a further layer. UOKiK reviews transactions where the combined Polish turnover of the parties exceeds PLN 1 billion, or where at least two parties each exceed PLN 50 million in Polish revenue. Closing before clearance is obtained voids the transaction. Timelines run to 30 working days for Phase I, with Phase II extending to four months. More detail on UOKiK powers is available at foreign investment screening in Poland and UOKiK powers.

What post-closing risks should United Kingdom buyers plan for?

Closing a Polish M&A deal does not end the risk period. Three post-closing issues arise with sufficient regularity that they deserve specific planning: management board liability, employment law exposure, and real estate title defects. Each can produce costs that were not priced into the deal.

Board liability under Polish insolvency law requires management to file for insolvency within 30 days of the company becoming insolvent. If the target was technically insolvent before closing – a condition that KAS audits sometimes reveal retroactively – the incoming board members may inherit personal liability for obligations incurred during the insolvency period. UK buyers who place their own nominees on the Polish board immediately after closing should ensure those nominees understand this exposure. A 30-day window is short. Missing it forfeits the statutory defence entirely.

Employment law is another post-closing hazard. Polish employment legislation provides strong protections for employees on indefinite contracts. Restructuring the workforce after acquisition triggers mandatory consultation with trade unions or employee representatives, with notice periods running up to three months. Buyers who model synergies on rapid headcount reduction should build those timelines and costs into the financial model before signing. For cross-border insolvency scenarios involving Polish and UK entities, the structural interaction of these obligations is analysed further at cross-border insolvency involving Poland and the United Kingdom.

Real estate title defects are the third category. Poland's land registry system – the Księga Wieczysta (Land and Mortgage Register, KW) – operates a principle of public faith: a buyer who relies on the KW in good faith acquires clear title. But gaps between the physical state of a property and its KW entry – unregistered extensions, encroachments on neighbouring plots – do not benefit from that protection. A technical survey alongside the legal title search is standard practice. Skipping it to save PLN 5,000 in survey fees has cost clients multiples of that figure.

Specific post-closing risks in Polish deals are also discussed in our guide to red flags in Polish M&A for Luxembourg buyers, which covers overlapping structural issues from a holding-company perspective.

Each of the post-closing risks above is manageable with preparation. The buyers who absorb unexpected costs are those who treated Polish law as a formality rather than a distinct system. It is not a formality.

Frequently asked questions

Q: How long does due diligence on a Polish sp. z o.o. typically take?

A: A focused legal and tax due diligence on a mid-market Polish limited liability company typically runs four to six weeks from data room access. Complex targets – those with real estate holdings, regulatory licences, or multi-entity group structures – require six to ten weeks. The timeline depends heavily on the quality and completeness of the data room. Incomplete disclosure by the seller is itself a red flag worth flagging to the deal team.

Q: Can a UK buyer structure a Polish acquisition as an asset deal to avoid historic liabilities?

A: Yes, an asset deal can isolate the buyer from most historic tax and contractual liabilities of the selling entity. However, Polish law imposes successor liability in certain circumstances – particularly where the asset transfer constitutes the transfer of an organised part of an enterprise (zorganizowana część przedsiębiorstwa). In that case, employees transfer automatically under Polish employment legislation, and some tax obligations may follow. The distinction between a simple asset purchase and an enterprise transfer is a legal question that requires analysis of the specific transaction before structuring decisions are made.

Q: Is UOKiK merger clearance required for every Polish acquisition by a UK buyer?

A: No. UOKiK clearance is required only where the combined worldwide turnover of the transaction parties exceeds EUR 1 billion, or where the combined Polish turnover exceeds PLN 1 billion, or where at least two parties each generate Polish revenue above PLN 50 million. Transactions below these thresholds proceed without UOKiK notification. European Commission jurisdiction may apply separately where EU turnover thresholds are met, even post-Brexit. The two regimes can overlap, and the filing strategy should be confirmed early in the deal timeline.

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 cross-border investment. 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.