Holding a final and binding judgment against a company that has been struck off the KRS does not necessarily mean losing the chance to recover a debt. Contrary to appearances, being struck off the KRS register is not always tantamount to the entity ceasing to exist altogether. Often, such information merely means that the entity continues its operations, but in a different legal form (i.e., it has been transformed). In such a situation, enforcement can be just as effective.
What can be the reasons for striking a company off the KRS?
There are many such reasons: conclusion of bankruptcy proceedings, liquidation proceedings, merger or division of companies, judicial dissolution of a company, or simply its transformation (i.e., a “change” of e.g., a general partnership (sp. j.) into a limited liability company (sp. z o.o.).
Unlike, for example, the liquidation of a company or its judicial dissolution, striking a company off the KRS due to its transformation into another commercial company does not thwart the possibility of conducting enforcement. What is more – it is possible on the basis of the same judgment, even though it indicates as the defendant the company that was subsequently transformed.
Does the transformation of a company make enforcement impossible?
Such enforcement is still possible due to the principle of continuation arising from the Commercial Companies Code (Article 553 § 1 of the CCC). According to it, in the event of the transformation of a commercial company into another commercial company, the transformed company (i.e., the new one) is entitled to all the rights and obligations of the transforming company (i.e., the one that ceased its operations). It is not necessary to formally “transfer” such obligations to the new entity.
We are dealing here with an automatic transfer of these rights and obligations. This automatism means that the transformed (new) company is immediately the subject of the rights and obligations of its predecessor (without the need, for example, to annex contracts, make assignments, etc.). In practice, therefore, we are legally dealing with the same entity, merely operating in a different legal form.
For the creditor, this means that the repayment of debts can be pursued directly from the company created as a result of the transformation (i.e., the new one). Legally, we treat it as the automatic continuator of its predecessor’s operations.
How does the recovery of payment from a transformed company work in practice?
Since it is already known that transformation does not release a company from its debts existing prior to this event, the question remains: how to effectively enforce one’s judgment in practice? The Supreme Court has provided practical guidelines on how to proceed, depending on the stage of the proceedings at which the transformation of the company occurred (resolution of the Supreme Court of November 29, 2017, III CZP 68/17).
Three situations should be distinguished:
1. Transformation occurred before the issuance of an enforcement title (judgment)
If the court case for payment is still ongoing, the court should take into account the new legal status and issue a judgment indicating the updated data of the debtor (i.e., indicate the data of the new – transformed – company in the judgment).
2. Transformation occurred after the issuance of the enforcement title (judgment), but before granting it an enforcement clause
In such a situation, the court should take into account the new legal form of the transformed company directly in the enforcement clause. This means that the judgment remains unchanged (it is issued against the “old” company), but the enforcement clause already indicates the “new” company as the proper debtor.
3. Transformation occurred after the judgment was granted an enforcement clause (the creditor already has a judgment with a clause against the “old” entity)
Such a document still constitutes a fully valid basis for conducting enforcement against the transformed company. In such a situation, the creditor should not apply to the court for a new clause, due to the previously described principle of continuation. In the application for enforcement, it is only worth referring to the information from the KRS confirming the fact of the company’s transformation (such information is visible even in an excerpt from the KRS).
How to correctly determine when the transformation took place?
It is therefore extremely important to correctly determine when the transformation of the debtor company took place. The Commercial Companies Code clearly indicates that the day of transformation is the day the transformed (i.e., new) company is entered into the register. It is precisely this date, appearing in the KRS excerpts, that is crucial for assessing which of the three scenarios described above will apply in a specific case.
What should be indicated in the application for enforcement to the bailiff to ensure the initiation of enforcement proceedings?
A very important issue is to clearly indicate in the enforcement application the fact that the company has been transformed. The subjective identity of the transforming company and the transformed company must be proven by referring to the information found in the KRS. Good practice here is to designate the company after transformation as the debtor, additionally indicating its previous legal form (e.g., debtor: ABC sp. z o.o., formerly: ABC sp. j.). As an auxiliary measure, it is also worth emphasizing the identicality of the NIP (Tax Identification Number) and REGON (National Business Registry Number) of both companies (since in the case of transformation, both these numbers remain unchanged).
Thus, striking a debtor (company) off the KRS is not tantamount to the impossibility of enforcement. In a situation where the cause is the transformation of the company, the enforcement will, with a high degree of probability, proceed without any obstacles.
the author of the article is lawyer – Patrycja Kiszka
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