Merging Two Limited Liability Companies Step by Step. How to Simplify the Structure Without Surprises After KRS Registration.

Merging two limited liability companies step by step

Do you have two limited liability companies, two sets of accounts, two KRS registrations and twice as many annual financial statements? This is a typical situation for founders who historically set up separate entities for different business lines, markets or products. Over time, maintaining such a structure begins to generate unnecessary costs and administrative burdens — without any real benefits.

Merging two limited liability companies into one is easier than you might think. Especially if you use the simplified procedure, which allows you to dispense with an auditor, reduce formalities and shorten the entire process to a few weeks. But there is one condition: you must first put the shareholding structure in order. If you fail to do so, you may fall into one of three traps that you will usually only discover when it is too late — no share redemption provision in the articles of association, insufficient retained earnings or tax risks when shares are redeemed at nominal value.

In this article, I will guide you through the entire process: from preparing the shareholding structure, through the simplified merger procedure for limited liability companies, to a checklist of actions required after registration with the KRS. You will learn how much it costs, how long it takes, what risks you need to consider and what to do to ensure that, after the merger, you are not faced with matters that should have been resolved beforehand.

Key concepts you need to know

Before we move on to the procedure, let us clarify the meaning of several terms that will appear throughout this article.

When a simplified merger is possible — and why it requires preparation

The simplified merger of limited liability companies is governed by Article 516 of the Commercial Companies Code. It applies exclusively to mergers by acquisition — not mergers through the formation of a new company.

The simplified procedure is available in several variants. The most commonly used are:

Why 100% ownership is the best route

The variant in which the acquiring company holds 100% of the shares in the acquired company offers the greatest number of simplifications. You do not need to determine a share exchange ratio, increase the share capital of the acquiring company or adopt a merger resolution in the acquired company.

If the acquired company has minority shareholders — for example, former co-founders holding a few percent of its shares — you must first buy out or redeem their shares. This is why share redemption is usually the first stage of the entire process.

Redemption of minority shares — the preparatory stage

Three conditions that must be met before you can proceed

1. The articles of association must provide for share redemption. Open the current consolidated version of the acquired company’s articles of association and find the paragraph concerning share redemption. If there is no such provision, you must first amend the articles of association before a notary. This adds 2–4 weeks to the process and generates additional notarial costs. Many founders are unaware of this at the outset.
2. The company must have sufficient retained earnings. Redemption from distributable profits — without reducing the share capital — is faster and simpler. However, it requires confirmation that the company has sufficient retained earnings to pay the consideration for the redeemed shares. Ask your accounting team for an up-to-date breakdown of the company’s equity.
3. Minority shareholders must give their consent (in the case of voluntary redemption). Voluntary redemption means that a shareholder transfers shares to the company for the purpose of their redemption. It requires a resolution of the shareholders’ meeting and the consent of the shareholder whose shares are being redeemed.

What if the company does not have sufficient profits?

In that case, redemption combined with a reduction in share capital is necessary. The procedure takes longer — among other things, it requires a creditor notification procedure in which the company’s creditors have 3 months to object to the capital reduction. Once that period has expired, you must file the capital reduction with the KRS within 6 months of the resolution. You should also remember that the share capital of a limited liability company cannot fall below 5 000 zł and the nominal value of a single share cannot fall below 50 zł.

Tax risk when shares are redeemed at nominal value

This is one of the most common traps. Shares redeemed at nominal value (e.g. 50 zł per share), when the company’s market value is many times higher, may attract the attention of the tax authority.

For an individual shareholder:
Voluntary redemption generates income from monetary capital (Article 17(1)(6)(a) of the PIT Act), taxed at a rate of 19%. Income = consideration received minus the historical cost of acquiring the shares. If the consideration = nominal value = acquisition cost → income = 0 and no tax is payable. However, under Article 19 of the PIT Act, the tax authority may adjust the revenue to market value if the consideration differs significantly from it without a justified reason.

For the company:
Redemption financed in cash from distributable profits is tax-neutral for the company. However, if the consideration is paid in a non-cash form (e.g. by transferring an asset), the company recognises revenue equal to the market value of that asset.

For a corporate shareholder (CIT):
Revenue from the disposal of shares for the purpose of voluntary redemption constitutes revenue from capital gains (Article 7b(1)(3)(a) of the CIT Act). Similarly, the authority may adjust the revenue under Article 14 of the CIT Act.

Additional risk — transfer pricing: The Ministry of Finance has confirmed that the voluntary redemption of shares without consideration or at a value grossly below market value constitutes a transaction within the meaning of the transfer pricing regulations. Where related parties are involved, documentation and an arm’s-length analysis are required.

What to do: Before the redemption, commission an independent valuation of the shares’ market value. Prepare documentation explaining the economic rationale for the agreed consideration. Consult a tax adviser about the PIT/CIT implications.

Simplified merger procedure — step by step

Below, I describe the procedure for the most common scenario: the acquiring company holds 100% of the shares in the acquired company (Article 516 §6 of the Commercial Companies Code).

Step 1: preparing the merger plan

A merger plan is required in all simplified variants. Its minimum content includes:

1. The legal form, business name and registered office of each company.
2. The method of merger (acquisition).
3. The legal basis (Article 492 §1(1) of the Commercial Companies Code in conjunction with Article 516 §6 of the Commercial Companies Code).

In the 100% ownership variant, the plan does not need to include the share exchange ratio, the rules governing the allotment of shares or the date from which the shares entitle their holders to participate in profits — because the acquiring company does not issue any new shares.

The plan must be accompanied by, among other things, draft resolutions, draft amendments to the articles of association, extracts from the KRS, financial statements and statements of financial position.

Step 2: publishing the merger plan

The merger plan is published in the Court and Commercial Gazette or made available on the companies’ websites.

Deadline: publication must take place at least 1 month before the date on which the application to register the merger is filed (not before the shareholders’ meeting — this is specific to the 100% ownership variant).

Step 3: merger resolution

In the 100% ownership variant, a merger resolution is required only in the acquiring company. The shareholders’ meeting resolution approving the merger and the amendment to the articles of association must take the form of a notarial deed — it is recorded by a notary.

Quorum requirement: at least half of the share capital must be represented.

Step 4: filing the application with the KRS

Once the documents have been signed, you file an application to register the merger with the KRS court having jurisdiction over the registered office of the acquiring company. Court fee: 500 zł for registering the changes.

Step 5: registration of the merger — the merger date

The merger takes effect on the date it is entered in the register (Article 493 §2 of the Commercial Companies Code). On that date:

1. The acquired company is removed from the KRS (without liquidation).
2. Universal succession takes place — the acquiring company assumes all rights and obligations of the acquired company.
3. The employees of the acquired company become employees of the acquiring company by operation of law.

How much does it cost to merge two limited liability companies?

The costs depend on the scope of legal support and the amount by which the share capital is increased.

In addition, there is the consideration paid for the redeemed shares — the amount depends on the valuation and the arrangements made with the minority shareholders.

Employees after the merger — transfer of an undertaking

A company merger constitutes a transfer of an undertaking within the meaning of Article 23¹ of the Labour Code. On the merger date, the employees of the acquired company become employees of the acquiring company by operation of law — there is no need to enter into new employment contracts.

Information obligations

1. Deadline: You must inform employees about the transfer of the undertaking at least 30 days before the expected merger date.
2. Form: An individual letter to each employee — not a notice on a bulletin board or an email without confirmation of receipt.
3. Content of the notice: The expected transfer date, the reasons for the transfer, the legal, economic and social consequences for employees, and the intended measures concerning employment conditions.
4. Absent employees (due to illness or parental leave) must also receive the letter — failing to notify them is one of the most common mistakes.

Employee rights

Within 2 months of the merger date, an employee may terminate the employment relationship without notice by giving seven days’ advance notice. The consequences are the same as in the case of termination by the employer — including entitlement to severance pay and unemployment benefits.

The transfer of an undertaking cannot constitute a reason justifying termination by the employer (Article 23¹ §5 of the Labour Code).

Joint and several liability

The former and new employer are jointly and severally liable for employment-related obligations arising before the merger date — outstanding remuneration, compensation for unused leave and severance payments.

Change-of-control clauses in agreements with counterparties

Universal succession (Article 494 of the Commercial Companies Code) means that the acquiring company becomes a party to all agreements of the acquired company. However, many commercial agreements contain change-of-control clauses — provisions giving the counterparty the right to terminate or renegotiate the agreement if the ownership structure changes.

What you need to know

1. Universal succession is mandatory — contractual provisions attempting to exclude the transfer of rights to the acquiring company are invalid (Article 58 §1 of the Civil Code in conjunction with Article 494 of the Commercial Companies Code).
2. Change-of-control clauses remain effective as part of the contractual relationship — the acquiring company enters into the legal relationship subject to the risk that they may be triggered.
3. A company merger may be treated as a “change of control” within the meaning of a contractual clause referring to the definition in Article 4 of the Commercial Companies Code or Article 4 of the Act on Competition and Consumer Protection.

What to do

Before the merger, commission a review of agreements with counterparties for change-of-control clauses. Identify agreements that require notification of or consent from the counterparty. Prepare your communications in advance — it is better to inform a counterparty proactively than to let them find out from the KRS.

Checklist of actions after the merger is entered in the KRS

The work does not end when the merger is entered in the KRS. A list of notifications and updates still needs to be completed — omitting them creates inconsistencies in registry data and may lead to penalties.

Additionally, check whether the combined revenue of both companies after the merger exceeds the threshold of EUR 2 million — which would result in the loss of the preferential 9% CIT rate and a switch to 19%.

Three scenarios we see most often

Scenario 1 — An IT founder with two companies. Historically, the founder established one limited liability company for a SaaS product and another for consulting services. Two sets of accounts, two sets of financial statements and double the administrative costs. Two former co-founders each hold a few percent of the shares in one of the companies. Solution: voluntary redemption of the minority shares from distributable profits → simplified merger under Article 516 §6 of the Commercial Companies Code.

Scenario 2 — A scale-up before an investment round. The investor requires a streamlined structure — one operating company rather than two. The merger must take place before the round closes, so time is of the essence. Solution: the same simplified procedure, but with an emphasis on speed — it is worth considering carrying out the merger around the end of the financial year, which will make it easier to close the accounting books.

Scenario 3 — A roadblock at the outset. The founder wants to merge the companies, but the acquired company’s articles of association do not contain a share redemption provision. Before anything can proceed, the founder must visit a notary and amend the articles — adding 2–4 weeks and additional costs. This is why the first step should always be to review the articles of association.

How we can help with the merger of limited liability companies

Merging two limited liability companies is a process that requires the coordination of several areas at once: corporate law, tax law, employment law, GDPR and registry administration. Overlooking any of them creates problems that resurface after the merger has been entered in the KRS.

Our support includes:

1. Audit of the shareholding structure and articles of association — we check whether the simplified procedure is available and what needs to be put in order before the procedure begins.
2. Conducting the redemption of minority shares — we prepare the documentation, coordinate with the notary and identify tax risks.
3. Preparing the merger plan and documentation — the merger plan, draft resolutions, draft amendments to the articles of association and statements of financial position.
4. KRS registration and handling proceedings before the registry court — we file the application, monitor the proceedings and respond to any requests from the court.
5. Analysis of agreements with counterparties — we identify change-of-control clauses and prepare communications.
6. Post-merger checklist — notifications to the Central Statistical Office, tax office, CRBR, BDO and banks, GDPR updates, employee notifications and applications to update land and mortgage registers.

We tailor the scope of our support to your situation — from the operational minimum (the merger itself) to comprehensive protection throughout the process.

A streamlined structure means lower costs and faster decisions

A simplified merger of two limited liability companies can realistically be completed within 1–2 months — provided that you first put the shareholding structure in order, review the articles of association and address the tax issues.

Three priorities: one company instead of two, the simplest possible process and no unresolved issues resurfacing after the merger is entered in the KRS.

If you are considering merging your companies and would like to assess whether the simplified procedure is feasible for your structure — contact us. We will analyse your situation and recommend the optimal route.

Frequently asked questions

How much does merging two limited liability companies actually cost, and how long does it take?

Time: under the simplified variant (100% ownership), the entire process — from redeeming minority shares to registration with the KRS — takes approximately 1–2 months. The redemption from distributable profits stage typically takes several weeks once all documents have been gathered. Costs: legal support ranges from several thousand to over twenty thousand zł net, depending on the scope, plus notarial costs (a fee of up to 10 000 zł net + VAT), KRS fees (500 zł to register the merger and 300 zł for other applications) and notices in the Court and Commercial Gazette.

Can I merge the companies without involving an auditor?

Yes — if you use the simplified procedure (Article 516 of the Commercial Companies Code). The condition is that the acquiring company must hold at least 90% of the share capital of the acquired company. With 100% ownership, there is also no requirement to prepare management board reports or determine a share exchange ratio. However, the simplified procedure is not available for cross-border mergers or where the acquiring company is a public company.

What happens to the acquired company’s employees after the merger?

The employees become employees of the acquiring company by operation of law — there is no need to enter into new employment contracts (Article 23¹ of the Labour Code). You must inform them in writing at least 30 days before the merger date. An employee has the right to terminate the employment relationship within 2 months of the merger by giving seven days’ advance notice. The former and new employer are jointly and severally liable for employment-related obligations arising before the merger.

Is redeeming shares at nominal value safe from a tax perspective?

Not always. If the market value of the shares significantly exceeds their nominal value, the tax authority may adjust the revenue to market value under Article 19 of the PIT Act or Article 14 of the CIT Act. Where related parties are involved, there is an additional transfer pricing risk. Recommendation: obtain an independent valuation of the shares’ market value and prepare documentation explaining the economic rationale for the agreed consideration. Consult a tax adviser about the PIT/CIT implications before making a decision.

What exactly do I need to report after the merger is entered in the KRS?

The list includes: updating details with the Central Statistical Office (7 days), filing the NIP-8 form with the tax office (7 days), updating ZUS details (7 days), filing a property tax notification (14 days), updating the CRBR (14 days), updating the BDO entry (30 days), filing an application to update the land and mortgage registers (immediately), updating GDPR information (immediately) and notifying banks. Failure to make these notifications creates inconsistencies in registry data and may result in penalties.

Do counterparties have to consent to the merger?

As a rule, no — universal succession (Article 494 of the Commercial Companies Code) takes effect by operation of law and cannot be excluded by the parties. However, agreements may contain change-of-control clauses that give a counterparty the right to terminate or renegotiate the agreement if the ownership structure changes. This is why it is advisable to review agreements for such clauses before the merger and prepare communications to counterparties in advance.