Negotiating an Existing Fund’s Rights in a Polish Company’s Next Investment Round

Negotiating an Existing Fund’s Rights in a Polish Company’s Next Investment Round

One fund held more than a dozen rights under a company’s governing document. At the next investment round, it agreed to remove exactly two—and neither was among the rights the founders had fought hardest to change. That outcome offers a practical lesson about investor negotiations that a term sheet alone cannot provide.

If you run a Polish spółka z ograniczoną odpowiedzialnością (sp. z o.o., or limited liability company) after a seed or Series A round, the next capital increase creates an opportunity to revisit the existing fund’s rights. The opportunity is tied to the transaction: if you do not agree the changes while the company’s governing document is already being amended, a separate amendment later means another round of approvals, notarial work, and registration.

To use that opportunity, you need to know which rights the fund may relinquish, which it is likely to retain, and why. This article sets out a four-layer inventory, a negotiation strategy, and the procedural issues that can delay the round.

Key Polish terms and investment mechanisms

A Polish sp. z o.o. is governed by an umowa spółki. This article calls it the company’s governing document; it is also often translated as its articles of association. Amendments to that document and increases in the company’s registered share capital involve formal shareholder and registration steps.

Inventory the fund’s rights in four layers

The first negotiating mistake is to argue over whichever clauses someone happens to remember. Investor rights may be spread across many provisions of the governing document. Before proposing changes, make a table with at least two columns: where the right appears and what it does. Then classify every right.

Layer 1: Exit and liquidation economics

These provisions affect what the fund receives when the company is sold or liquidated.

1. Guaranteed exit amount. The investor receives a multiple of its contribution on a defined share-liquidity event before proceeds reach the founders.
2. Priority return on liquidation. The fund’s capital contribution and share premium (agio) are returned before assets are divided among the other shareholders. Article 286 § 3 of the Polish Commercial Companies Code expressly permits the governing document to specify “different distribution rules.”
3. Transfer of intellectual property after liquidation. Under this clause, all company IP passes to the fund when liquidation is complete.

Layer 2: Sanctions affecting the founders

These are deterrents intended to be triggered by a breach:

1. Put option. The fund can demand that the founders repurchase its shares for a predetermined amount.
2. Voluntary redemption for consideration. The fund’s shares are redeemed for its contribution plus 100%.

Layer 3: Control of share transfers

1. Tag-along right. The right to join a share sale is reserved exclusively for the fund.

Layer 4: Corporate control

These rights affect how the company is managed and how shareholder decisions are made.

1. Meetings at the fund’s registered office. The investor specifies the meeting location.
2. Independent right to convene a shareholders’ meeting. The fund need not wait for the management board to call one.
3. Conditional quorum. Resolutions are binding only if the fund is present. In judgment I CSK 62/18, the Polish Supreme Court addressed quorum in relation to the validity of a resolution, but did not expressly decide whether a quorum dependent on a named shareholder’s attendance is permissible. The clause therefore remains subject to interpretive uncertainty.
4. Reserved matters stated to require consent on pain of invalidity. The list in the case included loans; liabilities above a threshold of around PLN 150,000; disposals of assets above around PLN 25,000; disposals of IP; forming or joining companies; and a recovery plan.
5. Personal right to dismiss a management board member. The fund can dismiss any board member, and its vote is required to appoint a successor. Article 159 of the Commercial Companies Code permits particular personal rights to be granted to a shareholder.
6. Three-day notification duty. The management board must tell the fund about every material change in the company within three days.
7. Reporting duties. These are linked to the investment agreement and the project implementation plan.
8. Unanimity requirement. A broad category of shareholder resolutions requires unanimous approval.

What the fund gave up—and what stayed

In the case examined, the fund agreed to remove two rights, both from the sanctions layer.

Everything in the other three layers remained: exit economics, share-transfer control, and corporate control. In particular, the liquidation preference, reserved matters, conditional quorum, and personal right to dismiss management board members were not changed.

The distinction matters. Sanctions may deter breaches, but enforcing them can be costly and can damage the relationship on which the fund’s return depends. Giving them up did not alter the fund’s core economic position in this case. By contrast, the liquidation preference determines how exit proceeds are allocated, while reserved matters give the fund continuing oversight of operational risk. Those were the rights it retained.

Set negotiation priorities before drafting amendments

The case suggests where founders may have a realistic opening, and where a request is less likely to succeed in a typical later round.

Where to focus

1. Founder sanctions. A put option, premium-priced redemption, and contractual penalties for breach may be easier to discuss than core economic rights. Consider what the fund actually gains from retaining each mechanism compared with its enforcement and relationship costs.
2. Thresholds and scope of reserved matters. Rather than demand removal of the entire consent mechanism, negotiate workable monetary limits. A PLN 25,000 asset-disposal threshold may bring larger routine purchases to the investor; a PLN 150,000 liabilities threshold may obstruct ordinary contracts. Higher thresholds may be negotiable.
3. The reach of a conditional quorum. Instead of requiring the fund at every meeting, propose limiting the requirement to selected resolutions, such as amendments to the governing document or disposals of IP. Keep the interpretive uncertainty surrounding a named-shareholder quorum in view.

Where to expect resistance

1. Liquidation preference. The fund is unlikely to surrender a right central to its investment return. At the first round, seek a 1× non-participating structure rather than a participating multiple. Once a different structure is embedded in the documents, changing it at a later round requires the fund’s agreement.
2. The existence of a reserved-matters mechanism. Scope and thresholds may be negotiable; eliminating the fund’s consent right altogether is a different proposition.
3. The personal right to dismiss management board members. A fund may regard it as protection against losing control over a portfolio company. Its removal is outside what the source case treats as achievable in a typical round.

Ask what must stay

Do not begin by sending a long list of clauses to delete. That invites a separate defense of each provision and can consume weeks.

Ask the fund: “Which rights must remain?” The answer will usually identify its real priorities—such as the liquidation preference, reserved matters, and management board control. The remaining provisions become the starting point for discussion.

Once the scope is agreed, confirm the closed list of provisions to be removed in writing, even if only by email. Do it before counsel drafts the notarial minutes and resolutions. Otherwise, the scope of the changes may reopen just before the notary appointment.

Why the capital increase is the practical time to amend the document

Amending a sp. z o.o.’s governing document requires a shareholder resolution recorded by a notary under Article 255 § 3 of the Commercial Companies Code. The amendment takes effect only when entered in the KRS. The capital increase in the investment round already entails the relevant resolutions, notarial procedure, and registration. A separate amendment later repeats costs and coordination.

Sources: biznes.gov.pl guidance on changes in share capital and the Minister of Justice’s regulation of June 28, 2004, on notarial fees.

Put proposed deletions, higher thresholds, and any sunset provision into the amendments being prepared for the round. This is generally the most efficient opportunity—not an absolute bar on acting earlier. If an existing clause seriously obstructs operations, the cost of waiting may exceed the cost of a separate amendment.

What can derail the transaction timetable

The formal steps look simple, but document approvals, signatures, and notary availability can push a round back by months.

Follow the required sequence

1. Hold an extraordinary shareholders’ meeting and have its resolutions recorded by a notary. Use separate resolutions for the capital increase and the amendment to the governing document.
2. Have the new investor make its declaration to subscribe for shares before a notary.
3. Pay the cash contribution into the company’s bank account.
4. Provide the company with a scan of the notarial deed and confirmation of payment.
5. Apply to enter the changes in the KRS after steps 1–4.

Filing before the subscription declaration or payment confirmation is available can result in a request to remedy deficiencies, adding weeks.

Plan for familiar delays

In the case examined, minutes drafted in July did not reach the notary until late September—approximately two and a half months later.

Resolve powers of attorney early

Article 243 § 1 of the Commercial Companies Code requires a power of attorney for the shareholders’ meeting to be in writing on pain of invalidity; it does not require a notarial deed. Article 25(2) of the eIDAS Regulation gives a qualified electronic signature the legal effect of a handwritten signature.

Not every notary, however, accepts a power of attorney presented solely as an electronically signed file. Practice is not uniform. Ask the particular notary how the document must be presented before the meeting. If the power is signed by hand, allow time to deliver the original.

Collect powers of attorney while the minutes are being drafted, not afterward. Obtaining an authorized signatory’s signature from an institutional shareholder, including a fund or ASI, may take longer than expected.

Build protections into the first round

If the investor has not yet entered, negotiate provisions you may struggle to change later.

1. Sunset provisions. Specify when selected rights are intended to expire—for example, on a later capital increase or after a defined period. “Sunset clause” is not an institution expressly named in the Commercial Companies Code. Its effectiveness depends on the type of right and precise drafting; see the consolidated text of the Code.
2. Thresholds that accommodate growth. A PLN 25,000 asset-disposal threshold might appear manageable at seed stage but obstruct day-to-day activity as the company scales. Set limits with planned growth in mind.
3. A 1× non-participating liquidation preference as a starting point. An uncapped participating multiple can be economically aggressive. In a mid-value exit, it may leave the founders and a new investor with nothing. For discussion of preference structures, see Balcarek, Ius Novum (2022).
4. An agreement to vote for a right’s expiry. An undertaking in the investment agreement is an alternative to a sunset clause. It binds the parties to that agreement and provides a basis to demand performance, but does not automatically amend the company’s governing document.

Check for public-program restrictions

A fund participating in a PFR Ventures, NCBR, BRIdge, or other publicly funded program may not be free to waive particular clauses. PFR Ventures documentation defines binding investment-agreement terms; breaching them may lead to funding being refused or an obligation to repay it. The restriction is contractual, not statutory, but it can still bind the fund.

Before negotiating, ask directly whether any right is required by a public funding program and cannot be modified.

What a new investor will find in due diligence

A later investor entering a company with an extensive existing fund-rights package faces two concerns.

First, exit economics. The existing liquidation preference can reduce the proceeds available to the new investor at a low or moderate exit price. Article 174 § 3 of the Commercial Companies Code permits share preferences relating to dividends, votes, and participation in assets on liquidation. The order of priority depends on the corporate documents, not simply on which investment round came first.

Second, operational control. Reserved matters, conditional quorum, and the earlier fund’s right to dismiss management board members may make important decisions dependent on that fund’s consent.

Before agreeing a valuation, the new investor should have a complete cap table—a record of who holds the company’s shares—and a waterfall model showing how exit proceeds would be distributed. Test at least these scenarios:

If the new investor discovers the full package only in due diligence, it may revisit the valuation or entry terms. Prepare the analysis before the other side does.

How we can help

Inventorying rights, agreeing amendments, and completing the notarial and registration steps are distinct stages, each capable of delaying the round. We support companies at three levels:

1. Rights inventory and negotiation priorities. We identify each investor right provision by provision, classify it, and provide a table and recommendations for discussions with the fund.
2. Inventory, negotiations, and transaction documents. We agree the scope of changes with the fund, draft the extraordinary meeting minutes and separate resolutions for the capital increase and amendment, and prepare the consolidated governing document.
3. Management of the full round. We coordinate with the fund, collect powers of attorney, arrange the notary appointment, manage the notarial steps and subscription declaration, and prepare the KRS application.

If you are preparing another round and want to know what can be changed, contact us.

Frequently asked questions

Which existing fund rights are most likely to be negotiable?

In the case discussed, the fund removed the put option and voluntary redemption at a premium—both founder-sanction mechanisms. Higher reserved-matter thresholds and limiting a conditional quorum to selected decisions may also be worth proposing. That outcome does not mean every fund will agree.

Why is a liquidation preference harder to remove?

It directly affects the fund’s return when the company exits. Removing it changes the investment economics. If you can negotiate before the fund enters, a 1× non-participating structure is a more useful starting point than trying to remove an embedded preference in a later round.

Can a majority amend the governing document without the fund?

A shareholder resolution is required. If the document requires the fund’s presence for a quorum or unanimity for the amendment, a voting majority alone may not be enough: the fund can withhold attendance or vote against the change. Bear in mind the interpretive uncertainty concerning a quorum tied to a named shareholder.

How long will a capital increase and amendment take?

In the case examined, about two and a half months passed between drafting the minutes and the notary stage. Shareholder review, notary availability, and powers of attorney caused delays. The subscription declaration, contribution, and KRS review add further time after the notarial meeting.

Should the company amend its document outside a round?

Generally, combining the amendment with a round avoids repeating notarial, registration, and coordination work. A separate amendment can still make sense if a clause is obstructing current operations so severely that waiting costs more.

What should founders negotiate at the first round?

Consider precisely drafted sunset provisions, reserved-matter thresholds that will remain workable as the business grows, and a 1× non-participating liquidation preference. These choices are easier to address before the rights become part of the existing fund’s agreed package.