Mr X attempted to convert his sole proprietorship into a limited liability company after a conflict erupted, which also spilled over into a corporate conflict in the family joint-stock company. Prior to the conversion, he entered numerous properties in the fixed assets register and a controlling interest in the family joint-stock company worth more than PLN 1 billion. Significantly, he made the declaration of conversion after he had information that his wife, who remained in the system of joint property with him, had filed a suit for property separation and objected to an independent disposition or obligation to dispose of assets constituting the joint property in excess of PLN 50,000.
Stan faktyczny
Mr X filed an application to register the conversion of a sole trader with the wrong court of registration. The court registered the company within 7 days. Already after the registration of the transformation, Mr X drew up before a notary an “annex to the declaration on transformation of an entrepreneur into a limited liability company”, in the content of which he listed the real estate, the value of which he collectively stated in the register of fixed assets and intangible assets at the time of the transformation. Subsequently, based on the transformation and the “annex to the declaration of transformation”, he submitted applications to the land and mortgage registers to disclose the limited liability company as the owner of the real estate.
Udzielenie zabezpieczenia
Mr X’s spouse applied for security for her claim to establish under Article 189 of the CCP that the declaration of conversion was invalid. The District Court in Bydgoszcz granted her security consisting in:
- prohibiting the transformed company from disposing of or entering into any agreement obliging it to dispose of a controlling interest in a company in the manufacturing sector,
- prohibiting a spouse from increasing the share capital in a converted company or merging that company with any other entity,
- prohibiting the spouse from disposing of any shares in the transformed company or entering into any agreement obliging the spouse to dispose of those shares. At the same time, the Court threatened the spouse or the transformed company represented by the spouse with payment of the sum of PLN 2,000,000 for each infringement.
The Court of Appeal in Gdańsk dismissed the complaints of Mr X and the transformed company and upheld the security in full. In justification of the order it stated:
In fact, the entitled person substantiated with the documents attached to the said application that, pursuant to Article 551 § 5 of the CCC, a transformation of the sole proprietorship conducted by a natural person, based on an enterprise consisting of assets covered by the statutory marital community (including real estate, rights of perpetual usufruct) was performed, which constitutes a legal act leading to the disposal of this enterprise and the real estate and rights of perpetual usufruct included in it, within the meaning of Article 37 § 1 items 1 and 3 of the CCC, and therefore requiring the consent of the other spouse. Thus, in the present case, the entitled party alleged that we are dealing with a unilateral legal act - submission of a declaration on transformation (Article 584(5)(2) of the Code of Commercial Partnerships and Companies), without the consent of the spouse, required pursuant to Article 37 § 1(1) of the Code of Commercial Partnerships and Companies, and therefore invalid (Article 37 § 4 of the Code of Commercial Partnerships and Companies in connection with Article 58 of the Civil Code). The invalidity of this act as an obligatory element of the conversion procedure (referred to in Article 584(5) of the Code of Civil Procedure) means, on the other hand, that the conversion has not taken place and this is not remedied by the entry made in the register." The freezing order is final and the main proceedings are pending
This position has been shared by more than twenty decisions of the land and mortgage register courts, which refuse to register the limited liability company as the owner of the property.
Komentarz
One should fully agree with the view presented by the Court of Appeal in Gdańsk. Indeed, there is no doubt that the declaration on transformation of a sole proprietorship into a limited liability company is a unilateral legal act consisting in the disposal of joint assets. Such an act requires the consent of the spouse remaining in joint property ownership (art. 37 § 1 KRiO). The absence of such consent results in the invalidity of such an act (Article 37 § 4 KRiO). There is no indication in the KRiO that we are dealing with another type of nullity sanction, and therefore it is absolute nullity (Article 58 § 1 KC). Absolute nullity, on the other hand, is characterised by the fact that it occurs from the very beginning of the action and consists in the courts and authorities applying the law taking it into account ex officio at every stage of the proceedings.
It follows from the comments cited above that courts commonly take this absolute nullity into account ex officio. And it follows from the very construction of Article 189 of the CCP that a judgment in a case for determination, in which the Court has granted security, will only have a declaratory character. Therefore, the view of the Court of Appeal in Gdańsk that the invalidity of a material action is not in any way cured by an entry in the Register of Entrepreneurs of the National Court Register is also fully justified.
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