Hereditary administration will rescue a company in the case of the death of the company’s owner

In the present legislature, there are no regulations which would allow for a fast take-over of an inherited company. Heirs face many organisational and legal problems. And in many cases, the death of the owner also means the end of the operation of the owner’s enterprise.

This will change when the Act on Hereditary Administration of a Natural Person’s Company, which was passed on 5 July 2018, comes into force.

The major goal of the Act is to remove obstacles to heirs operating the company of a deceased natural person.

The Act allows for the continuation of the company’s operation by entrusting it to hereditary management board. Such a management board will be appointed by the company’s owner in his/her lifetime or, for example, by a spouse of the company’s owner, however with the consent of all known heirs.

In addition, the Act stipulates that if the company’s owner does not appoint the hereditary management board in his/her lifetime, the heirs will have such a right for two months of the owner’s death. Then, the right will expire.

The Act ensures that companies of natural persons will carry on their operation after the owner’s death, because the company is perceived not only as an economic value or an asset, but as a social interest which provides jobs, as well.

As sole proprietorship is a common form of business activity, the changes set forth by the Act are very desirable. It is recommended that when the Act comes into force the owners of companies should establish hereditary management boards in case of their death like in the case of their last will.

Paweł Karasiński, Legal Counsel

Roksana Dworak, Lawyer