3 Tools That Help Make a SHA Enforceable in Poland

22.07.2025

• 1. Irrevocable Power of Attorney
• 2. Pledge of Shares
• 3. Call or Put Options
• Conclusion
• Contact our lawyer for more details

Poland has recently become one of the leaders in M&A activity among EU countries. Globally, English law is typically applied to M&A deals. It is straightforward, well understood, and offers a broad set of tools that enable flexible structuring of even the most complex transactions. Additionally, it is familiar to lawyers and courts worldwide who handle M&A disputes.

Recently, Polish courts have emphasized that certain deal structures commonly used in M&A can, in principle, be applied under Polish law, for example, based on the principle of freedom of contract. Nevertheless, it remains simpler and safer for the parties to subject their transaction documents to English law. Choosing English law for such deals is entirely lawful in Poland. However, even when a deal is structured under English law, practical issues may arise – certain clauses might prove unenforceable in reality.

The essence of any legal mechanism lies not only in its content but also in its enforceability. A provision in a contract – even if well drafted – does not guarantee performance in practice. Parties must carefully consider how to ensure enforcement if the other side refuses to sign documents, avoids registration formalities, or becomes unresponsive.

Each shareholders' agreement (SHA), or “umowa wspólników” in Polish, concluded as part of a venture capital or M&A deal, sets out the ground rules for cooperation and includes tools to protect the interests of the parties (the investor and the startup). Mechanisms such as drag-along, tag-along, ROFR, pre-emption rights, and others have become standard elements in any SHA.

This article explores key tools for compelling performance under the SHA – ensuring the mechanisms actually work and are not just attractive wording on paper.

1. Irrevocable Power of Attorney

An irrevocable power of attorney is one that the principal cannot revoke before its expiry, except in cases specified by law or in the PoA itself. If the document does not explicitly state that it is irrevocable, then according to the Polish Civil Code, it may be revoked at any time – unless the principal waives that right for reasons justified by the nature of the legal relationship on which the PoA is based. This was confirmed by the Polish Supreme Court*, which noted that a clause making a PoA irrevocable does not exclude the principal’s right to revoke it for valid reasons.

In the context of securing enforceability in deals, an irrevocable PoA works as follows: one shareholder grants another (or, for example, a company director/officer) an irrevocable power of attorney that allows the latter to act on behalf of a non-cooperative party.

Irrevocable PoAs are especially effective in drag-along scenarios – where majority shareholders (or a group holding a certain % of shares) have the right to require minority shareholders to sell their shares on the same terms, if a buyout offer is received.

• Example: A majority investor agrees to sell the company and informs the minority founder shareholders, demanding they join the deal. The minority is obliged to cooperate but may, in practice, avoid signing the share purchase agreement (SPA), registration forms, or ignore communication. If the majority already holds an irrevocable PoA from the minority, they can sign all required documents on their behalf, and the transaction proceeds regardless of the minority's behavior.

Important: An irrevocable PoA is effective only if it complies with the requirements of the applicable jurisdiction. First and foremost, it must explicitly and precisely state which actions the attorney is authorized to perform. Formal requirements may also apply.

In Poland, there is a distinction between the irrevocability of the PoA itself and the obligation not to revoke it. The Supreme Court emphasized that while an irrevocable PoA authorizes the agent to act, the principal’s obligation not to revoke it may still be breached – leading only to liability for damages.

Judicial practice has established that even a clause under the Civil Code regarding irrevocability does not prevent revocation for serious reasons*. Moreover, although not extensively addressed in case law, some court opinions suggest that an irrevocable PoA could be revoked (or challenged as invalid) if the attorney acts contrary to the purpose of the PoA or the nature of their authority. This view was mentioned in the Supreme Court's ruling** , in a case related to company law and an attorney exercising shareholder rights against the will of the principal.

Therefore, drafting the text of an irrevocable PoA requires special care. It should clearly demonstrate the attorney’s firm intention to waive the right to revoke, so their actions remain within the defined scope and nature of the authority. The PoA should explicitly state:

• that it is irrevocable;
• that it secures specific obligations under the SHA;
• that it remains valid until all SHA obligations are fulfilled (or the SHA expires).

If the actions authorized by the PoA are to be performed in Poland, the PoA should ideally be governed by Polish law, executed in writing, and notarized. If the principal cannot come to Poland, the PoA should be issued abroad.

Foreign documents must be properly certified. Normally, this means:

• affixing an apostille (for documents from countries that are parties to the Hague Convention of 5 October 1961), or
• consular legalization.

Keep in mind: an apostille does not validate the content or legality of the PoA – only the signature and stamp of the certifying official (e.g., a notary). Therefore, to ensure a foreign-issued PoA is effective in Poland, it’s best to have it reviewed in advance by a Polish lawyer.

For some countries with bilateral agreements with Poland (e.g., Austria, Estonia, Italy), an apostille may not be required. However, in practice, using such documents in Poland may still be difficult. We recommend applying an apostille as a precaution.

Once in Poland, the PoA must be translated by a sworn translator.

All of these steps take time – signing, shipping, translating – so we strongly recommend preparing the PoA in advance and storing a ready, notarized, and translated version (and optionally, a certified copy) in a secure place.

2. Pledge of Shares

A pledge of shares is a security mechanism whereby one party grants another the right to enforce against their shares if they breach the obligations under a deal - i.e., upon the occurrence of certain events (default).

A share pledge gives the creditor more control over the debt recovery process, including the right to sell the shares. Although the creditor does not automatically become a shareholder, they are entitled to satisfy their claims from the pledged asset, making this a valuable tool in riskier transactions.

A pledge can be especially effective in enforcing mechanisms like the Right of First Refusal (ROFR). If a shareholder wants to sell their stake to a third party, they must first offer it to existing shareholders on the same terms unless otherwise stated in the pledge or in the company’s Articles of Association.

• Example: Under the SHA, a founder must first offer their shares to the investor but attempts to bypass this by selling directly to a third party. If a pledge is in place, such a breach of ROFR is treated as a default event. The investor can then: (i) initiate transfer of the stake to themselves, (ii) block registration of the transaction with the third party (since the pledge is recorded in the register), (iii) retain corporate control.

The pledge is an effective protection mechanism because, generally, the owner of the pledged asset can only dispose of it with the consent of the pledgee. Failure to obtain required consent may result in the pledge being invalid. Therefore, all shareholders should carefully review the company agreement to avoid legal issues related to pledging shares. The terms of the pledge agreement must also be drafted precisely to ensure they can be effectively enforced later on.

Important: In Poland, pledges over company shares are typically established as registered pledges under the Act on Registered Pledges. While Polish law also provides for possessory pledges (regular pledges), they are not used for shares in limited liability companies due to legal and practical limitations. Registered pledges differ in their establishment formalities (requiring notarized signatures and registration in the Pledge Register) and allow for contractual out-of-court enforcement, provided this is explicitly agreed in the pledge agreement.

The Polish Pledge Register is a public register, which means that anyone can access it to verify whether an asset (including company shares) is encumbered with a registered pledge and in favour of whom. Entries in the register enjoy a presumption of accuracy and validity (legal presumption), meaning that third parties may rely on the information contained therein. In particular, a registered pledge is effective against third parties upon its entry into the register.

The Polish Pledge Register is a public register, which means that anyone can access it to verify whether an asset (including company shares) is encumbered with a registered pledge and in favour of whom. Entries in the register enjoy a presumption of accuracy and validity (legal presumption), meaning that third parties may rely on the information contained therein. In particular, a registered pledge is effective against third parties upon its entry into the register.

3. Call or Put Options

An option is an agreement between deal parties that gives one of them (the option holder) the right, in the future, to either buy (call option) or sell (put option) a stake in the company at a pre-agreed price, within the option period and upon the occurrence of certain conditions.

Options can also serve as instruments for enforcing contractual obligations.

Let’s take the tag-along right as an example – a tool that protects the interests of a minority shareholder when the majority decides to sell their shares to a third party. The idea behind a tag-along is simple: if the majority shareholder decides to sell their shares, the minority shareholder has the right to join the deal and sell their own shares under the same terms.

Suppose the majority shareholder intends to sell to a third-party buyer. The minority shareholder notifies them of their intention to exercise the tag-along right, but the majority shareholder proceeds without including the minority in the transaction.

In such a case, the minority shareholder may exercise their put option (i.e., the right to sell), demanding that the majority shareholder buy out their stake at the agreed price. This creates a consequence that forces the majority to either include the minority in the deal or buy the shares directly – ultimately reducing the majority’s benefit from the deal.

Put options often include penalty mechanisms, such as a buyout at a premium price. For instance, if the majority violates the tag-along and excludes the minority, the latter may force them to buy the shares at a higher price – e.g., $120 per share instead of $100.

When structuring a deal under Polish law, one must bear in mind that call and put options are not explicitly regulated. To implement these mechanisms, parties often rely on more traditional instruments recognized by law: a preliminary share purchase agreement, a conditional or fixed-term share purchase agreement, or an irrevocable offer to sell shares.
This practice evolved from case law. Polish courts do not oppose the use of option-like mechanisms but interpret each deal on a case-by-case basis. The absence of specific regulation for option agreements – as noted by the Supreme Court*  means such contracts can be tailored freely by the parties. However, the legal weight of the agreement depends on its form: an option interpreted as an offer is weaker than one framed as a preliminary agreement.

When considering option clauses, it’s also worth thinking ahead: what if the counterparty tries to avoid performing under the option? In such cases, you can include penalty clauses, combine the option with a share pledge, or – as discussed earlier – issue an irrevocable power of attorney allowing the option holder to sign the final purchase or sale agreement and perform other actions needed to close the deal.

Conclusion

It is crucial to understand that an agreement in the SHA is only the foundation. Without a properly integrated enforcement mechanism, it may remain unenforceable.

A well-drafted SHA should include a combination of tools that can be “triggered” to allow the parties to effectively exercise their rights – even if the other party tries to avoid compliance.

Authors: Aleksander Skirpan, Inna Semenova 

The material was prepared for eGospodarka.pl.

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