Transformations of business companies are a valuable tool for responding flexibly to corporate needs — changes in internal structure, growth strategies, generational transitions, investor entry, or crisis management. However, it is a highly formalized process requiring thorough preparation and precise execution. Even seemingly minor mistakes can turn a useful step into a legal or financial risk threatening the company’s ongoing operations.
Main Risks and Common Mistakes
In domestic corporate transformations, several recurring mistakes can have time-consuming and costly consequences:
- Incorrect or incomplete identification of real estate in the transformation project — leads to uncertainty over ownership rights and may result in the rejection of registration in the land registry.
- Omission of parts of the transferred assets (accessories, related plots, equipment) — risk of disputes or the need for additional transfers.
- Overlooking obligations from received grants — companies must inform or obtain approval from the grant provider; violations may result in reduction or repayment of the grant.
- Failure to consider loan obligations and covenants — changes in the debtor or assets may trigger loan acceleration.
- Interrupted contractual relationships (change-of-control clauses) — risk of termination or penalties from business partners.
- Insufficient communication with employees — potential loss of key staff, entitlement to severance pay, and legal disputes.
- Formal deficiencies — failure to publish notifications on the company website, missing the 12-month deadline for registration, or incorrect determination of the decisive date can halt the transformation.
- Missing expert valuation where legally required.
- Failure to notify the tax authorities or comply with tax rules — e.g., incorrect continuation of asset depreciation, omission of registration for VAT or property tax.
Conclusion
A corporate transformation is a complex project requiring the alignment of legal, accounting, and tax procedures. To minimize risks, it is essential to conduct a thorough preliminary analysis, identify potential issues in advance, and carefully fulfill all legal and contractual obligations. Collaboration with experts experienced in practical transformations is strongly recommended.
This article is part of the latest issue of the Auditing magazine. It can be found on page 21 (page 22 in the PDF) under the title: “The Most Common Mistakes in Company Transformations from a Practical Perspective.”
