Buy-side legal due diligence in Poland: defining scope and using the findings in the transaction

How should the buyer define the scope?

Start with the investment thesis: what is the buyer acquiring and where does the value sit? For a technology target, software rights, customer contracts, product security and the team may be decisive. In a services business, key people, contractual liability and customer concentration may matter more. For a regulated business, permits and operational compliance can determine whether the transaction is viable.

The scope also depends on structure. In a share deal, the buyer acquires shares while the target remains party to its contracts, owner of its assets and liable for its obligations. The review therefore covers the target’s legal position and history within the agreed parameters. In an asset deal, the key question is whether selected assets, contracts, rights, employees and permits can transfer effectively and which liabilities follow them. The acquisition process is explained in Sale of shares in a Polish limited company — procedure.

How should materiality and red flags be defined?

The parties should agree a monetary threshold for contracts, disputes and liabilities. It should not replace qualitative judgment. A low-value agreement may contain an exclusivity restriction that blocks growth, while a free licence may be essential to the entire product.

A red flag is not every irregularity or missing document. It should be an issue capable of affecting the decision, structure, value or ability to close. A useful classification distinguishes:

• deal blockers or matters requiring action before signing;
• issues to be cured before closing;
• risks requiring contractual protection;
• operational matters for post-closing remediation; and
• information gaps that cannot yet be assessed.

Which areas normally require review?

The exact scope depends on the target, but it commonly includes corporate matters, title to shares, material contracts, finance and security, employment and B2B contractors, intellectual property, property and assets, disputes, data protection, compliance, permits and insurance.

Particular attention should be paid to change-of-control provisions, transaction-related termination rights, third-party consents and assignment restrictions. The buyer should also verify whether the target validly acquired the rights to its core product from employees, contractors and suppliers. Possession of files or use of a system does not prove the right to sell or continue developing it.

Tax, financial, technical, cybersecurity or environmental work may require other advisers. Workstreams should be coordinated so that a material issue does not fall between teams.

How should the data room and Q&A process be managed?

The data room should have an index, logical folders and an access history. The buyer should maintain one list of missing materials and questions, distinguishing between a document that has not yet been uploaded and confirmation that it does not exist. Management explanations are important but do not always replace evidence.

The most sensitive information can be disclosed in stages. Employee, customer and user data should be limited, anonymised or aggregated until identification is necessary. In deals between competitors, access to prices, margins, strategy and customer lists may require a clean team or comparable restrictions.

The seller should prepare its documentation and risk narrative in advance, as discussed in How to prepare a Polish company for legal due diligence. The buyer should nevertheless verify completeness and significance independently.

How should findings affect the transaction documents?

The report should not end with a description. The parties must select the appropriate mechanism:

• condition precedent where the deal should not close without consent, a permit or a specified action;
• pre-closing covenant where the seller can correct a document, obtain consent or resolve an issue;
• price or payment adjustment where the matter affects value or creates an identifiable cost;
• representation and warranty where the buyer requires confirmation of a state of affairs and a remedy if it is incorrect;
• specific indemnity where a known risk should be allocated under separate rules rather than the general liability cap;
• escrow or holdback where the buyer needs an effective source of recovery; or
• post-closing integration action where remediation can safely occur under the buyer’s control.