A draft bill amending the Civil Code and the Code of Civil Procedure, prepared by the Civil Law Codification Commission, has been published on the website of the Ministry of Justice. The draft is referred to as a “minor amendment to estate law”. Although the draft is not currently included in the list of legislative and programme works of the Council of Ministers, it is worth looking now at the direction of further changes in estate law, in particular because the Commission proposes introducing regulations concerning the rules for the judicial division of a business.
What do the changes proposed by the Commission concern?
The Civil Law Codification Commission proposes solutions concerning, among other things, the rejection of estate and the revocation of a will. In addition, the draft provides for the introduction of detailed rules for court proceedings concerning the division of a business. The purpose of these new regulations is to protect a business against fragmentation and to enable the heir to continue conducting business activity.
Proposed changes concerning the statement on acceptance or rejection of inheritance
The published draft provides for changes concerning the beginning of the period for submitting a statement on acceptance or rejection of estate. Under the currently applicable provisions, an heir may submit such a statement within six months from the day on which they learned of the basis for being called to inherit. This means that the heir must correctly determine the moment from which the period for submitting the relevant statement begins to run. In practice, this may be problematic for persons who become entitled to inherit only at a later stage.
Submitting the statement in advance may, in turn, have serious consequences for the heir. Following a resolution of the Supreme Court, in most cases it is assumed that a statement on rejection of inheritance made by a person in relation to whom the period for rejecting the inheritance has not yet begun to run is ineffective. However, there are also judgments in which the Supreme Court’s reasoning was not approved. These discrepancies, as well as the need to introduce uncomplicated regulations in this respect, were also noticed by the Commission, which proposed a change to the commencement of the period for submitting a statement on acceptance or rejection of inheritance.
According to the proposed solution, such a statement could be submitted from the moment the inheritance is opened, but no later than within six months from the day on which the heir learned of the basis for being called to inherit.
The draft also provides that a statement on rejection of inheritance would cover all bases for inheritance — under a will or under the law — unless the scope of the statement was expressly limited by the heir.
At the same time, submitting a statement on rejection of inheritance that does not raise doubts would mean that the heir who submitted such a statement would not have to participate in the probate proceedings.
Proposed changes concerning the revocation of a will
The Commission’s draft also provides for the addition of Article 947¹ of the Civil Code. According to the proposed wording of the article to be added, the revocation of a will by which a previous will was revoked restores the effect of that previous will, unless a different intention of the testator follows from the content of the will containing such revocation. This solution introduces a rule for cases where several wills have been made and the will that revoked an even earlier will is then revoked. In such a case, the will that had been revoked earlier regains effect. Resolving the issue of revocation of an earlier revocation of a will would eliminate doubts and differing positions presented in legal doctrine.
Proposed changes concerning special rules for the division of a business
Importantly, the Civil Law Codification Commission drew attention to the need to protect a business in the course of division proceedings against fragmentation, undertaking an attempt to introduce statutory regulations in this respect. For this purpose, it proposes using the already existing provisions concerning the abolition of co-ownership of agricultural holdings.
What would this mean for heirs inheriting a business?
First of all, it would mean determining specific rules of procedure in the event of inheriting a business and its judicial division. The proposed solutions prefer awarding the business to one of the heirs in a situation where the division of the business would threaten the continuation of business activity. There is, of course, no problem if the heirs agree as to what they want to do with the inherited business.
In practice, however, it happens that a family business is run by one of the heirs or only by some of them, and these persons do not intend to give up further activity, often remaining in conflict. At the same time, they are not always able to pay off the remaining heirs, who may be interested in selling the business and dividing the funds obtained. According to the Commission, the proposed changes are intended to respond precisely to this type of situation.
The Commission proposes introducing a preferential method of division consisting in awarding the business to one of the heirs if the division of the business would threaten the continuation of business activity. If the heirs do not reach an agreement as to whom the business should be awarded, priority would be given to the heir who runs the business or works in it on a permanent basis. The draft also provides for criteria allowing the court to determine which heir should be awarded the business in a situation where several heirs declare their willingness to take it over. Additionally, which is particularly important and appears to be the most controversial, the possibility is proposed of reducing the payments from the business due to the remaining heirs.
What is the significance of the proposed changes for heirs?
The Commission’s proposal is intended to simplify the proceedings for a further heir who, upon learning of the testator’s death, submits a statement on rejection of inheritance as a precaution, despite the fact that other heirs precede him or her. At present, an heir who submits a statement before learning of the basis for being called to inherit is exposed to the risk that the statement will not be effective.
Standardising the beginning of the period from the moment of the testator’s death is intended to be a significant simplification for heirs, while at the same time ensuring greater certainty as to the legal situation connected with being called to inherit. The changes would eliminate the problem of premature statements on rejection of inheritance submitted by cautious heirs who are determined that they do not wish to inherit, in case they should nevertheless become entitled to inherit.
According to the Commission, the special rules for the division of a business are intended to protect it against fragmentation through the allocation of individual components of the business to many persons. The assumption is that one heir should be able to continue the business activity conducted by the testator. A significant change for heirs may be the possibility of spreading payments into instalments and, above all, reducing them on condition that the activity is continued. After all, in most cases the aim is to ensure the continued operation of family businesses after the entrepreneur’s death. Nevertheless, introducing the possibility of reducing payments for taking over a business on the same principles as in the case of agricultural holdings may give rise to controversy.
For now, this is only a proposed draft bill adopted by the Civil Law Codification Commission. However, it is worth following the further course of the draft concerning subsequent changes in estate law. Currently, the list of legislative works of the Council of Ministers includes draft UD30 of the bill amending the Civil Code and the Code of Civil Procedure, which provides, among other things, for changes concerning wills and the introduction of an audiovisual oral will.
