- Business in Poland -

Contract Due Diligence: Change of Control, Assignment Restrictions, and Other Hidden Traps in Agreements

Contract due diligence is a review of agreements to identify legal and commercial risks that may surface in a transaction (e.g., a share sale, an investor entry, or a reorganisation) as well as in day-to-day management of relationships with key counterparties. In practice, it is about spotting provisions that affect business continuity, costs, termination rights, and sometimes also criminal and compliance exposure (e.g., where approvals are not obtained properly or information obligations are breached).

In M&A transactions and financing, the most issues typically come from three groups of clauses: change of control clauses, assignment restrictions (no-assignment clauses), and “technical” provisions (e.g., consents, notices, cross-default). Missing them can be expensive, as they may trigger termination following a change of control, contractual penalties, or force renegotiation on less favourable terms.

Change of control clause: when a change of ownership triggers consequences under a contract

A change of control clause is a provision that ties specific legal consequences to a “change of control” over a party to the contract (e.g., a company). The consequences vary and can include: a notification obligation, a requirement to obtain consent, a termination right, automatic termination, price increases, loss of discounts, or acceleration of payments/performance.

The most common definitions of “control” refer to:

• acquiring a specified threshold of shares (e.g., >50%, >25% combined with special rights),
• obtaining a majority of votes at the shareholders’ meeting/general meeting,
• the right to appoint a majority of management board or supervisory board members,
• the actual ability to exercise decisive influence (so-called “de facto control” clauses).

The key risk in due diligence is that an agreement with a key counterparty may be directly impacted by a share sale. Even if the contract itself is not being transferred, a change in the company’s ownership may be treated as a trigger event giving the counterparty specific rights. As a result, an investor may acquire a company that can lose a strategic contract or will have to renegotiate it.

Termination after a change of control: typical scenarios

Termination after a change of control provisions usually come with short time windows (e.g., 30–90 days) and are often unilateral. Sometimes the trigger is the counterparty’s “reasonable concerns” or the absence of “reasonable assurance” regarding contract performance. Such a clause may be enforceable under Polish law if it remains within the limits of contractual freedom (Article 353¹ of the Polish Civil Code) and does not violate the nature of the legal relationship or principles of social coexistence.

As part of contract due diligence, it is worth confirming whether the change of control clause:

• covers only a direct sale of shares, or also indirect changes within a group (e.g., at the parent company level),
• triggers automatic termination or merely a right to terminate,
• requires prior notice and, if so, in what form,
• is linked to a right to renegotiate pricing or security/guarantees.

No-assignment clause: what it means and how it can block a deal

What does an assignment restriction actually mean in practice? Most commonly, it prohibits transferring rights (receivables) or rights and obligations under a contract to a third party without the counterparty’s consent. In transactions, it appears as an assignment clause and can be critical when it comes to:

• transferring contracts as part of a reorganisation (e.g., a business carve-out, an in-kind contribution),
• moving operational activities to another group company,
• assigning receivables to a factor or bank (financing),
• outsourcing and subcontracting (sometimes confused with assignment, but often addressed together in contracts).

Under Polish law, assignment of receivables is generally permissible, but it may be contractually limited (Articles 509–516 of the Polish Civil Code). If a contract expressly prohibits assignment or makes it conditional on consent, a breach may lead to contractual liability and, in certain cases, the assignment may be ineffective as against the debtor—depending on the clause wording and circumstances. That is why in due diligence it is not enough to note “there is a no-assignment clause”: what matters is the scope and the sanction.

Third-party consent in M&A: a practical approach to consents

Third-party consent in M&A typically arises in two situations: (1) where the contract requires consent for a change of control, and (2) where it prohibits assignment or a change of contracting party. In both cases, the risks relate to timing (the counterparty’s internal procedures), the content of the consent (conditions, amendments), and transaction confidentiality.

A common approach is to prepare a “consents package” in parallel with the deal process, with scenarios such as:

1. unconditional consent,
2. conditional consent (e.g., retention of key personnel, additional security, non-compete constraints),
3. renegotiating contracts before closing if the counterparty is expected to take a hard line.

Other hidden “traps” in contracts discovered during due diligence

Beyond change of control and assignment restrictions, contract risks in due diligence often include:

• cross-default — a breach under one contract triggers remedies or sanctions under others (especially in financing and supply arrangements),
• audit and inspection clauses — the counterparty’s rights to access documents, sometimes sensitive from a trade secret perspective,
• contractual penalties (Articles 483–484 of the Civil Code) — overly broad triggers, automatic accrual, stacking of penalties,
• unclear SLAs and KPIs — increased dispute risk regarding non-performance or improper performance,
• exclusivity clauses and non-compete obligations — potential conflict with post-transaction growth plans,
• termination for convenience — termination without cause on short notice, reducing contract value,
• formal requirements and service/notice provisions — ineffective notices can lead to missed deadlines and loss of rights.

What a contract review looks like in practice: from a contract list to an action plan

An effective review starts with mapping which contracts are “critical” for valuation and operational continuity (revenue, key supplies, licences, leases, IT, management agreements). Only then does the analysis focus on change of control, assignment, termination rights, and compliance-related risks.

In practice, the process follows three steps:

1. Identification — a complete set of contracts, amendments, T&Cs, orders, and actual performance practices (not just PDFs in the data room).
2. Assessment — risk classification: whether consent is required, whether there is a termination right, and the exposure to penalties and disputes.
3. Mitigation plan — decisions on consents, amendments, pre-closing renegotiations, conditions precedent in the SPA, W&I insurance, or indemnity mechanisms.

In transactions, a comprehensive due diligence review provides support by combining legal analysis with recommended actions and an implementation sequence.

This material is for informational purposes only and does not constitute legal advice, as the impact of specific clauses depends on the contract wording, performance context, and the purpose of the transaction.

If you need an assessment of change of control clauses, assignment restrictions, and the best route to obtain third-party consents, it is advisable to commission a review and action plan prepared by Kopeć & Zaborowski (KKZ) — Contact us.

FAQ – contract due diligence: change of control, assignment restrictions, and other hidden traps

Does a change of control clause always mean you need the counterparty’s consent?

No. It depends on the wording: sometimes it only requires notification, while in other cases it grants the counterparty a termination right or makes the contract’s continuation conditional on consent.

What does a “no-assignment clause” most often mean in B2B contracts?

Typically, it prohibits transferring receivables or transferring rights and obligations to another entity without the other party’s consent. The consequences of a breach depend on how the clause is structured and can include damages liability and, in certain cases, ineffectiveness of the assignment as against the debtor.

Does a share sale always breach a no-assignment clause?

Usually not, because a share sale is not an assignment of rights under the contract. The issue arises when the contract contains a change of control clause that treats a change of ownership as a trigger event for sanctions or a consent requirement.

How can you reduce the risk of termination after a change of control?

Common tools include conditions precedent in the transaction documents (making closing conditional upon obtaining consents), early discussions with key counterparties, and renegotiating contracts before closing where the clause is particularly restrictive.

What is the difference between “consent” and a contract amendment?

Consent is approval of a specific event (e.g., an assignment or change of control), often on a one-off basis. An amendment changes the contract going forward—for example, removing the change of control clause or softening the assignment restriction.

What should you look for in an assignment clause in transactions and financing?

Key points include the scope of the restriction (rights, obligations, receivables), the required form of consent, the sanction for breach, and whether any exceptions apply (e.g., assignment to a bank as security or for factoring).

Bibliography

[1] Act of 23 April 1964 – Polish Civil Code (consolidated text: Journal of Laws 2024, item 1061, as amended), in particular Articles 353¹, 483–484, and 509–516.