The ban on company chaining is being abolished

What does the ban on chaining mean?

The so-called ban on chaining of companies is currently regulated in Section 105a of the Commercial Code and applies exclusively to the legal form of a limited liability company. It is a restriction under which a limited liability company with a sole shareholder may not be the sole shareholder or founder of another limited liability company. In the second case, the restriction concerns the ability of a natural person to establish or be the sole shareholder in more than three limited liability companies.

In practice, these restrictions pose an obstacle especially for so‑called holding structures, in cases where:

• a holding company with sole shareholder intends to carry out its business activities through separate commercial companies, or
• their 100% subsidiaries wish to diversify their activities into separate companies.

Subsidiaries are, however, a common solution used by entrepreneurs to address practical economic, legal and structural aspects of their business.

The legal consequence of breaching the ban on chaining is the risk of the invalidity of a legal act, up to the dissolution of the company.

Why is this ban unnecessary?

In practice, the ban on chaining is often circumvented by artificially creating a multi‑member structure at the level of the shareholders of the holding company, or by including a related person in the ownership structure of the subsidiaries.

The explanatory report to the new Act on the Commercial Register itself acknowledges that both restrictions have proved ineffective in practice. The ban on chaining can be easily and lawfully bypassed by involving an additional person in the company, with the result that it increases entrepreneurs’ costs, complicates transactions and prolongs processes related to corporate changes.

Change from August 2026 and its impact

The new Act on the Commercial Register also amends the Commercial Code and completely repeals Section 105a in its entirety. From August 2026, a significantly more liberal regime will therefore apply to entrepreneurs, which will be particularly noticeable in the areas of company formation, the purchase and sale of companies and business shares, as well as in overall changes to ownership structures.

The positive impact will manifest itself mainly in the substantial simplification of corporate structuring, and entrepreneurs will no longer have to devise complex strategies and plans when selling or restructuring companies. This legislative change will thus contribute to greater flexibility, especially for single‑member (i. e. sole shareholder) limited liability companies and for natural persons who are the sole shareholder in multiple companies.