Prologue

The acquisition of real estate through a corporate structure constitutes a particularly widespread practice in the Greek market, especially when it concerns investment properties, tourism facilities, commercial properties or high-value real estate. The choice, however, between the direct purchase of a property from a company and the acquisition of the company that already owns the particular property is not merely a business or tax choice. These are two different transactions, which entail different legal consequences, different risks and a different scope of review. In the first case, the company itself acquires ownership of the property and becomes the holder of the relevant proprietary rights, whereas in the second, the investor acquires corporate interests, as a result of which the property remains under the ownership of the company. This distinction is particularly important, since the company constitutes a separate legal entity, with its own assets and liabilities, independent from the assets of its partners or shareholders.

The Direct Purchase of Real Estate by a Company – Corporate, Property and Tax Due Diligence

If a company is to directly purchase a property, the due diligence must begin with the company itself and lead to the property, and vice versa. At corporate level, the exact legal form of the company, its articles of association, its corporate purpose and the registrations in force with the General Commercial Registry (G.E.MI.) must first be examined. It is of particular importance to establish which corporate body is competent to decide on the sale of the property and who has the authority to represent the company and sign the relevant agreement. Before the signing of the deed, it must therefore be examined whether the signatory actually has the required authority to represent the company. Tax-related risks associated with the taxation of the property prior to the purchase and with the Special Real Estate Tax must also be examined by a tax advisor. At the level of the property, the legal due diligence must include the chain of title, any mortgages, prenotations of mortgages, attachments, claims, easements and other encumbrances, as well as the accuracy of the description of the property in the title deeds and cadastral registrations. At the same time, particular attention is required at the level of the technical due diligence by a specialized engineer for the investigation of a range of matters, such as planning and zoning issues, buildability, the legality of existing constructions, any unauthorized constructions, the required certificates and supporting documents for the transfer, etc. The purchase of real estate should not be treated as a simple sale and purchase, but as a complex transaction in which corporate, property and planning law intersect. Proper preparation prior to the signing of the deed can prevent significant risks, particularly when the investment concerns a high-value property or a property that is intended to be commercially exploited.

Acquisition of a Company Owning Real Estate – The Risks of a Share Deal and the Importance of Due Diligence

The situation is different where the investor does not directly purchase the property but acquires the shares or corporate interests of the company that already owns it. This particular form of transaction may present significant advantages from a business perspective, particularly where the company already has an established business activity, contracts, permits, financing arrangements or a portfolio of properties. At the same time, however, it entails increased requirements in terms of legal and financial due diligence, since the purchaser does not merely acquire a specific property, but enters into an existing corporate structure and indirectly assumes the risks associated with it. For this reason, the due diligence cannot be limited to the title to the property. The company’s corporate books and records, financial statements, tax liabilities, bank debts, existing agreements, any pending judicial or administrative proceedings, employment liabilities, debts to the State and social security institutions, as well as any other liability that will remain with the company following the change in its shareholding or corporate structure, must be examined. It is also particularly important to examine whether the property actually constitutes an asset of the company and whether there are any rights or claims of third parties that could affect its exploitation. In practice, the choice between an asset deal, i.e. the direct purchase of the property, and a share deal, i.e. the acquisition of the corporate interests, must be made after a comprehensive assessment of the legal, tax and financial consequences of each solution. At the same time, particular attention is required where the company and its shareholder or partner are, in practice, treated as one and the same person. The autonomy of the legal entity is not unlimited. The case law of the Supreme Court (Areios Pagos) has accepted that, in exceptional cases of abuse of legal personality, corporate autonomy may be lifted or disregarded. Decisions of the Supreme Court refer, among other things, to undercapitalization, commingling of corporate and personal assets, and the use of the company to avoid obligations or cause harm to third parties as indicative circumstances that may establish abuse. The same approach is also confirmed by more recent case law, where it is emphasized that the disregard of legal personality constitutes an exceptional measure and relates to circumstances such as the commingling of assets and the use of the company to avoid obligations or cause harm to third parties. Therefore, the corporate form should not be used merely as a formal shell for a transaction, but should be accompanied by genuine corporate organization, clear financial autonomy and separate management of assets. For the prospective investor, the examination of the company prior to the acquisition of its corporate interests is therefore equally important as the examination of the property itself.

Epilogue

The choice of a company as a vehicle for the acquisition and exploitation of real estate may constitute an effective tool for investment and business planning; however, it does not guarantee legal or financial security. The critical issue is the selection of the appropriate structure for the particular investment and the prior comprehensive examination of all the parameters of the transaction. In the case of the direct purchase of real estate by a company, due diligence must focus both on the company’s legal standing and authority to act on its behalf and on the cleanliness of title, the encumbrances and the planning and zoning status of the property. Conversely, in the case of the acquisition of the shares or corporate interests of a company that owns real estate, the due diligence must be broader, since the investor essentially acquires an entire legal and financial position and not merely the property included among its assets. The case law of the Supreme Court also demonstrates that the autonomy of the company constitutes the rule, but may exceptionally yield when it is used abusively, a fact which makes proper corporation and asset organization even more important. The choice between the direct purchase of real estate and the acquisition of a corporate interest must therefore be made on a case-by-case basis, following a combined legal, technical and financial due diligence. Particularly in high-value transactions, the timely involvement of a lawyer, notary public, tax advisor and engineering consultant is not merely a formal procedure, but an essential prerequisite for limiting risks and safely completing the investment. The true value of legal due diligence does not, therefore, lie solely in establishing that a property can be transferred, but in ensuring that the investment is carried out through the appropriate corporate structure, with a clear understanding of the obligations and risks accompanying it and with the greatest possible legal certainty for the investor.