Increase of the share capital

Increase of the share capital

In the Polish legal system, the only business entities with share capital are a limited liability company and a joint-stock company. The law requires a minimum amount of the share capital for these companies, while the maximum amount is not specified. Importantly, in the course of operation of a limited liability company and a joint-stock company, the amount of their share capital may be changed, including by way of its increase. Discussed below are the circumstances in which the share capital in a joint-stock company may be increased.

The required amount of share capital in a joint-stock company

In principle, a joint-stock company is required to have a share capital of at least PLN 100,000.00. However, if justified by the nature of the company’s business activity, this statutory requirement may be increased. For example, banks must have a share capital equivalent to at least EUR 5 million, as calculated following the average exchange rate of the National Bank of Poland. 

Modes of increasing the share capital in a joint-stock company

The share capital in a joint-stock company may be increased:

  1. in an ordinary mode;
  2. with the use of the company’s own funds;
  3. in a contingent mode;
  4. without amendments to the company’s articles of association.

Ordinary share capital increase in a joint-stock company

Increasing the share capital in a joint-stock company in an ordinary mode involves the issuance of new shares or increasing the nominal value of the existing shares. In both cases, an amendment to the articles of association is required. The share capital in a joint-stock company may only be increased if 9/10 of the share capital has been paid up.

The new shares may be acquired by the shareholders by way of:

  1. an offer made by the company to specific addressees (private subscription); in such case, the offer should be accepted in writing, otherwise it will be null and void;
  2. an offer made in an announcement (open subscription); and
  3. an offer made solely to the shareholders (closed subscription). 

For the company’s share capital to be increased, a resolution amending its articles of association must be adopted by the general meeting of shareholders by a majority of three‑fourth of the votes (however, the articles of association may provide for stricter requirements in this respect).

An amendment to the articles of association must be entered in the register. As a rule, an application to the register court should be filed within 3 months of the adoption of the resolution. The share capital in a joint-stock company will be increased upon entry in the register.

Capital increase with the use of the company’s own funds

The share capital in a joint-stock company may be increased by a resolution of the general meeting. The sources of the capital increase may be the reserve capital and the supplementary capitals created from the profit, but only if they may be used for this purpose or if they were created as a result of a previous reduction of the share capital.

The law allows for the share capital to be increased with the use of the company’s own funds if the financial statements for the previous financial year, in which the company made a profit, have been approved, and there are no major concerns as to the company’s financial standing.

The shares created in such a mode of increasing the share capital may be acquired by the shareholders proportionally.

A special case of a capital increase in a joint-stock company with the use of the company’s own funds is an increase based on the share premium account. What is important, if the shares are acquired at a higher price than the issue price, the resulting additional paid-in capital is used to increase the supplementary capital.

Capital increase without amendments to the company’s articles of association

The share capital may be increased without amendments to the articles of association only if the articles of association so provide. The management board may be authorised in the articles of association to increase the share capital in a joint-stock company within a period of up to 3 years. The increase may be carried out once or repeatedly until the limit of the authorised capital is reached, but may not exceed three fourth of the share capital as at the date of the authorisation. The share capital in a joint-stock company may not be increased without an amendment to its articles of association if the increase is based on the company’s own funds. As a rule, capital increases without an amendment to the articles of association are based on cash contributions. The share capital is increased without amending the articles of association by a resolution of the management board adopted in the form of a notarial deed. Such a resolution replaces a resolution of the general meeting in that respect.

Contingent share capital increase in a joint-stock company

A contingent increase of the share capital in a joint-stock company may be carried out to:

  1. grant rights to holders of convertible bonds or bonds with priority rights, or
  2. grant rights to employees, members of the management board or the supervisory board in return for contributions in kind, in relation to their rights to a share in the company’s profit; 
  3. grant rights to the holders of subscription right certificates.

A contingent capital increase may not exceed twice the share capital at the date of the resolution adopted by the general meeting. A contingent capital increase is announced by the management board within six weeks of the date of its entry in the register, and the shares are acquired by way of a written representation made on the forms drafted by the company.

Summary

The share capital in a joint-stock company may be increased either in a procedure involving an amendment to the company’s articles of association or in a procedure under which such an amendment is not required. Contact Radkiewicz Lawyers Poland for legal support with corporate issues, such as changes of the company’s share capital. Our team consists of advocates and attorneys in law with broad experience in registration matters.

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General meeting of shareholders

General meeting of shareholders

The general meeting of shareholders is a governing body that only exists in a joint-stock company. A joint-stock company is a capital company with a legal personality. However, it cannot properly operate without its governing bodies. Described below are the tasks of the general meeting of shareholders and the ways in which it operates.

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Dividend

Dividend

The term “dividend” is inseparably linked to shareholders in a joint-stock company. Capital companies, including joint-stock companies, engage in operations usually meant to generate profit. A company may share its profit with its shareholders. Explained below are the questions of what a dividend is, who may receive it and in what amount. 

What is a dividend?

A dividend is simply a portion of the company’s profit meant to be distributed among the shareholders. For the profit to become a dividend, a resolution of the general meeting on the distribution of profits to the shareholders is necessary. 

Who is entitled to dividends?

As a rule, the parties entitled to dividends are the shareholders of the company. A shareholder’s claim to receive a dividend only arises upon the adoption of a resolution by the general meeting on the payment of dividends for a given year. Legal scholars also believe that the company’s articles of association may provide for a complete exclusion of the right to dividends (e.g. for companies operating not for profit).

In addition to shareholders, other entities entitled to dividends are the holders of utility certificates.

How are dividends distributed to shareholders?

As a rule, dividends are distributed proportionally to the number of shares held. If the shares are not fully paid up, the amount of the dividend is proportional to the payments made for the shares. The articles of association may provide for a different profit distribution framework.

What is the amount of the dividend?

The sums to be divided among the shareholders may not exceed the profits for the previous financial year, increased by the undivided profits from previous years and by the sums drawn from the supplementary and reserve capitals which were ring-fenced for dividends. However, that amount to be divided is reduced by the uncovered losses (also from previous years), own shares, and the sums allocated to the supplementary or reserve capitals. 

Some shares in a joint-stock company may be preference shares as regards the distribution of profit. Such shares give their holders the right to a higher dividend than they would be entitled to under the general rules described above. However, the dividend payable on such preference shares may not be more than 50% higher than the dividend on non-preference shares. 

What is the dividend day?

The dividend day is the day with reference to which the persons entitled to receive the dividends are determined. For a joint-stock company, which is not a public company, such persons are the shareholders who held shares on the date of the general meeting’s resolution on the distribution of profits. However, the articles of association may allow for the general meeting to set another date as the dividend day. 

In a public company, as well as in a company whose shares are registered in a securities deposit, the dividend day is determined differently, i.e. by an ordinary general meeting. In such a case, the dividend day may be set within a period between 5 days and 3 months from the date of adoption of the resolution on the distribution of profits. 

How are the dividends paid out?

As a rule, dividends are paid out within three months of the dividend day, on a date determined by a resolution of the general meeting or the supervisory board. If no such date is set by either of these bodies, the dividend must be paid out immediately after the dividend day. 

Is it possible to receive an interim dividend?

The articles of association may grant the management board the right to make advance payments towards the expected dividend, provided, however, that the company has the funds to make such interim payments and that it obtained a profit in the preceding financial year. For an interim dividend to be paid out, consent of the company’s supervisory board is required. An interim dividend may not exceed half of the profits earned in the financial year in which it is paid out, increased by the reserve capitals and reduced by the uncovered losses and own shares.

The management board must announce the payment of interim dividends at least 4 weeks before the payment date.

Summary

If a company earns a profit, it can share it with its shareholders by paying out dividends. In general, dividends are distributed to the shareholders in proportion to their holdings of shares. As a rule, it is the shareholders themselves who set the dividend amount and payment date by way of a resolution of the general meeting. At Radkiewicz Lawyers Poland, we specialise in providing ongoing legal support to commercial companies. We assist clients in drafting corporate documents, especially resolutions of the shareholders’ general meetings concerning the payment of dividends.

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Convocation procedure

Convocation procedure

The convocation procedure is related to the functioning of a joint-stock company. A joint-stock company is one of the two types of capital companies provided for in the Polish legal system. Each such company must have a share capital. The convocation procedure is a procedure held in a joint-stock company when its bodies decide to reduce the company’s share capital. There may be various reasons behind such decision, which may include some shareholders’ intention to withdraw from the company or which may be related to the company itself (e.g. the level of the share capital being too high). Below, we discuss the circumstances requiring the holding of the convocation procedure and explain its course.

General information on the reduction of share capital in a joint-stock company

A reduction of the share capital in a joint-stock company requires an amendment of its articles of association. As a rule, such amendment is made by a resolution of the general meeting, i.e. through a decision of the shareholders. A share capital reduction in a joint-stock company may be carried out in various ways, i.e. through redemption of some of the shares, a reduction of the nominal value of all shares, or through a division of the company into smaller entities.

For a share capital reduction to be effective, it needs to be notified to the registry court within 6 months from the date of the amendment of the articles of association and the adoption of the resolution to reduce the share capital.

What is a convocation procedure?

The convocation procedure is meant to protect the interests of the company’s creditors. The creditors are notified of the passing of the resolution on the reduction of the share capital before its registration with the National Court Register. This allows them to take measures to recover their claims against the company.

When does the convocation procedure begin?

Immediately after adopting a resolution on the share capital reduction, the company’s management board announces this fact in Monitor Sądowy i Gospodarczy (Court and Business Gazette). In the announcement, the company’s creditors should be summoned to file claims against the company within 3 months from its publication. Exceptionally, this time limit may be extended, if justified by the protection of the creditors. It is no longer possible to file an objection against the reduction of the share capital. According to legal scholars, the right to file claims may be assigned to other persons representing the creditors. The creditors’ tacit consent to the share capital reduction is also believed to be acceptable. 

The announcement in Monitor Sądowy i Gospodarczy should inform about the adopted resolution, specify the amount and the form of the share capital reduction, as well as explicitly summon the creditors to submit their claims. Any claims filed after the lapse of the time limit specified in the announcement will not be taken into account in the convocation procedure.

What claims are settled in the convocation procedure?

Claims settled in the course of the convocation procedure are those which are due and which are filed within 3 months of the announcement. 

The creditors may also request that their claims not yet due which emerged before the resolution on the share capital reduction be secured, provided that they prove not having received any security from the company, while the capital reduction poses a threat to such claims. As a rule, the payment under the claim in such circumstances is deposited by the court, although other ways of securing it are also available, such as establishing a mortgage on the company’s real property, creating a registered pledge and obtaining a bank guarantee or a surety.

When can a shareholder who is also a creditor recover their claim?

Under the convocation procedure, a company’s shareholder who is also a creditor may only recover their claim after 6 months from the date of announcement of the company’s share capital reduction.

When is the convocation procedure not held?

A reduction of the share capital does not always involve the convocation procedure. Polish law provides for situations in which this procedure is not required, namely:

  1. when the contributions towards the shares made by the shareholders are not returned to them, and the share capital, while being reduced, is also increased, at least to the original amount, by way of a new issue of shares which are fully paid,
  2. if the purpose of the share capital reduction is to balance losses sustained by the company or to transfer certain amounts to the reserve capital,
  3. in the event of redemption of the company’s own shares which were not transferred within the statutory time limit and whose value does not exceed 10% of the share capital;
  4. in the event of redemption of fully paid-up shares, when:
    • the redeemed shares are the company’s own shares acquired for the purpose of their redemption;
    • the shareholders whose shares are being redeemed will be satisfied from the company’s profit allocated for distribution (i.e. from dividends);
    • the shares are redeemed without any consideration to the shareholders, except for utility certificates;
    • the share capital reduction concerns a company that is being divided.

The exemptions referred to in points 1 and 2 above are only applicable if the value of the reserve capital does not exceed 10% of the company’s reduced share capital.

Summary

The convocation procedure is related to the reduction of the share capital in a joint-stock company. Its purpose is to protect the company’s creditors. However, it is not always held. In certain cases defined in the Code of Commercial Companies and Partnerships, the convocation procedure is not required. Nevertheless, its proper handling determines the effectiveness of the share capital reduction. It is therefore important to individually analyse in each case whether the obligation to carry out the convocation procedure applies. To do so, do not hesitate to contact Radkiewicz Lawyers Poland. We will support you through the entire share capital reduction process to ensure it is carried out in a timely and effective manner. 

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Redemption of shares

Redemption of shares

Redemption (repurchase) of shares in a joint-stock company is often linked to a reduction of its share capital. Share redemption may result from circumstances specified in the company’s articles of association or from generally applicable provisions of law. Described below are the situations in which redemption of shares may occur. We explain the share redemption procedure and clarify whether it always leads to a share capital reduction.

Redemption of shares – types

Redemption of shares may be voluntary (against remuneration or without remuneration), forced, or contractual (automatic). Forced redemption (leading to a repurchase of the shares by the company), automatic redemption and voluntary redemption of shares must all be provided for in the joint-stock company’s articles of association. A resolution on the redemption of shares must be published in Monitor Sądowy i Gospodarczy (Court and Business Gazette).

Voluntary redemption of shares 

Voluntary redemption of shares by way of their acquisition by the company may either be carried out against remuneration or without remuneration. Redemption of shares against remuneration requires a resolution of the general shareholders’ meeting specifying the amount of the remuneration, the legal grounds for the redemption of shares, and the method of reducing the share capital. In the case of redemption without remuneration, the resolution must specify the reasons for the lack of remuneration. Voluntary redemption may only be carried out once in a financial year.

Forced redemption of shares

The characteristic feature of forced redemption of shares is the fact that the consent of the shareholder whose shares are to be redeemed is not required. Forced share redemption is always carried out against remuneration. As stipulated in the applicable legal provisions, the remuneration may not be lower than the net asset value per share as for the previous financial year, reduced by the amount to be divided among the shareholders. Forced share repurchase resulting from an amendment to the company’s articles of association may not concern shares subscribed for prior to the registration of such amendment in the National Court Register. Similarly to the voluntary redemption of shares, forced share redemption also requires adoption and publication of a resolution of the general shareholders’ meeting. However, such a resolution should also state the reasons for the redemption.

Automatic redemption of shares

Automatic redemption of shares may only be carried out if an event the occurrence of which allows for such a possibility is provided for in the articles of association. Similarily to forced redemption, contractual redemption is also carried out against remuneration, which may not be lower than the net asset value per share as for the previous financial year, reduced by the sum to be divided among the shareholders. Under this share redemption mode, unlike under the two other modes described above, no resolution of the shareholders’ general meeting is required. Instead, it is the management board that passes a resolution on the reduction of the company’s share capital.

Purchase of the company’s own shares for the purpose of their redemption

As a rule, a company may not purchase its own shares. However, there are certain exceptions to this rule which include a situation in which the company’s own shares are acquired exclusively for the purpose of their redemption.

Utility certificates

It is a frequent practice that articles of association of joint-stock companies provide for utility certificates to be issued to shareholders in exchange for the redeemed shares. Utility certificates may be registered certificates or bearer certificates. However, they do not have a specified nominal value. In principle, utility certificates entitle their holders to participate in the dividends and in the balance of the assets of the company over and above the nominal value of the shares. However, utility certificate holders are not liable for any obligations attached to the redeemed shares, nor do they enjoy any such rights, except for those named above.

Should creditors be summoned to file claims?

Generally, redemption of shares is linked to a reduction of a joint-stock company’s share capital. As a rule, a share capital reduction results in the company’s obligation to summon its creditors to file claims against the company (the so-called ‘convocation procedure’). However, an exemption from this obligation applies with regard to fully paid-up shares in the following situations:

  1. the shares to be redeemed are the company’s own shares which had been acquired gratuitously for the purpose of their redemption;
  2. the remuneration of the shareholders of the redeemed shares is to be paid out of the company’s profit allocated for distribution among the shareholders;
  3. the redemption is carried out without any consideration payable to the shareholders (except for any utility certificates to be granted).

Summary

Redemption of shares is often linked to a reduction of a joint-stock company’s share capital. Redemption of shares should be provided for in the company’s articles of association. It may be carried out both with and without the consent of the shareholder concerned. Moreover, the shareholder will not always be entitled to remuneration in consideration for the redeemed shares. However, the shareholder may expect to receive a utility certificate in return, often making them eligible for a dividend from the profit obtained by the company in a given financial year. Radkiewicz Lawyers Poland has the knowledge and the experience in providing ongoing support to capital companies. We will gladly offer you our assistance in carrying out a share redemption and a share capital reduction process concerning a joint-stock company.

Registration of a limited partnership

Registration of a limited partnership

The Code of Commercial Companies and Partnerships provides for several types of business entities, one of which is a limited partnership (spółka komandytowa). A limited partnership has legal capacity, the capacity to perform acts in law and the capacity to be a party to court proceedings. However, just like other partnerships (and in contrast to a limited liability company or a joint-stock company), it does not have a legal personality.

What distinguishes a limited partnership from other partnerships is the fact that it has two categories of partners – a general partner and a limited partner. A general partner is liable for the partnership’s obligations in the same way as a partner in a general partnership, i.e. with all their assets (unlimited liability), on a subsidiary basis (i.e. when enforcement against the partnership is ineffective). A limited partner, on the other hand, is only liable up to the amount specified in the partnership agreement (limited partner’s liability amount). It is worth emphasising that a limited partnership is only liable for its own obligations, and not for the obligations of its partners. Below we explain how to establish a limited partnership quickly and efficiently.

Who can be a partner in a limited partnership?

The entities which may set up and be partners in a limited partnership are as follows:

  1. natural persons;
  2. other partnerships;
  3. legal persons.

Also, just like in the case of a general partnership, partners in a limited partnership may not be civil law partnerships.

Modes of registration of a limited partnership

Currently, it is possible to register a limited partnership in two different modes, independent of each other:

  1. in the traditional form; and
  2. over the Internet.

Limited partnership agreement

In order to be valid, a limited partnership agreement must be executed in the form of a notarial deed. Such form is also required for any amendments to the partnership agreement.

Such agreement should include the following elements:

  1. business name of the partnership;
  2. its registered office;
  3. its objects (e.g. machinery production);
  4. the contributions made by the partners and the value of each contribution;
  5. the limited partners’ liability (i.e. specification of the maximum amount of their liability);
  6. the life of the partnership (e.g. indefinite period, 15 years, etc.).

The partnership agreement may also include other elements, in addition to those specified above.

Limited partnership’s business name

The name of a limited partnership must include the name of at least one general partner and the words identifying its legal form: “spółka komandytowa”. If the general partner is a legal person, that partner’s complete name should also be included in the business name of the partnership. It must also be emphasised that the business name of a limited partnership should not include the name of the limited partner. 

Registration of a limited partnership in the traditional mode

Registration of a limited partnership requires filing an application with a district court competent for the partnership’s registered office. A limited partnership registration application should include the following elements:

  1. the partnership’s business name;
  2. its registered office and address;
  3. its objects;
  4. details of the general partners;
  5. details of the limited partners;
  6. details of the persons authorised to represent the partnership;
  7. manner of the partnership’s representation;
  8. the limited partner’s maximum liability amount (commendam sum).

Registration of a limited partnership over the Internet

Currently, it is also possible to set up a limited partnership online. In such a case, a limited partnership agreement is based on a form available on the website. A limited partnership agreement is executed once the template agreement is filled out and signed with a qualified electronic signature. The agreement may also be signed with the so-called ‘trusted signature’ via the Electronic Platform of Public Administration Services (ePUAP). 

The effects of the entry into the register

A limited partnership is formed upon its entry into the business register of the National Court Register. That is when the limited partnership becomes a legal entity.

Summary

In conclusion, it is important to emphasise that currently, entrepreneurs wishing to register a limited partnership face the choice of two options – the traditional mode and the online mode. These modes are independent of each other and each has some advantages and disadvantages. Different modes may be appropriate for different businesses, depending on their individual situation. Should you have any doubts as to the choice of the mode that best suits your needs and if you wish to avoid mistakes in the course of the registration procedure, do not hesitate to contact Radkiewicz Lawyers Poland. As a law firm with extensive experience in registering limited partnerships, we will support you throughout the process.

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Registered partnership formation

Registered partnership formation

A registered partnership, also referred to as a registered partnership (spółka jawna), is one of the forms of conducting business activity available to entrepreneurs. For some time now, it has been possible to form a registered partnership in two ways – either by traditional methods or over the Internet. Below we explain the registered partnership formation process.

Key characteristics of a registered partnership

A registered partnership operates under its own name, it has legal capacity, the capacity to perform acts in law and the capacity to be a party to court proceedings. However, it does not have a legal personality.

The purpose of a registered partnership is to operate a business enterprise. Therefore, such partnership may not be formed, and subsequently registered, without the operation of such enterprise (e.g. just to carry out a single transaction). Under the provisions of the Civil Code, a business enterprise is defined as an organised set of tangible and intangible elements intended for conducting economic activity. A non-exhaustive list of such elements is also provided (it includes a business name, licenses obtained, receivables and ownership titles to real property and movables held).

Another feature of a registered partnership is that – as an entity separate from its partners – it is liable for its own obligations; it does not, however, bear any liability for the obligations of the partners. The partners, in turn, bear unlimited personal liability for the obligations of the partnership.

Who can establish a registered partnership?

A registered partnership may be formed by natural persons having full capacity to perform acts in law (i.e. in general, persons of at least 18 years of age who are not incapacitated, whether fully or partially). 

Moreover, partners in a registered partnership may be legal persons and other commercial law partnerships and companies (e.g. another registered partnership or a limited liability company), but not civil law partnerships.

Registered partnership agreement

As a rule, a registered partnership agreement should be made in writing – otherwise such agreement is null and void. In other words, unless executed in the written form, a registered partnership agreement is invalid, does not have any legal effect and cannot be registered. 

A registered partnership agreement must include at least the following elements:

  1. the partnership’s business name;
  2. the partnership’s registered office (town/city in which it operates);
  3. the partnership’s objects (e.g. consultancy services, production of electronic equipment, etc.);
  4. the life of the partnership (e.g. indefinite period, 20 years, etc.).

The business name of a registered partnership must include the name of at least one of its partners and the words identifying its legal form: “spółka jawna”.

Registration of a registered partnership under the traditional procedure

In order to register a registered partnership in a traditional way, an application must be filed with a district court competent for the partnership’s registered office. Such an application must include the following information:

  1. the partnership’s business name;
  2. its registered office and address;
  3. the partnership’s objects;
  4. details of the partners (e.g. names, surnames and addresses);
  5. details of the persons authorised to represent the partnership;
  6. manner of the partnership’s representation.

It should also be mentioned that the spouse of a partner in a registered partnership is entitled to request an entry into the register concerning the marital property agreement between them and such partner.

Registration of a registered partnership over the Internet

As mentioned above, the registration of a registered partnership can also be done online. For this purpose, the entire registration process is conducted through an ICT system. Importantly, in the case of online registration, the partnership agreement is based on a template. Such a template is available on the website, and the partnership agreement is entered into upon the filling out of the form and signing it with the use of a qualified electronic signature or the so-called ‘trusted signature’ (via the Electronic Platform of Public Administration Services – ePUAP).

It is worth noting that adopting resolutions, notifying changes of address and approvals of financial statements can also be done by electronic means. In addition, a registered partnership formed under a template agreement may also be dissolved by a resolution based on a relevant template available online.

The effects of the entry into the register

A registered partnership is only formed upon its entry into the business register of the National Court Register. 

Summary

To sum up, there are currently two modes in which a registered partnership can be registered – the traditional mode and the online mode, each of which involves several formalities. To ensure that such formalities are managed efficiently and successfully, we encourage you to use the company formation services of Radkiewicz Lawyers Poland. Our team of experienced lawyers will be happy to support you throughout the registered partnership formation process.

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How to form a limited liability company?

How to form a limited liability company?

Currently, a limited liability company (spółka z ograniczoną odpowiedzialnością) can be formed in two ways – in the traditional way and electronically, over the Internet. Presented below are the main similarities and differences between the process of setting up a limited liability company over the Internet and in the traditional way.

Limited liability company – characteristics

A limited liability company is a company regulated by the Code of Commercial Companies and Partnerships. It has a legal personality and it is liable for its commitments with all its assets. This type of company operates by means of the share capital contributed to it, which must be at least PLN 5,000.00. The value of each of the shares held by the shareholders may not be lower than PLN 50.00. Importantly, the shareholders are not liable for the company’s obligations.

Who can establish a limited liability company?

A limited liability company may be established by one or more natural persons. It may also be formed by partnerships or other companies (e.g. by another limited liability company). The shareholders in a limited liability company may be, apart from natural persons, also partnerships or companies.

Which entities may not form a limited liability company?

The only entity which may not form a limited liability company is another single-shareholder limited liability company. It means that a single-shareholder limited liability company may not be the sole shareholder in another limited liability company. Where there are more shareholders, a single-shareholder company may be among them.

Limited liability company formation – two modes

According to the Code of Commercial Companies and Partnerships, as amended by the Act of 1 April 2011, a limited liability company may be formed under two different procedures. In the case of the ordinary procedure, all documents must be submitted by traditional means, in paper form. In contrast, under the electronic (simplified) procedure, any documents are submitted via the Internet, and the articles of association are made by completing an online form.

Registration of a limited liability company – ordinary mode

Registration of a limited liability company in the ordinary mode requires the following steps:

  1. execution of the articles of association by the shareholders in the form of a notarial deed;
  2. contributions being made by the shareholders to cover the company’s entire share capital;
  3. appointment of the management board (at the time of execution of the articles of association or separately afterward);
  4. appointment of a supervisory board or an audit committee (such bodies are not always appointed; however, a supervisory board or an audit committee is required once the company’s share capital exceeds PLN 500,000 and the number of shareholders exceeds 25);
  5. an entry being made in the National Court Register – registration of the company.

It should be noted that under the ordinary procedure, the shareholders may make either cash or non-cash contributions (contributions in kind). For a limited liability company to be established, the contributions must cover the entire share capital.

The last stage of setting up a limited liability company is registering it in the National Court Register. An entry into the Register is constitutive in nature and grants such an entity a legal personality. Prior to the registration, a company may operate as a “company in organisation”, even though it has not yet been incorporated. 

Registration of a limited liability company over the Internet

The Polish law also provides for a simplified procedure of forming a limited liability company. It involves the submission of all documents (articles of association, application for registration, etc.) in electronic form. Under this procedure, the shareholders complete a template of the articles of association online. Such template, however, may not be modified. Under the simplified mode, the articles of association are executed by filling in the template and attaching a qualified electronic signature to it. Such signature may also be attached via the Electronic Platform of Public Administration Services (ePUAP) as the so-called ‘trusted signature’. 

However, the simplified procedure entails some limitations on the nature of the contributions made by the shareholders – they can only take the form of cash contributions. Moreover, unlike under the ordinary procedure, the company’s share capital does not need to be fully covered at the time of registration. The shareholders have seven additional days from the registration date to pay up the share capital in full.

Limited liability company formation – who may file for registration?

The registration of a limited liability company may be filed for by its management board.

What is the time limit for filing for registration of a limited liability company?

A limited liability company must be registered within 6 months from the execution of the articles of association. If the management board fails to file for registration by this date, the company will be liquidated. In such case the shareholders are entitled to claim damages from the members of the management board.

The cost of incorporating a limited liability company

The cost of incorporating a limited liability company depends on the type of procedure chosen. Under the traditional mode, in addition to the notary costs, the shareholders must pay a registration fee of PLN 500. If the simplified procedure is chosen, the National Court Register entry fee amounts to PLN 250. In addition, when setting up a limited liability company, one needs to pay a fee of PLN 100 for the publication of the National Court Register entry in the Court and Commercial Gazette (Monitor Sądowy i Gospodarczy).

Summary

Selecting the mode in which a limited liability company is to be formed is not an easy decision. On the one hand, there is the traditional procedure which is more expensive but allows for the articles of association to be adapted to the shareholders’ needs. On the other hand, the choice of the cheaper simplified procedure imposes strict limitations concerning any modifications of the articles of association template. To receive individual advice, do not hesitate to contact Radkiewicz Lawyers Poland where we help clients choose the procedure of setting up a limited liability company that best suits their needs.

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