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.

Back to Company formation in Poland