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:
- in an ordinary mode;
- with the use of the company’s own funds;
- in a contingent mode;
- 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:
- 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;
- an offer made in an announcement (open subscription); and
- 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:
- grant rights to holders of convertible bonds or bonds with priority rights, or
- 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;
- 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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