What can constitute the shareholders’ contribution to a limited liability company in Poland?

When establishing or buying a ready-made limited liability company one has to be prepared to make the obligatory contribution to the company’s share capital required by the Commercial Companies Code provisions. The company’s share capital includes contributions made by the shareholders and is divided into shares of equal or unequal nominal value.

Contributions` type and value

A limited liability company, unlike partnerships, is a capital company. This means that it has its own assets. It is the share capital including contributions made by the shareholders. What is important, the capital contributions must be covered in full even before the company is entered in the National Court Register.

Ready-made companies for sale, including ready-made limited liability companies, usually have a minimum paid-up share capital. In the case of limited liability companies, the minimum value of the share capital is 5 000 PLN, and the lowest nominal value of one share is 50 PLN.

Each share with an equal nominal value represents one vote for its holder, unless the articles of association provide otherwise. The same applies to shares of unequal value. Then every 10 zloty of its nominal value corresponds to one vote which entitles the holder to co-decide on the company’s business profile and future.

Entrepreneurs are often interested in increasing the share capital of their companies. There are two ways of increasing the capital:

• through an amendment to the articles of association
• by adopting an appropriate resolution at the general meeting of shareholders

However, regardless of the manner in which this is achieved, it results in an increase in the value of already existing shares or in adding completely new ones to the pool. Each time the capital is increased, it has to be reported to the relevant registry court.

Moreover, while planning the increase of the capital, one should not forget that in the company, which was established with the use of a standard form of agreement, the increase of the capital may be covered only by contributions in cash. In-kind contributions may constitute a value increasing the capital only if the company’s agreement is amended or concluded in the form of a notarial deed.

Types of contributions made to a company

Contributions to a limited liability company capital may include:

• Contributions in cash (expressed in Polish zloty or in a foreign currency converted into zloty paid in a traditional way or electronically),
• Contributions in kind, or so-called in-kind contributions.

The in-kind contribution is made by the shareholders to the share capital. If the in-kind contribution is to constitute the whole or a part of the contribution, then the articles of association should clearly specify its subject and the person making such contribution. The content of the articles of association should also include information on the number and value of shares that have been acquired in exchange for the in-kind contribution.

Under no circumstances in-kind contribution is to consist of:

• Non-transferable rights, i.e. rights that cannot be transferred to another entity in any way and cannot be inherited (examples of non-transferable rights are concessions or rights to perform specific professions),
• The provision of work,
• The provision of services.

Moreover, it is impossible to make an in-kind contribution to a company registered electronically or established using a standard form of agreement. This also applies to ready-made companies. In such a case, the Code allows only cash contributions, and the coverage of the share capital of the newly established company should take place not later than within seven days from the date of its entry in the National Court Register.

What is also important from the point of view of shareholders is the fact that in the case of a significant over-estimation of the in-kind contribution’s value in relation to its transfer value, the shareholder who made the contribution and the management board members who, being aware of this, registered the company may be obliged to jointly and severally compensate the company for the missing value.

In-kind contribution to joint stock companies

The situation is different when it comes to the contribution to a capital of a joint stock company. The fair value of such contribution is then determined by an auditor, which essentially reduces the risk of its significant overestimation and thus reduces the risk of liability on this account taken by the shareholder making the contribution in-kind and by the members of the management board who approved such contribution.

The contribution in kind to a simple joint stock company is also different. Here, the legislator allows for in-kind contributions in the form of the provision of work or services, however, provided that the contribution is not intended to cover the share capital and the company, including a company ready for sale, has not been established via the Internet.