A limited liability company (spółka z ograniczoną odpowiedzialnością, abbreviated sp. z o. o.) is recommended especially for foreign investors willing to set up their subsidiaries or small and medium-sized joint-ventures in Poland. Like in other jurisdictions, a Polish limited liability company offers a corporate veil for its shareholders due to its legal personality. It means that the obligations of the company are to be covered only by the assets of the company. The assets owned by shareholders are not exposed to any compulsory enforcement of the company’s obligations. Only founds provided as a contribution to the company are put at risk.
The following persons may be shareholders in a Polish limited liability company:
- Natural persons,
- Legal persons,
Organizational entities without legal personalities, whom the Law grants legal capacity (LCE) – e.g. registered partnerships.
A limited liability company may not be incorporated by another single shareholder limited liability company. Nevertheless, a single shareholder limited liability company may acquire all shares of another limited liability company.
At the initial stage, shareholders bring to life a so-called limited liability company in organization. Having been registered in the National Court Register (KRS) it acquires legal personality as a duly registered limited liability company.
The minimum value of share capital is 5000 PLN which is divided into equal or non-equal shares. The minimum value of a is 50 PLN.
Articles of association (concluded in the form of a notarial deed) shall at least stipulate:
- the name and registered office of the company,
- the objects of the company,
- the amount of the share capital,
- whether or not the shareholder may have more than one share,
- the number and nominal value of the shares acquired by individual shareholders,
- the term of the company, if it is defined.
The articles of association may as well be concluded via Internet using standardized articles of association stipulated by the law.
A management board and a general meeting of shareholders are compulsory corporate bodies for a limited liability company.
The management board consists of one or more members, which must be natural persons with full capacity to perform legal acts. There are no limitations as to the period of performing duties on the management board. Unless the articles of association provide otherwise, the term of a member of the management board shall expire on the date of general meeting of shareholders which approves the financial report for the first full financial year of service as a member of the management board.
The most important factor from the perspective of each member of management board is the fact that members of the management board shall be liablejointly and severally for financial obligations of the company if enforcement proceedings against company turns out to be ineffective.
A member of the management board may release himself from the responsibility, if he proves, that in the proper time a bankruptcy motion has been filed with a court, restructuring proceedings have been opened, an accord with creditors has been accepted or the fact that a bankruptcy motion has not been filed in proper time was not his responsibility. Moreover a release from responsibility may happen if a member of the management board proves that failing to fulfill the abovementioned duties did not cause loss to the creditors.
A member of the management board is entitled to handle all of the internal affairs and to represent the company. The above-mentioned rights cannot be limited in any way whatsoever. A way of representation of the company arises out of the articles of association ( referred to as: AoA). Unless the articles of association provide otherwise, then – according to Polish Commercial Companies Code – two members of the management board or one member of management board together with an authorized signatory officer are entitled to make representations in the name of the company.
The other positive factor is that Shareholders ofpolish limited liability company enjoy a large degree of supervision over the company’s affairs. Thus, a shareholder is entitled to revise company’s documentation at any time, draw up a balance-sheet or demand an explanation (e.g. for certain company expenses) from the management board.
Each shareholder can participate in the supervision of the company’s affairs, unless articles of association stipulate specific limitations on supervision exercised by shareholders. This may be the case if the articles of association designate a supervisory board, or audit committee.
A supervisory board or an audit committee is compulsory in a limited liability company, whose share capital exceeds 500 000 PLN and consists of more than 25 shareholders. These bodies shall have at least 3 members which are appointed and dismissed on the basis of a resolution passed by a shareholders meeting.
A supervisory board controls and oversees all affairs of the company. Nevertheless it does not have a right to impose any orders to the management board. The particular tasks of a supervisory board are as follows:
- a check-out of both management board reports regarding the activity of the company and also a financial report regarding previous financial year especially taking into consideration documentation of the company and a factual state of affairs;
- an assessment of management board`s proposals, regarding division of profits or cover of losses;
- a submission of concluding report regarding the above-mentioned actions;
The shareholders meeting plays a significant role in the activity of the limited liability company. It is a forum for the decision-making process of the owners in the crucial issues regarding day-to-day activity, conclusion of previous financial year and a set of new objectives for the future.
Resolutions, especially concerning the following issues, are passed during the shareholders meeting:
- assessment and approval of the management board report regarding the activity of the company and financial report regarding the previous financial year;
- approval of other corporate bodies` performances regarding their duties;
- decisions regarding enforcement of claims asto damage caused on the company formation stage or as a result of activity of the management board, supervisory board or audit committee;
- disposal of and lease of the enterprise belonging to company or setting a limited right in rem (e.g. usufruct, easements);
- acquisition and disposal of real property, a perpetual usufruct right over real property;
- return of additional loan payments made by the shareholders;
- conclusion of contracts between a dominant and a dependent company regarding transfer of profits and management of the dependent company.
Nevertheless articles of association may set other issues, which are to be decided in the form of a shareholders meeting resolution.
Moreover, the Polish Commercial Companies Code states that a consent of shareholders meeting is required as to acquisition of real property or other fixed assets, in which the price exceeds ¼ of the share capital, but is not lower than 50 000 PLN and the acquisition is executed within a two-year period of the date of company’s formation. The consent is not required if the conclusion of the contract has been planned in articles of association.
Additionally, it must be underlined that disposal of a right or entering into obligation, in which the value exceeds twice a share capital require a consent in the form of a shareholders` meeting resolution, unless the articles of association state otherwise. In this regard, lack of consent does not lead to nullity but may be a basis for claiming damages from members of the management board, if a company suffers a loss as a consequence of such action.
The material provided above is for general information purposes only and cannot be regarded as legal advice. Should you require legal assistance, please contact a lawyer.
attorney-at-law /radca prawny/