For Polish limited liability companies (GmbHs), the minimum share capital is PLN 5,000.00. At the same time, the law stipulates that the nominal value of a share must be at least PLN 50.00. This regulation means that, in the case of Polish GmbHs with low share capital, the share capital loses its guarantee function towards creditors. The company's financial credibility is determined not by the level of its share capital, but by the level of equity. The decision regarding the company's capitalization level rests with the shareholders, who, depending on the company's investment plans or the estimated initial operating costs, can set the capital at a significantly higher level. Higher initial capitalization is sometimes a requirement of the banks that are to finance the company's operations.
1. Type of capital coverage in a Polish limited liability company
The share capital is covered either by cash contributions or by contributions in kind (apporte). The method of covering the share capital depends on the shareholders' wishes. An exception is the limited liability company (GmbH) established through the electronic incorporation process (so-called S24). In this process, the company can only be established through cash contributions. The share capital of a Polish limited liability company is usually covered at least partially by cash contributions. This is because it is necessary to cover the costs of establishing the company as well as the funds for the first operating period (fees for registration in the commercial register, rent for premises, accounting costs, personnel costs for the initial operating period before revenue is generated, etc.). Individual shareholders can make different contributions, for example, one in cash and the others through contributions in kind that serve the company's operations. Furthermore, a shareholder can commit to contributing a specific amount in foreign currency to cover their share of the share capital, corresponding to the equivalent of the purchase price of the shares expressed in PLN. Cash contributions can be made by depositing cash into the company's cash box, by bank transfer, or, less frequently, by handing over a cashier's check or crossed check. However, it is assumed that cash contributions cannot be securities such as bills of exchange or bonds. Contributions in kind to a Polish limited liability company (LLC) must meet the requirements of eligibility for contribution and, furthermore, cannot be non-transferable rights or labor or services. In the case of the articles of association of a Polish LLC, the share capital must be specified as a fixed sum; a flexible specification such as "from – to" is not permitted. The articles of association stipulate whether each shareholder can hold only one share in the company (in which case the value of the shares can be different – a so-called unequal share system) or whether they can hold more than one share – in which case their nominal value must be equal (a so-called equal share system).
It should be noted that in Polish limited liability companies (LLCs), it is possible to subscribe to shares above their nominal value. In this case, the excess value (agio) is credited to the company's reserve capital. Consequently, it is possible for the nominal value of the company's shares to be PLN 50.00 each, but for the shareholders to agree to subscribe to the shares at a significantly higher price, the excess amount, representing the difference between the purchase price and the nominal value, is recorded on the liabilities side of the company's balance sheet under "reserve capital." Issuing shares above their nominal value is possible for both cash and non-cash contributions.
The subscription of shares at a premium becomes the norm in the case of subsequent capital increases, since offering new shares at par value would generally be disadvantageous for the existing shareholders, as the company's equity is usually significantly higher than its share capital.
2. Time of coverage of the share capital
Regardless of how the original share capital of the Polish limited liability company is covered, whether by cash contributions or contributions in kind, these contributions must be transferred to the company before the company is entered in the commercial register.
When applying for registration in the commercial register, the application must be accompanied by a declaration from all members of the board of directors stating that the contributions have been fully made by all shareholders.
An exception is made for limited liability companies (GmbHs) established via the teleinformatics procedure, where the share capital must be paid in no later than 7 days after registration in the commercial register. In this case, the management board is obligated to submit the corresponding declaration to the commercial register within 7 days of the company's registration. However, if the share capital was already paid in during the company's formation using the "S24" procedure, the original registration declaration must be accompanied by a declaration from all members of the management board (with a qualified electronic signature, trusted signature, or personal signature of each individual) confirming that the cash contributions to cover the share capital have been fully paid in by all shareholders.
3. Contributions in kind to the company (contributions)
A contribution in kind to a Polish limited liability company (GmbH) can be an alternative to purchasing specific assets. In the case of a traditional purchase, the company would be obligated to make the payment (i.e., it would at least have to secure the financing), whereas in the case of a contribution in kind, the company would be obligated to issue shares of the share capital to the shareholder. This leads to a dilution of the share capital for the other shareholders who do not make a contribution in kind.
In companies established in the traditional manner, i.e., in notarial form, contributions in kind (apporte) can be made both at the time of the company's formation and later in connection with an increase in share capital.
In a company established using a standard contract template in the teleinformatics system (S24), only cash contributions can be made at the time of incorporation. Subsequent contributions in kind require a notarized amendment to the articles of association. Submitting a resolution to amend the articles of association of a limited liability company (GmbH) only permits an increase in share capital through cash contributions.
It should therefore be emphasized that the contribution of an asset in kind to a Polish company established using a standard contract will result in the company losing its status as an "e-company" and no longer being able to use the electronic decision-making procedure.
The contribution of an asset to a GmbH (limited liability company) requires a number of stipulations to determine the overall legal and tax implications of the contribution.
Contributing an in-kind contribution to a GmbH (limited liability company) requires:
a) the determination of the shareholder contributing the respective contribution in kind, i.e., the person entitled to dispose of the contribution to the company,
b) the specification of what the contribution is to be (in particular, it must meet the requirements for eligibility for transfer described below). The contribution in kind must be described in detail. Legal doctrine indicates that the description of the contribution should be clear and detailed: “The aim is to ensure that third parties conducting business with the company and the commercial register, within the framework of the statutory minimum capital coverage, are able to assess the reliability of the capital coverage based on a clear description of the contributions without the need for additional, often difficult-to-access information. Therefore, the standard of detail in the description of the contribution, as defined in Article 158, paragraph 1 of the Commercial Code (KSH), should be understood as:
c) determining the value of the contribution. In principle, the contribution in kind should be valued at its fair value (market value);
d) determining the parameters for the increase of the share capital by the shareholders, i.e., whether the entire value of the contribution is related to the share capital (i.e., the entire value of the contribution is reflected in the nominal value of the shares issued), or whether new shares are issued at a premium and the contributing shareholder receives a smaller number of shares, while the difference between the nominal value of the shares and the purchase price is allocated to the company's reserve capital.” remains,
e) The determination of the tax consequences of the contribution in kind from the perspective of value added tax (VAT), income tax on the part of the shareholder contributing the contribution in kind to the limited liability company (LLC), and from the perspective of stamp duty regulations (on the part of the LLC itself). For example, the contribution of a business or an organized part of a business is not subject to VAT at all, unlike the contribution of undeveloped land designated for development in the local zoning plan,
f) the transfer of the contribution to the Polish LLC. The transfer of a contribution in kind to an LLC upon its formation can take place either on the basis of the LLC's articles of association (in which case the articles of association of the Polish LLC in formation, which provide for the transfer of the contribution to the LLC, have a dual binding effect), or on the basis of a separate agreement, whereby the contribution is transferred to the LLC by virtue of the obligation arising from the articles of association,
g) in the case of an increase in share capital through the contribution of a contribution in kind – the submission of a declaration by the new or existing shareholder regarding the acquisition of the shares,
h) the filing An application for registration of the limited liability company (GmbH) in the Commercial Register or an application for registration of changes in the Register of Entrepreneurs of the Commercial Register, together with a declaration from all members of the company's management board confirming that the contributions to cover the share capital have been fully paid by all shareholders. From July 1, 2021, registration will be carried out electronically via the Court Registers portal. When applying for registration or registration of changes, as previously required with the paper-based KRS-Z3 application, the value of the shares/equity from new contributions must also be specified. This value will be displayed in the entry in the Register of Entrepreneurs of the Commercial Register.
4. Ability to carry
The subject of a contribution to a limited liability company (GmbH) must not be non-transferable rights (such as lifetime rights of use, personal easements, rights of repurchase or rights of first refusal) or the provision of work or services (Article 14 paragraph 1 of the Commercial Code).
In the service sector, it is assumed that these are contracts for orders, contracts for work and services or service contracts in the B2B sector.
Article 14(1) of the German Commercial Code refers to the provisions of Article 7 of the non-binding Second Council Directive 77/91/EEC of 13 December 1976 on the coordination of guarantees required by Member States for companies within the meaning of Article 58(2) of the Treaty in order to achieve equivalence, for the protection of the interests of shareholders and third parties in the formation of a public limited company and in the maintenance and modification of its capital (Official Journal of the European Communities L 1977 No. 26, p. 1). According to this provision, only assets capable of economic evaluation may be included in the subscribed capital. However, the obligation to provide work or services cannot be an asset. A similar provision was retained in Article 46 of Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 on certain aspects of company law (Official Journal of the European Union L 2017 No. 169, p. 46). According to this provision, only assessable assets may be included in the subscribed capital. However, these assets do not include obligations to provide work or services.
The most frequently cited criteria for eligibility to import, which have been specified by legal doctrine, are:
a) the criterion of the possibility of determining the economic value of a particular right or object,
b) the criterion of the possibility of recording a particular right or object in the company's balance sheet as an asset (accountability),
c) the criterion of the shareholder's legal ability to dispose of the contribution for the benefit of the company (transferability of the right),
d) the criterion of the usefulness and actual availability of the contribution for the company,
e) the criterion of the possibility of contributing the contribution to the insolvency estate or the liquidation estate.
Based on the above-mentioned criteria for items/rights that are generally considered eligible for export, the following can be listed:
a) Real estate, the right to permanent use of land,
b) Companies, organized parts of companies,
c) Shares, stocks, investment certificates; the entirety of rights and obligations in a partnership,
d) Intellectual property rights, inventions, utility models and designs, trademarks and graphic signs, integrated circuit topographies,
e) Claims, including against the company, etc.,
f) Know-how, which, however, exists in tangible form, such as recipes, technical records, documentation.
Case law indicates that, for example, the following items are eligible for import:
a) Own bill of exchange with blank endorsement (Decision of the Supreme Court of 20 May 1992, III CZP 52/92),
b) The tenant's right to use a commercial property (Decision of the Supreme Court of 26 March 1993, III CZP 21/93).
However, the following cannot be the subject of an Aport:
a) a cooperative enterprise within the meaning of Article 551 of the Civil Code (Decision of the Supreme Court of 12 January 2001, III CZP 44/00: “It is inadmissible for a cooperative to contribute in kind in the form of its enterprise to a limited liability company if this precludes the carrying out of the cooperative’s statutory economic activity”),
b) the right to compensation for immovable property outside the current borders of the Republic of Poland (Decision of the Supreme Court of 27 March 2001, III CZP 3/01).
In accordance with the jurisprudence of the Supreme Court, it should be noted that "the subject matter of a contribution can be assets (tangible goods and rights) provided they are transferable and can be included as assets in the company's balance sheet" (Supreme Court decision of June 7, 1990, III CRN 97/90). Similarly, the Supreme Court stated in its decision of September 19, 1990, III CRN 268/90: "A contribution in a limited liability company can include all assets (tangible goods and rights) provided they are transferable and can be included as assets in the company's balance sheet."
In the case of aports, the most common form is the transfer of specific rights or assets to the company. However, it is also conceivable that an aport can be contributed constitutively, for example, through the establishment of a leasehold by a municipality in favor of a corporation.
For questions regarding deposits in a Polish company (Ltd.), please contact us by email at kontakt@kancelaria-pozniak.pl or by phone at +48 665 246 969 .