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When is it worth forming a limited liability company before a notary? We explain the limitations of the S24 system
Forming a limited liability company can be simple, quick and inexpensive. Registering a company through the S24 system undoubtedly meets these criteria. However, this solution has some significant drawbacks and limitations. We explain them all in this article, identifying situations in which it is worth forming a limited liability company before a notary.
A limited liability company — how do you register a company in the National Court Register, and why is it worthwhile? Formation before a notary or through S24, online using a model agreement
A limited liability company is one of the most popular legal forms of conducting business in Poland.
This is hardly surprising. It is a capital company with legal personality, enabling it to exist as a legal entity independent of its owners, which can own assets and independently incur and be liable for obligations.
Consequently, the shareholders of a limited liability company benefit from limited liability and also:
Gain a professional image and greater flexibility in their business structure;
Have opportunities for tax optimisation, for example through Estonian CIT;
Can benefit from an exemption from ZUS contributions in a company with multiple shareholders.
A limited liability company can be formed in two ways:
Through the S24 system, a cheaper, faster and simpler solution;
With the assistance of a notary, allowing non-standard provisions to be included in the articles of association.
Many entrepreneurs choose the first option, registration through S24, often without much consideration. However, this is not always the optimal solution...
The limitations of S24: when choosing this method of registering a limited liability company may not be optimal
Although forming a limited liability company through S24 is indeed cheaper, faster and simpler than the traditional route involving a notary, it has very significant limitations.
It involves registration using a fixed official model agreement available in the system. The S24 portal does not allow any changes to it by adding non-standard clauses or removing elements already included.
This means that when forming a limited liability company without a notary, it is impossible, for example, to:
Establish different classes of shares or differentiate the rights attached to them, including preference rights, meaning shares entitling their holders to more than one vote at the company’s shareholders’ meeting or to a higher dividend;
Introduce provisions concerning subsequent additional contributions or other additional shareholder obligations;
Introduce special mechanisms concerning share transfers, such as pre-emption rights or pricing formulas;
Define special rules concerning the inheritance of shares, including restricting or excluding heirs from joining the company;
Establish special rules concerning the quorum and the majority required to adopt certain resolutions.
In addition, it should be remembered that S24 only allows the share capital of the company being formed to be covered by cash contributions. Contributions in kind are therefore not possible, for example real estate, equipment, machinery or intellectual property rights.
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When should shareholders choose to register a company before a notary rather than through S24?
Given the above, registering a limited liability company before a notary is necessary primarily when shareholders want to include arrangements in the articles of association which S24 does not permit.
This usually concerns situations where the company will have several shareholders whose relationships need additional safeguards, or where their contributions or rights are to differ.
It is also worth going straight to a notary when:
Rapid and substantial growth of the company being formed is planned and we want its future operation to be properly regulated from the outset;
Attracting external investors is planned;
We want to precisely define the rules for transferring shares and influence their possible inheritance;
We want to build an even more professional image for the company, supported by well-prepared articles of association;
A contribution in kind is to be made to the company;
We want individually prepared articles of association and the opportunity to discuss their content with a notary.
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Summary
When is it worth forming a limited liability company before a notary? We explain the limitations of S24
S24 is a good solution when the company has a simple structure, shareholders make only cash contributions and the standard model agreement meets their needs.
However, if shareholders want to introduce non-standard rules concerning, for example, preference shares, obligations to make additional contributions, transferring or inheriting shares, the required voting majority, or plan to make a contribution in kind, concluding the articles of association in the form of a notarial deed will be a better solution.
With all the above, it should be clearly stressed that choosing S24 does not make subsequent amendments to the articles impossible. If, after registration, the company needs more extensive provisions, its articles can be amended, although changes going beyond the S24 model will require a notarial deed.
This is precisely why it is worth analysing the company’s planned structure and future growth at the formation stage. This makes it possible to choose the solution best suited to the shareholders’ needs.
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