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What is the minimum share capital in a limited liability company? How and when must it be contributed, and what is its purpose? This article answers all these questions and summarises the most important information about limited liability company share capital.
What is the minimum share capital of a limited liability company?
Under Article 154 of the Commercial Companies Code, a limited liability company’s share capital must be at least PLN 5,000, with each share’s nominal value at least PLN 50.
The capital must be covered in its full declared amount, generally within seven days of entry in the National Court Register. For notarial registration, however, it must be contributed before submitting the registration application.
Generally, share capital may take cash or in-kind form, although S24 registration requires cash contributions only.
How to contribute share capital to a limited liability company? Cash contribution versus a report
Share capital in cash can be contributed in two ways:
- bank transfer to the company’s account,
- payment into the company’s cash desk.
If all or part is a non-cash contribution, Article 158 §1 requires the articles of association to specify the contribution’s subject in detail, the shareholder making it, and the number and nominal value of shares received. The chosen assets, such as movable property, real estate or receivables, must actually be transferred to the company and valued very precisely.
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Remember again that share capital cannot be covered by non-cash contributions when the company is established through S24. In other words, a notary must be involved.
When contributing cash or non-cash assets to cover share capital, remember tax on civil-law transactions.
PCC of 0.5% of share capital is always payable, regardless of contribution type and establishment method.
The importance of share capital in a limited liability company. When is increasing it worthwhile?
Finally, why contribute share capital at all? Apart from its formal function, it is also, perhaps primarily, a safety buffer and financial base for operations.
Share capital becomes company property, usable for current needs, development and liabilities. It also protects shareholders from personal liability: their actual risk for unpaid company debts is limited to contributions.
It is also a buffer for management board members, who under Article 299 §1 are jointly and severally liable only when enforcement against the company’s assets proves unsuccessful.
Share capital also helps build credibility with current and prospective customers and investors and increase creditworthiness. Banks and institutions often check it before financing, while some particularly large counterparties and investors see high share capital as evidence of stability.
For some tenders or bidding procedures, capital above the minimum may be an entry requirement.
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Summary
Share capital of a limited liability company — how much is it, how to contribute it and what else should you know?
Share capital is the financial base of a business in this legal form, usable for current needs, development and paying liabilities. The latter role also limits potential negative consequences of unpaid company debts for shareholders and provides a safety buffer for board members.
The minimum is PLN 5,000 and the full declared amount must generally be covered within seven days of KRS entry, although notarial registration requires contribution before filing the application.
Share capital can generally be covered by cash or non-cash contributions, but the latter option is excluded for S24 registration.
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