The sole shareholder of a limited liability company
may be, in principle, an employee of the same
company, also in a managerial position, provided
that his/her stake in the share capital is less than
100 per cent. Nevertheless, as numerous judicial
decisions of the Supreme Court make it clear, this
is not possible where the sole shareholder (or a
shareholder whose stake in the company is about 99
%) is a member of the management board, since in
such a situation the fundamental criterion an
employment relationship, that of the employee’s
subordination to his/her employer, is not met.
For example, we may cite the judgments issued by
the Supreme Court on 3 August 2011. (case file no. I
UK 8/11), on 12 May 2000 (case file no. II
UKN 546/99), on 6 October 2004 (case file no. I PK
488/2003), on 9 September 2004 (case file no. I PK
659/2003), on 7 April 2010 (case file no. II UK
357/2009), and also on 20 March 2008 (case file no.
II UK 155/2007). In the reasons given for the first of
these judgements, it is pointed out that, regardless
of the reasoning relating to the absence of
employee’s subordination where the sole (or
“almost” sole) shareholder is employed in a
management position, the paid work principle is
not satisfied either, given that wealth transfers
take place within the pool of assets of the same
shareholder. Formal ownership criteria are really
irrelevant in this case.
As a result, Social Insurance Institution’s audit units
frequently
challenge
the
effectiveness
of
employment contracts concluded between limited
liability companies and their sole shareholders and
refuse to pay out the benefits when employment
takes this form. Such negative rulings are also
passed quite frequently where the sole shareholder
is employed in a non-managerial position in a
limited liability company.
While the case-law is clear that it is not permissible
for management board positions to be filled on the
basis of a contract of employment, it cannot be
nonetheless excluded a priori that the sole
shareholder may be validly and effectively engaged
on that basis in a non-management board position
in the limited liability company, provided however
that all the criteria of an employment relationship
are met, namely: the employee being in a
relationship of subordination (in terms of service
provided and organisational hierarchy), personal
performance of work requirement and finally performing work for and at the risk of the
employer.
To illustrate, in the justification to one of such
judicial decisions (judgment of 12 May 2000, case
file no. II UKN 546/99), the Supreme Court stated:
“The sole shareholder could become an employee
of his/her single-shareholder limited liability
company, but to do so he/she would need to
separate the role of the owner of capital from the
managerial function, by completely entrusting the
running of the company to a third party or at least
to the extent allowing [the sole shareholder] to be
employed, without resigning from his/her
membership on the management board (…), in a
non-managerial position (pracownik wykonawczy),
executing substantive tasks within the business of
the company and required to follow in this respect
the instructions of another member of the
management board who is a manager employed by
the company (see the judgment of the Supreme
Court of 15 July 1998, II UKN 131/98, OSNAPiUS
year 1999, no. 14, item 465).”
The tax authorities also presented a view that the
engagement of the sole shareholder in the limited
liability company under a contract of employment
is acceptable. In the private tax ruling issued by the
Second Mazowiecki Tax Office in Warsaw dated 31
May 2004 r. (US 72/ROP1/423/440/04/PS), in
answer to the following taxpayer’s query: “Is it
possible to conclude a contract of employment with
the only shareholder who is the president of the
management board in such a way that such contract
would be valid under the provisions of the tax law
and the related costs would be tax deductible?”,
the tax office stated that “the sole shareholder may
enter a contract of employment with the company
if he/she is not a member of the management
board. Article 22 of the Tax Code rules out the
admissibility of employment contracts concluded
between the company and its sole shareholder who
is also a member of the management board.”
MILLER, CANFIELD,
W. BABICKI, A. CHEŁCHOWSKI I WSPÓLNICY SP.K.
ul. Batorego 28-32
81-366 Gdynia
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Fax +48 58 782-0060
gdynia@pl.millercanfield.com
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00-513 Warszawa
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Fax +48 22 447-4301
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53-125 Wrocław
Tel. +48 71 780-3100
Fax +48 71 780-3101
wroclaw@pl.millercanfield.com
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certain recent legal developments of selected areas of law. For this reason the information contained in this publication should not form the basis of any
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