The shareholders of a Polish limited liability company (spółka z ograniczoną odpowiedzialnością) have several ways they can use to inject the company with additional capital. The most frequent of these comprise: increasing the initial capital, additional payments (dopłaty), and loans.
An increase of the initial capital is effected by increasing the nominal value of existing shares or by issuing fresh ones. Importantly, an increase of the initial capital requires that the shareholders adopt an appropriate resolution and subscribe for (acquire) shares in the increased initial capital. The shares can be acquired in exchange for both cash and non-cash (in-kind) contributions. If the company’s articles of association set the ceiling for the value of the initial capital and a time limit for its increase, there is no need to amend the articles of association to increase the capital. The increase of the initial capital can also be based on the supplementary capital or reserve capital (funds) established from the company’s profit. Such manner of initial capital increase requires a shareholders’ resolution to amend the company’s articles of association, the fresh shares are vested in the shareholders pro rata to the shares held, and do not require to be subscribed for (acquired). Unless the company’s articles of association or the resolution to increase the initial capital provide otherwise, the existing shareholders have the right of pre-emption to acquire fresh shares in the increased initial capital, pro rata to the shares held. An increase of the share capital is subject to the transfer tax. The additional costs for the company comprise, if its articles of association need amending, the notarial fee.
As regards additional payments, the company’s articles of association may obligate shareholders to make additional payments up to a numerically specified ceiling, relative to the shares held. Additional payments are imposed and paid by shareholders evenly in proportion to their shares. The Commercial Companies Code provides a possibility of refunding additional payments to the shareholders. Pursuant to Article 179 of the Commercial Companies Code, additional payments may be refunded to the shareholders if they are not required to cover a loss reported in the financial statements. The refund itself may be effected following expiry of one month after the date of announcement of the intended refund in the journal designated for the company’s corporate announcements and is made equally to all the shareholders. Additional payments are subject to the transfer tax that the company is required to pay, at 0.5 percent of the amount contributed on account of the additional payments. Importantly, tax authorities have developed an interpretation according to which, if the company’s articles of association do not include provisions permitting additional payments, additional payments contributed to the company are treated as revenues subject in their full amount to the corporate income tax.
The last of the ways used most frequently to increase capitalization of a limited liability company by its shareholders are loans extended to the company. It must be stressed that the loan should bear a standard market interest rate, as an interest-free loan may be treated as a value contributed to the company free of charge and consequently as constituting taxable income. Loans granted by the shareholders are not subject to the transfer tax, and the very loan agreement must meet the requirements laid down under provisions of the Civil Code.
As has already been noted at the beginning, while the above ways of injecting capital into a limited liability company are those applied most often, they do not exhaust the list of possible methods of increasing company capitalization. When selecting the most beneficial solution, one should thoroughly examine all its legal facets as well as tax consequences.