Increasing Share Capital in a Polish Company
Increasing the share capital in a Polish company is a process undertaken to secure additional financing or meet legal and regulatory requirements. The raising share capital of company in Poland can be completed either through traditional notarial procedures or online via EKRS system. This article provides overview of the methods, procedural steps, requirements and potential costs to navigate this process effectively and ensuring compliance with Polish corporate regulations.
Raising share capital
Share capital is the equity contributed by the shareholders forming a company. It can consist of monetary funds or other assets of value, such as real estate or receivables. The minimum share capital required for a limited liability company in Poland (Spółka z ograniczoną odpowiedzialnością) is PLN 5,000. More information about share capital may be found here.
The reasons for increasing share capital may include:
- Increasing the company’s assets by shareholders to provide additional resources for business operations;
- Improving the company’s creditworthiness;
- Admitting new shareholders to the Company, by allowing them to acquire newly created shares in exchange for contributions made to the company;
- Meeting regulatory requirements;
Methods of Increasing Share Capital
The share capital can be increased in two ways:
- Raising the nominal value of existing shares: Increasing the value of shares already held by current shareholders.
- Creating new shares: Issuing additional shares, which enables the inclusion of new shareholders in the company or acquiring them by current shareholders
Methods of Financing Share Capital Growth
The increase in share capital can be financed from two sources:
- From monetary or non-monetary contributions by shareholders:
This method results in an increase in both share capital and the company’s overall assets. It is a form of recapitalization, often used to admit new shareholders who contribute funds or assets to the company.
- From the company’s own resources:
Funds are reallocated from retained earnings or reserve capital created from the company’s profits. In this case, the company’s total assets remain unchanged as the funds are already part of the company’s resources. Only the positions in the company’s balance sheet are reallocated. Only existing shareholders can acquire the new shares created under this method.
Form of increasing share capital
An increase in share capital can be carried out:
- Based on the current provisions of Articles of Association, If it already allows for such an increase.
This form of increasing share capital can not be used by companies in Poland that were incorporated online. Online company formation in Poland does not provide the option to include provisions that allow for a share capital increase without amending Articles of Association.
For the capital increase to take place based on the existing provisions of the company’s Articles of Association, they must specify both the maximum amount of the capital increase and the deadline, for example:
The share capital of the Company may be increased pursuant to a resolution of the Shareholders Meeting. An increase in the share capital up to 5,000,000.00 (five million) zlotys pursuant to a resolution of the Shareholders Meeting adopted by 31st (thirty first) December 2050 (two thousand fifty) shall not entail an amendment to these Articles of Association.
The share capital will be effectively increased if the shareholders’ meeting adopts a resolution on this matter by an absolute majority of votes, and all existing shareholders submit declarations confirming their subscription for new shares.
The adoption of the resolution does not require a visit to a notary; a simple written form is sufficient. Subscription for new shares is done through contributions of either cash or non-cash assets.
- The increase in share capital by amending the company’s Articles of Association
If the company’s Articles of Association does not include provisions for increasing the share capital, the increase in share capital requires an amendment to the company’s Articles of Association.
The amendment requires a resolution passed by the shareholders with, as a rule, at least a two-thirds majority of votes.
Companies formed online via the EKRS procedure may increase their share capital by amending the company’s Articles of Association online, provided that no other changes to the Articles of Association were made outside the online system. However, contributions to cover the increased share capital, if the increase was carried out online under the EKRS procedure, may only be in the form of cash contributions.
For other companies (those formed traditionally at a Notary Public’s Office or those whose Articles of Association have been amended by a notary), the amendment to the Articles of Association increasing the share capital must be adopted in the form of a notarial deed.
This process creates new shares in the company, and existing shareholders have a preferential right to subscribe to them proportionally to their current shares. The company’s management board sends a call for subscription to all shareholders simultaneously.
Existing shareholders should subscribe to the shares within one month from the date of the call. If any shareholder fails to subscribe, the capital increase will not take effect.
A resolution to increase the share capital that amends the company’s agreement may exclude the preferential right of existing shareholders to subscribe to new shares. This allows new shareholders to join the company. However, such exclusion requires the consent of the shareholders affected by it.
Registration of increasing share capital
At the end, increasing of company’s share capital has to be registered in National Court Register. The application must be accompanied by the following corporate documents:
- Resolution on amending Articles of Association or resolution on increasing share capital;
- List of shareholders with updated information about owned shares in share capital;
- Information about service proxy (proxy for delivery) if the shareholders are foreigners;
- Declarations regarding the subscription of new shares or the increase in the nominal value of existing shares;
- Declarations of accession to the company, if applicable;
- Statement on whatever the is considered a foreign entity under Polish regulations;
The application has to be submitted online via https://ekrs.ms.gov.pl/s24/ or https://prs.ms.gov.pl/krs , depending on the method of increasing the share capital.
Costs Associated with Increasing Share Capital
Increasing share capital of company in Poland involves various costs, which can be divided into the following categories:
- Tax on Civil Law Transactions (pl: ”PCC”)
The tax rate is 0.5% of the amount by which the share capital has been increased. The taxable base is reduced by costs associated with the share capital increase procedure, including the notary’s fee (including VAT) and the fees related to the registration of changes with the National Court Register (KRS).
- Court fee
Application to enclose amendments to the company’s share capital in Commercial Register is connected with fee of PLN 350
- Notary fee
Notary fee is calculated based on a sliding scale, with a maximum of PLN 10,000 (excluding VAT).
- Legal service fee
Legal service fee depends on the complexity of the case, additional tax advice, and involvement in other aspects of corporate restructuring.
Example Calculation:
Assume a company increases its share capital by PLN 600,000:
Notary Fees (if applicable): Approx. PLN 3,813.
Court Fees: PLN 350.
PCC Tax: PLN 3.000 (0.5% of PLN 600,000).
Legal Assistance (example): EUR 1,250.
