The share capital of a limited liability company does not have to be covered solely by cash contributions. It sometimes happens that a shareholder, instead of money, wishes to offer the company, for example, real estate, a vehicle, know-how, or the right to a trademark. Such a solution is possible, although not in every case.
Are there any restrictions on making a non-cash contribution (in-kind contribution)?
Contributions to cover shares are made at the stage of establishing the company or later, when its share capital is increased.
If the company is established via the S24 portal (i.e. electronically, without a visit to a notary), contributions to its share capital may only be made in cash. Therefore, making an in-kind contribution is possible only if the company is established in the traditional manner (i.e. by concluding the articles of association in the form of a notarial deed).
If, on the other hand, the share capital of a limited liability company established via the S24 portal is increased, an in-kind contribution may be made only if the articles of association are amended before a notary.
What may constitute an in-kind contribution in a limited liability company?
The Commercial Companies Code explicitly states what cannot be contributed as an in-kind contribution to a limited liability company. These are non-transferable rights as well as the performance of work or services. Currently, it is accepted that this is not an exhaustive list—which means that in certain cases other assets may also be excluded from being contributed as an in-kind contribution.
Most often, the following are contributed to a company as in-kind contributions: enterprises, know-how, licences (the right to use a specific item), receivables, real estate (ownership of real property), and movables (machines, cars, etc.). It is important that a non-cash contribution represents a real, measurable economic value and is economically relevant to the company itself.
What formalities apply when making an in-kind contribution to a limited liability company?
First and foremost, making an in-kind contribution requires a precise description in the articles of association (or in the resolution increasing the share capital) of the subject of the non-cash contribution and the shareholder who makes it. In addition, the number and nominal value of the shares covered by this in-kind contribution must be indicated.
Contribution agreement – is it necessary?
There is no specific provision that would require the conclusion of a so-called contribution agreement (in-kind contribution agreement), i.e. a separate agreement under which a shareholder would transfer ownership of a non-cash contribution to the company. However, a contribution agreement becomes necessary where the subject of the in-kind contribution is real estate or, for example, an enterprise, which require a special form for the transfer of ownership—simply put, they require a visit to a notary.
Nevertheless, in order to avoid any doubts as to whether and when a given asset was transferred to the company, it is recommended to conclude contribution agreements in every case where shares are covered by a non-cash contribution.
How (and whether) should a non-cash contribution (in-kind contribution) be valued?
The obligation to value a non-cash contribution also does not arise directly from any specific legal provision. Nevertheless, it is sometimes worth considering such a valuation, as it is connected with the liability of the shareholder making the in-kind contribution and the members of the company’s management board. Pursuant to Article 175 of the Commercial Companies Code, these persons are obliged to compensate the company for the missing value if the value of non-cash contributions has been significantly overstated in relation to their disposal (market) value.
Similar consequences will be borne by a shareholder if the in-kind contribution made by them has defects (Article 14 § 2 of the Commercial Companies Code). This applies to situations where the contribution lacks the properties it should have, which results in a reduction of its value.
The above issue is mainly relevant in the case of companies with at least several shareholders. In single-member companies, the sole shareholder is at the same time the economic owner of the company, so as a rule there will be no infringement of a shareholder’s interests caused, for example, by an overvaluation of the in-kind contribution.
The Polish Limited Liability Company (in Polish: spółka z ograniczoną odpowiedzialnością; sp. z o.o.) is the most common form of establishing a company in Poland. The LLC is frequently chosen by small entrepreneurs as well as by large international groups, both Polish and foreigners.
Limited liability company is one of the most popular forms of business activity in Poland. Shereholders, the Management Board and share capital – these are terms that are constantly mentioned in this context. So, what is share capital and how much should it be? Where can you register a limited liability company? How does the Management Board differ from a shareholder?
