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What is the Management Board, a shareholder, share or share capital in a limited liability company (LLC)?

8 November 2023

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?

Limited liability company (LLC or “sp. z o. o.” – in Polish) is a type of capital company. This means that specially appointed bodies are responsible for representing as well as managing the company. An LLC can be established by one or more individuals (natural or legal persons – most commonly other companies), and its subject can be any legally permissible business activity. In 2021, this type of capital company accounted for nearly 68% of all businesses registered in the National Court Register (KRS).

Due to the widespread interest in limited liability companies, it is essential to understand the basic legal concepts that characterize them.

Shareholder in an LLC

A shareholder in limited liability company is anyone who owns shares in the company. In practice, this means that each partner invests some assets (e.g. money, vehicles, machinery, real estate, copyrights) and, in return for contributing these assets to the company (usually becoming its owner), they receive shares in the company.

According to Polish law, a shareholder in an LLC can be a natural person, legal person, or a legal entity without personality, provided that it has a legal capacity (for example general partnerships – spółki jawne). Citizens or entities – Polish as well as foreign, have the capacity to become shareholders in a company.

Usually – shareholders in a limited liability company have equal rights and responsibilities. However, there are also some exceptions to this concept. The law allows, among other things, the possibility of privileging shares or granting certain rights to individual shareholders.

Shareholders make decisions in the company (e. g. voting on resolutions) at General Meetings of shareholders – which are convened to make specific resolutions.

The Management Board in an LLC

The Management Board along with the General Meeting, is a mandatory body of an LLC. The main tasks of the Management Board are to represent the company and manage its affairs. This means that when the company enters into contracts, the Management Board signs them on behalf of the company. When the company is sued in court, the Management Board testifies on its behalf.

The Management Board consists of one or more members, who are natural persons (legal entities cannot be appointed to the Management Board of Polish LLCs). Members of the Management Board can be shareholders of the company as well as they can be individuals not associated with the company (there is no legal obligation for a board member to be shareholder of the company). Polish citizen or a foreigner can be appointed as the Member of the Management Board.

Members of the Management Board are appointed by a resolution of the shareholders unless the company’s Articles of Association (AoA) provide otherwise.

Share Capital in an LLC

Share capital is the sum of contributions (money, movables, immovables) made by all shareholders during the establishment of the company. Contributions to cover share capital can be either financial or non-financial. When founding a company, some shareholders may contribute money (in practice – they deposit a certain amount into the company’s bank account and later receive shares in return), while other may contribute in-kind (e. g. vehicles) in exchange for shares.

In a limited liability company, the share capital amounts to at least 5.000 PLN. It should be paid fully from the beginning. After establishing the company, the share capital can be increased if additional funds are needed for the company’s development or in case of expansion of its activities.

Shares in the share capital of an LLC

The share capital in an LLC is divided into shares of equal or unequal value. Nominal value of the share cannot be less than 50 PLN.

Shares represent contributions made to the company by individual shareholders (for example when company has 2 shareholders, and the share capital of the company amounts to PLN 5.000 and is divided into 50 equal shares at PLN 100 each, one of the shareholders may contribute 3.000 PLN and take 30 shares as a result, while the other contributes PLN 2.000 and acquires 20 shares).

Shares in an LLC guarantee certain rights related to the company’s activities for those who own them. The values of individual shares determine the part to which each shareholder owns for example right to dividends (i.e., the distribution of the company’s profits) or the number of votes at shareholders’ meetings.

In the case mentioned above, the former shareholder will take part in 60% of the company’s profit, and the latter-  in 40%. First one obtains 30 votes during General Meeting, and the second one – 20.

National Court Register (KRS)

National Court Register is a public register maintained by the commercial departments of district courts in Poland. Everyone has free access to information about any registered company in the National Court Register through the website www.ems.ms.gov.pl

Every limited liability company is subject to mandatory registration in the National Court Register (KRS). After registration company gets its own, individual KRS number which serves for its identification, and also automatically obtains tax number (NIP) and business entity identification number (REGON).

Central Register of Beneficial Owners (CRBR)

Central Register of Beneficial Owners is a system which was introduced in 2018 in Poland as an amendment to the Act on Counteracting Money Laundering and the Financing of Terrorism. It is used to register all natural persons who derive real benefits from company’s activities or have a decisive influence on its operations.

Thus, all natural persons exercising direct or indirect control over another entity, such as an LLC, are subject to registration in the Central Register of Beneficial Owners.

Agnieszka Bodzek

paralegal

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