What is the share capital of a limited liability company and what is its minimum value?

Share capital is one of the basic legal structures in a limited liability company. It is not only a mandatory provision in the articles of association, but also an element that affects the credibility of the company, its relations with contractors, and the protection of creditors' interests.

Although its minimum value is symbolic, the way in which the company contributes, documents, and subsequently manages its amount may determine how it is perceived on the market. Understanding the role of share capital and the formalities associated with it is crucial both when establishing a company and when making subsequent changes to its structure.

What is the share capital of a limited liability company?

The matter of a company's share capital is regulated by the Commercial Companies Code. In the case of a limited liability company, this is the amount to which the company is liable for its financial obligations. That is, in other words, the partners of a limited liability company are liable up to the amount of their contributions to the share capital. In case of trouble, their personal assets are safe.

This is one of the reasons why , when starting a company, you should consider just setting up a limited liability company.

What does the share capital of a limited liability company include?

The company's share capital is otherwise known as the company's assets. It may consist only of money, but may also consist of real estate and movable property, such as production machinery and equipment. A component of the company's share capital may also be patent rights or copyrights. At the same time, the value of the company's non-cash components should be fairly valued, if possible by an expert.

Legal requirements versus the amount of the company's share capital

The establishment of a limited liability company actually begins with the determination of its share capital. This is because the established components of the share capital are determined by the articles of association. However, since the share capital can always be increased, you can carry out the registration of the company quickly by paying only the minimum share capital. According to Polish law it is not high. Cash contributions from shareholders in the amount of five thousand zlotys are sufficient.

Inviolability of the company's share capital

The company's share capital is a safeguard for potential creditors. They must be assured that if the business fails, they can rely on the company's share capital to secure their claims. Therefore, the share capital is inviolable. Dividends, salaries and other claims cannot be paid from it. The minimum share capital specified in the company's articles of association must always remain available.

The higher the share capital, the more confidence the company can count on from the market. Also, aim for a situation where the share capital is high enough for the scale of business done.

Does the company have to have an amount set aside in its coffers for share capital?

Share capital does not have to lie in the company's coffers or accounts. It can be used to conduct the company's business, that is, to purchase materials or equipment or other things necessary for the company's operation. However, it must be remembered that the company's share capital must be available on demand. For this reason, it is better for a limited liability company to have it deposited in a bank account.

What is the capital reserve?

The company's reserve capital is money set aside from profits for a black hour. There is no obligation to set aside reserve capital. It is independent of share capital and is a form of security for the company. The company's board of directors or shareholders' meeting may decide to set aside reserve capital for the company's future liabilities.

How to pay the share capital of a limited liability company?

When setting up a limited liability company with a notary, the sequence of events will be as follows:

We draw up a notarized memorandum of association, then open a bank account and pay into it the contributions specified in the memorandum of association. Cash can be paid into the share capital, but also other values specified in the articles of association. As we wrote earlier, the components of share capital can be various tangible and intangible assets useful for the company's operations.

At the time of payment of share capital by shareholders, the notary public shall prepare a record of payments until the share capital is fully paid up. The protocol is an important document confirming that the company's share capital has been paid in accordance with the law.

Share capital - limited liability company vs. other companies

Coverage of the company's share capital is not required in all types of companies. It is required in a limited liability company, in a joint-stock company, but already in a partnership, for example, there is no obligation to create share capital. The share capital of a limited partnership does not have to be paid up either.

Change in the share capital of a limited liability company.

A change in the share capital of a limited liability company requires an amendment to the company's articles of association. It is necessary to convene a shareholders' meeting. They must pass a resolution to change the company's share capital, that is, to change the company's assets. The changes must be reported to the National Court Register and the required fees paid. It may be necessary to draw up a new notarized contract of the company.

Reduction of share capital of a limited liability company?

Reduction of the company's share capital can be carried out as written above. However, the minimum amount of share capital must be maintained in accordance with the regulations There may, however, be a problem in the continued operation of the company, as such a change is sure to worry the company's creditors. Questions from concerned counterparties should also be expected.

When to increase the share capital of a limited liability company?

An increase in a company's share capital is a signal to the market that the company wants to grow, to expand into new markets. An increase in share capital may be accompanied by the acquisition of new investors or shareholders. In the case of a company's share capital increase, it is necessary to carry out a full procedure, i.e. a shareholders' meeting and, finally, registration of the changes in the National Court Register.