Spółka z ograniczoną odpowiedzialnością (), abbreviated Sp. z o.o., is the legal title of a limited liability company in Poland.

Formation of an Sp. z o.o.

Overview The necessary steps for establishing an Sp. z o.o. (spółka z ograniczoną odpowiedzialnością) are determined by Article 163 KSH (Kodeks spółek handlowych, eng. Commercial Companies Code).Cf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 163 Nr. 1; Rodzynkiewicz: Kodeks spółek handlowych: Komentarz, S. 271-273; Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 5. It first requires the notarization of the articles of incorporation. It must take place in Poland. The conclusion of the articles of incorporation creates a legal capacity subject, the company prior registration.

The second step requires the full payment of the share capital as codified by the articles of incorporation. Where required the payment includes the agreed surplus over the nominal value of the company share.Cf. Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 7; Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 163 Nr. 3.

The share capital may be covered by cash or contribution in kind. Inalienable rights, e.g. work or services cannot place as a deposit in an Sp. z o.o.Cf. Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 7; Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 14 Nr. 2.

The third step is the appointment of the board and possibly other organs of the Sp. z o.o. The Board of Directors or the first board members can already be appointed at formation. Once all deposits are paid in full, the board may register for entry into the business register. The application is inter alia accompanied by a statement of all board members that the deposits were placed to cover the common stock in full by all shareholders in the company. The registration of the company in the business register takes about two to four weeks. By registering the company in the business register, the company becomes a legal entity.Cf. Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 9; Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 12 Nr. 1. After registration in the business register, the Board of Directors has to request the so-called REGON number at the statistics agency. This is issued within one to two days. Subsequently the Board of Directors has to register the company at the company's financial authorities and obtain the so-called "NIP" number (Taxpayer Identification Number) and the VAT number.

The granting of the NIP requires the submission of a lease or other proof that the company has any accommodation, also a bank account contract is required. For these reasons it is recommended that already with formation the Board of Directors is appointed. In this way, in the start-up phase before registration in the business register the company is already able to open a bank account and sign a lease agreement.Cf. Bogen/ Siekierzyński (2006): Länderbericht Polen, S. 3 Rn. 7.

Since 2012 - it is possible to register an Sp. z o.o. online via S24 system. Sp. z o.o. registration is available only to users that hold qualified electronic signature or Polish Trusted Profile. Registration takes approx. 3-5 days.

Content of the articles of incorporation The minimum content to be regulated the articles of incorporation determines Article 157 KSH. The articles of incorporation must contain information about the name of the company, place of business, the subject of the activity, the amount of registered capital, an indication of whether a shareholder is allowed to take over one or more company shares, the number and the nominal value of the company shares of each of the shareholders are taken and the duration of the company, if it is determined.Cf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 157 Nr. 1; Rodzynkiewicz: Kodeks spółek handlowych: Komentarz, S. 256-257. Beyond the minimum content the shareholders are free to regulate their relationship to each other or to the company more extensive.

Costs of formation Notable costs are first of all the notary fees, which are calculated in dependence to the share capital. If the share capital amounts e.g. 8,000 złoty (about €2,000), the maximum amount to pay is zł 100 plus 3% on the difference between share capital and zł 3,000, consequently 3% of zł 5,000. In result of this the total costs for the notary would be zł 250 (about €62). In addition the value added tax (VAT) at the legal rate from the current 23% has to be added.Cf. PAlilZ/ JP Weber (2009): Ratgeber für Investoren – Polen: Hinweise zur Führung der Geschäftstätigkeit, S. 106 und 107.

Furthermore, costs incur associated with registering the company in the business register and the publication in for this responsible "monitor Gospodarczy i Sądowy" in the amount of approximately zł 1,500 (about €370). Finally, within 14 days after formation of the articles of incorporation, the so-called tax on civil law transactions (PCC) is to pay. This is 0.5% of the share capital.Cf. Bogen/ Siekierzyński (2006): Länderbericht Polen, S. 6 Rn. 15; Ustawa podatku od czynności cywilnoprawnych, Dz.U. Nr. 86 Pos. 959.

Financial condition of the Sp. z o.o.

Capital raising and capital maintenance The share capital amounts to at least zł 5,000 (about €1,230 - depending on the exchange rate). The shares can either be of equal or unequal height, depending on the articles of incorporation. If a shareholder can have more than one share, the shares must be equal and indivisible. The minimum nominal value of a share amounts to zł 50 (approx. €12.5).Cf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 154 Nr. 2. The Polish legislator has various instruments to ensure the protection of creditors.

The share capital must be maintained throughout the life of the company. It may be reduced only in the manner allowed by law, e.g. through a capital reduction. The ban also applies to the hidden distribution of profits. A payment from the required share capital covering the company's assets is not possible for the shareholders under any title.YCf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 189 Nr. 3.

The shareholders are also prohibited from referring to or from the assets contributed their rightful share interest. Claims of the shareholder from a granted loan of the Sp. z o.o. applies as a contribution to the company if the loan was granted within two years before the insolvency of the Sp. z o.o. In addition, Article 14 § 4 KSH contains a setoff of maturing share payments.Cf. Brockhuis/ Schnell (2002): Gesellschaftsrecht in Polen, S. 56.

The access rights of the shareholders at the company's assets are generally restricted to the distribution of certain portion of the profits.Cf. Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 12.

Change in the share capital amount The capital increase is governed by Articles 255 ff. KSH. Basically, the increase in share capital demanded the change of the articles of incorporation. This requires a notarized resolution of the shareholders' meeting and the entry into the business register. Without changing the articles of incorporation, the capital increase can be carried out only if this is expressly permitted by the articles of incorporation. The exact height to which the share capital can be raised and the exact date to which the increase take place is also a requirement have to be regulated.Cf. Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 13.

The capital increase is carried out either by increasing the nominal value of existing shares or by issuing new shares (ordinary capital increase). In case of the ordinary capital increase the company's assets is increased by the new deposits, which is provided from the old or new shareholders.Cf. Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 14.

In principle, the existing shareholders are entitled to acquire the new shares. The take-over declaration needs to be notarized. In the case of the nominal capital increase the share capital will be increased by retained earnings or capital reserves.Cf. Oplustil in Liebscher/ Zoll (2005): Einführung in das polnische Recht, 2. Teil § 15 Rn. 14.

The capital reduction of share capital requires changing the articles of incorporation in general as well. The shareholders may decide either the recovery of shares or the reduction of the share value. The reduction decision has to determine the amount of the share capital reduction and the way by which the capital should be reduced.Cf. Brockhuis/ Schnell (2002): Gesellschaftsrecht in Polen, S. 59.

The minimum share capital and the minimum nominal value of shares may not be affected by the reduction. The reduction of the share capital needs to declare immediately to the creditors of the company with the request to object within three months, if they do not agree with the reduction. Creditors, which contradict the deadline, are generally to be satisfied by the company or have to obtain an appropriate security for their claim.Cf. Brockhuis/ Schnell (2002): Gesellschaftsrecht in Polen, S. 59.

Each corporate action becomes effective upon its entry into the business register, and thus has a constitutive effect.Cf. Schnell/ Brockhuis (2001): Polen: Gesetzbuch der Handelsgesellschaften - Teil 4: GmbH. WIRO 2001, 240.

Constitutional organ of the Sp. z o.o.

The Board of Directors The board consists of one or more individuals. To the board may be appointed both shareholders and third parties. Board members may be foreigners or persons resident abroad.Cf. Bogen/ Siekierzyński (2006): Länderbericht Polen, S. 26 Rn. 117. The members of the Board are appointed and dismissed by resolution of the shareholders, unless the articles of incorporation provides otherwise, such as the appointment by the Supervisory Board.

Board members are generally appointed for one year. An excess of this one-year term of office may also be agreed. The term of office generally terminates with the date of holding of the shareholders’ meeting, which approved the financial statements for the last full financial year of the exercise of Executive Function. Board members are also free to withdraw from its role as manager.Cf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 202 Nr. 5; Rodzynkiewicz: Kodeks spółek handlowych: Komentarz, S. 364-367.

Unless otherwise agreed in the articles of incorporation, a board member can be dismissed at any time. However, the claims arising from the employment relationship persist.Cf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 203 Nr. 1.

The Board conducts the business of the Sp. z o.o. and represents it externally. The legal representative of a board member cannot be confined in an external legal effect.Cf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 204 Nr. 1. The articles of incorporation certainly may determine the way of representation.

The legal base case therefore regulates by a multi-person board that for issuing statements on behalf of the Sp. z o.o. the interaction of two board members or one board member along with a registered manager is required.Cf. Kidyba (2010): Kodeks spółek handlowych: TOM I: Komentarz do art. 1-300, § 205 Nr. 1.

Other bodies