LLC without initial capital?

Poland: Council of Ministers accepts project guidelines for amendment to Commercial Companies Code.

Planned changes aim to make the Polish model of limited liability company more flexible and to increase its competitiveness on European markets.

If accepted, the amendment will be quite a revolution in company law. The biggest change will be removal of the obligation for limited liability companies to set initial capital. Poland would be the very first country in Europe to introduce this solution. Setting initial capital would be for the shareholders to decide. Another change would be the minimal value of capital, currently 5000 PLN (1250 EUR), which the amendment foresees reducing to only 1 PLN (0.25 EUR).

A novelty is shares without a nominal value. The essence here is absence of the need to tie up financial assets in a company to correspond with the value of initial capital. This would be an alternative to the present type of capital consisting of shares with a nominal value. Companies could choose one of the capital types or even use mixed capital. This is especially important for existing companies, which may be able to obtain financing by issuing shares without a nominal value. This would avoid the need to conduct the complicated procedure of increasing the initial capital. Issuing shares without a nominal value would only require amending the articles of association but even that would be unnecessary if the articles of association already foresee this possibility.

Critics have long complained that initial capital has stopped fulfilling its function, so the guidelines introduce new instruments for creditor protection. The Council of Ministers suggests applying a solvency test before every payment to shareholders from a company’s assets. Members of the board would bear the responsibility for correct operation of the system. An additional type of creditor protection would be the obligation to set aside supplementary capital to cover future losses. The guidelines further propose creating a hierarchy of sources of loss coverage and a duty to call a general meeting if the company is likely to suffer substantial loss.

The amendments are expected to come into force by 01.01.2015.

Source: Project guidelines for amending the Commercial Companies Code and other Acts.

For more information, please contact:

Dominika Izabela Wągrodzka
Partner, bnt Warsaw

Phone: +48 223736550

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