On 8th January 2009 y. there came into force the act of 23rd October 2008 y. on amendment of act – Code of Commercial Companies (Dz.U. No. 217 Item 1381). The major novelty brought by the act is a reduce of minimum share capital, which is required to form a limited liability company or a joint-stock company.
In case of l.l.c. it went as far as to a ten time decrease from 50,000 PLN to 5.000 PLN, whereas the new minimal share capital of a joint-stock company was set on a level of 100.000 PLN instead of the former minimum of 500.000 PLN. Still under the law only a fourth part of joint-stock company share capital needs to be paid-up in order for the company to be registered and operational – i.e. 25.000 PLN. The rest may be paid-up in term convenient for shareholders (though in-kind contributions have to be paid-up within a year of joint-stock company?s registration). L.l.c. share capital in turn has to be fully paid-up prior to its registration.
As a result running a company became more convenient. Lower share capital means that less assets shall be frozen within a company. Provisions of Code of Commercial Companies, arising from the general rule, that company?s share capital should be preserved, forbid distribution of company?s assets which are required to fully cover company?s share capital. Besides, in order for dividend to be paid to a shareholder of a joint-stock company spare capital must equal to at least one third of company?s share capital. As a consequence of decrease in share capital of a joint-stock company from 500.000 to 100.000 PLN the minimal spare capital is five times lower than previously and dividend may be disbursed far more easily.
This amendment of Code of Commercial Companies means, that currently even a very modest capital enables an investor to institutionalize his business activity by forming a company, whether it shall be 5.000 PLN for l.l.c. or 25.000 PLN for a joint-stock company. Does this mean that Polish legislator intention was to encourage representatives of small business to establish companies? One might get this impression while reading the justification of the act published on web page of Office of Prime Minister (http://kprm.gov.pl/bip/080513u4uz.pdf), which focuses on issues of easier establishment of a company by small investors due to decrease of a minimum share capital of companies. To this extent it is definitely true.
However there is one other important aspect of the novelisation. Major decrease of the share capital of companies may turn out to be even more favourable for medium seized companies, that already run their businesses. Small business usually prefer partnership because due to the fact, that taxation of income of partnerships is generally more favourable than in respect to companies. Thus I wouldn?t expect a massive increase in companies being registered by small and medium Polish investors. I do however expect, that as a result of the novelisation, foreign medium seized companies with will be more eager to form subsidiaries in order to diverse their operational risk in times of economical crisis, which roams across the Europe. Especially that the novelisation brought another positive change in provisions of Code of Commercial Companies, that concerns single member companies (http://www.howtoinvestinpoland.com/blog/2009/01/running-a-subsidiary-company-just-became-easier).
By implementing act of 23rd October 2008 y. on amendment of act – Code of Commercial Companies Polish legislator, whether he intended or not, granted a New Year present to medium seized companies willing to diversify the risk that goes with conducting business during the time of an economical crisis. So now there is nothing else to do than to unpack the present and let the fun start.
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