Disposal of 50% of the Shares in a Limited Liability Company by Shareholders Holding an Odd Number of Shares: Discussion of the Issue and Practical Solutions
The disposal of shares in a limited liability company (sp. z o.o.) is one of the key instruments by which shareholders shape the ownership structure and implement business strategies. In practice, however, where shareholders hold an odd number of shares and the aim is to dispose of exactly 50% of the share capital, significant legal and practical challenges arise.
This is because shares in a limited liability company are indivisible and each share has a specified nominal value, which can make it difficult to reflect exactly half of the shares when their number is odd.
In this article we discuss the most common problems that arise when shareholders holding an odd number of shares attempt to dispose of 50% of their shares, and we present practical solutions that allow such a transaction to be carried out effectively.
We analyse both the formal aspects and the options for adapting the articles of association or dividing the shares, in order to ensure compliance with the provisions of the Commercial Companies Code (CCC) and to respect the interests of all parties to the transaction.
Disposal of Shares in the Company
Under Article 180 CCC, a disposal of shares, regardless of the type of agreement, must be made in writing with notarised signatures. If this form is not observed, the legal act is invalid.
Disposal of Part of a Share or a Fractional Part of a Share
Where each shareholder plans to dispose of 50% of their shares, an odd number of shares to be disposed of creates a problem. For example, where each shareholder holds 75 shares, each of them would have to dispose of 37.5 shares.
The Commercial Companies Code allows the disposal of part of a share or a fractional part of a share in a limited liability company. Under Article 181 CCC, if under the articles of association a shareholder may hold only one share, the articles of association may allow the disposal of part of a share.
The division may not result in shares of less than PLN 50. If a shareholder may hold a larger number of shares, their shares are equal and may not be divided. If, however, a shareholder may hold at most one share, that share may be divided (Article 153 CCC). It must therefore be assumed that if a shareholder holds a maximum of one share, part of a share may be disposed of if the articles of association permit the disposal of part of a share.[1]
Shares in the company therefore cannot be divided, so the disposal of part of a share (for example, 37.5 shares) is excluded. In the situation described, several solutions are possible (they are presented below).
See also: Commercial Law (in Polish)
Disposal of 50%+1 and 50%-1 of the Shares
Where the number of shares held by the shareholders is odd, one shareholder could dispose of 50%+1 (for example, 38) and the other shareholder of 50%-1 (for example, 36) of the shares. In that case, a disproportion of one share in favour of one person would remain between the existing shareholders. The same situation would arise among the new shareholders.
To equalise voting power, the articles of association may provide for privileged shares or a so-called golden vote. The newly taken-up shares may be privileged so that the number of votes held by the new shareholders equals the number of votes held by the existing shareholders (giving a 50:50 balance of power in the company).
It is also possible to introduce personal rights for a specified shareholder or shareholders (for example, a personal right to one additional vote at the shareholders' meeting or to an increased dividend).
See also: Company Audit (Due Diligence)
Disposal of Fractional Parts of Shares
It would also be possible to dispose of fractional parts of shares, but this is a more complicated structure, which would create co-ownership of ½ of one share between each of the existing shareholders and each of the new buyers of the shares.
The resulting structure would look like this: a share in the co-ownership of 49 shares with a total nominal value of PLN 49,000, in a fractional part of ½ in each share, together with [the other shareholder]. Holding a "joint" share, however, sometimes makes it harder to exercise the rights attached to shares, such as the right to vote.
See also: Legal Services for Companies
Increase of the Share Capital
The third possible solution is to increase the company's share capital by 2 shares (to 152 shares). Each shareholder will then hold a number of shares divisible by 2 (76) and will be able to dispose of 38 shares.
Under Article 257 § 2 CCC, the share capital is increased by increasing the nominal value of existing shares or by creating new shares and, as a rule, this requires an amendment of the articles of association (unless the increase is made on the basis of the existing provisions of the articles of association).
The articles of association may contain special provisions on increasing the share capital. Under Article 257 CCC, where the articles of association provide for the possibility of increasing the share capital and specify the maximum amount and the date of the increase, the increase does not require an amendment of the articles of association in this respect, for example: The Company's share capital may be increased to PLN 100,000.00 by 2030 without amending the articles of association.
Under the articles of association, the company's share capital may in that case be increased by a resolution of the shareholders' meeting. Shares in the increased share capital may be covered by cash or non-cash contributions, in accordance with the resolution of the shareholders' meeting. Statements by the existing shareholders on taking up the new shares must be made in writing, otherwise they are invalid (Article 257 § 3 CCC). Article 260 § 2 applies accordingly.[2]
The share capital may therefore be increased by a resolution of the shareholders' meeting creating 2 new shares. The existing shareholders will each take up 1 share by making a written statement and making their contributions, for example in cash.
Under Article 262 § 1 CCC, the management board files the increase of the share capital with the registry court. The share capital is increased at the moment of entry in the register (§ 4). This matters because the shareholders will be able to conclude the agreement for the sale of 50% of the shares only after the court has registered these changes.
See also: Business Succession (in Polish)
The Following Must Be Attached to the Filing of the Share Capital Increase:
- the resolution on the increase of the share capital;
- statements on taking up shares in the increased share capital;
- a statement by all management board members that the contributions to the increased share capital have been made in full.
The share capital may also be increased under Article 260 CCC from company funds. A shareholders' resolution amending the articles of association may increase the share capital by using funds from the supplementary capital or from reserve capital (funds) created out of the company's profit (an increase of the share capital from company funds).
An Increase of the Company's Share Capital Has the Following Tax Consequences:
- Tax on civil law transactions (PCC) of 0.5% of the value of the capital increase
Under Article 1(1)(2) of the Act of 9 September 2000 on Tax on Civil Law Transactions (consolidated text: Journal of Laws of 2024, item 295), tax is charged on amendments to the agreements listed in point 1 (for example, point (k): articles of association) if they increase the tax base, subject to paragraph 3(4). Under Article 1(3)(2) of that Act, in the case of articles of association, an amendment in a capital company means an increase of the share capital from contributions or from company funds, and additional payments (dopłaty).
- Corporate income tax (CIT): none
Under Article 12(4)(4) of the Act of 15 February 1992 on Corporate Income Tax (consolidated text: Journal of Laws of 2023, item 2805, as amended), income does not include income received to create or increase the share capital. This income is therefore not subject to corporate income tax (CIT).
See also: Family Foundation (in Polish)
Voluntary Redemption of Shares
The fourth possible solution is to redeem 2 shares. Shares may be redeemed only where the articles of association so provide. A provision of the articles of association to this effect might read as follows: shareholders' shares may be redeemed by way of a reduction of the share capital or out of net profit. Redemption may take place with or without the shareholder's consent.
The proposed solution is voluntary redemption (with the shareholders' consent) of one share held by each shareholder. Each shareholder will then hold a number of shares divisible by 2 (74) and will be able to dispose of 37 shares.
Under Article 199 § 2 CCC, redemption of a share requires a resolution of the shareholders' meeting, which should specify in particular the legal basis for the redemption and the amount of the consideration due to the shareholder for the redeemed share. With the shareholder's consent, a share may be redeemed without consideration (Article 199 § 3 CCC).
The best solution would be a redemption of shares that does not result in a reduction of the Company's share capital. The Company then avoids having to notify creditors of the capital reduction (under Article 264 CCC[3]) and to file an application with the registry court (under Article 265 CCC).
Under Article 199 § 6 CCC, redemption of a share out of net profit does not require a reduction of the share capital (this concept is not defined in the Commercial Companies Code or in the Accounting Act: it means extinguishing shares without having to reduce the share capital, with the consideration paid out of the company's profit that is not intended to cover the share capital).
The procedure for redeeming shares without reducing the share capital in a limited liability company is as follows:
- The shareholders' meeting adopts a resolution on the redemption of shares, which should specify the legal basis for the redemption and the amount of the consideration for the shares being redeemed.
- The redemption is made out of net profit, without having to reduce the share capital.
- The source of payment for the redeemed shares may be the profit for the last financial year, profit from previous years set aside in special funds intended for redemption purposes, or profit from previous years alone (where a loss occurred in the last year).
- After shares are redeemed out of net profit, the product of the number of shares and their nominal value will not correspond to the amount of the share capital, which is permissible and may be a permanent state of affairs.
Of the four solutions proposed above, the optimal one is to increase the company's share capital.
The next step will be the disposal of shares in the company (the disposal of 50% of the shares held by each shareholder). You can read more about the disposal of shares in a limited liability company in the article on our blog Disposal of Shares in a Limited Liability Company
[1] A. Kidyba [in:] M. Dumkiewicz, A. Kidyba, Komentarz aktualizowany do art. 1-300 Kodeksu spółek handlowych, LEX/el. 2025, Article 181.
[2] Article 260 [Increase of the share capital from company funds]. § 1. A shareholders' resolution amending the articles of association may increase the share capital by using funds from the supplementary capital or from reserve capital (funds) created out of the company's profit (an increase of the share capital from company funds).
[3] Article 264 [Convocation procedure]. § 1. The management board shall promptly announce the adopted reduction of the share capital, calling on the company's creditors to lodge objections within three months of the date of the announcement if they do not consent to the reduction. Creditors who have lodged an objection within that period should be satisfied or secured by the company. Creditors who have not lodged an objection are deemed to have consented to the reduction of the share capital.
