Disposal of Shares in a Limited Liability Company
Holding a share carries the rights and obligations attached to the status of a shareholder. A shareholder has, among other things, the right to dispose of shares freely (subject to the restrictions under the Commercial Companies Code and the articles of association).
In this article we discuss the following issues:
- Shareholders' rights.
- The form of a disposal of shares in a limited liability company.
- Restrictions on the transferability of shares and consent to the disposal of shares (before the agreement is concluded).
- Notifying the company of the transfer of shares (after the agreement is concluded).
- Filing the changes with the KRS.
The Law Firm's Role in the Disposal of Shares in a Limited Liability Company
We help with the disposal of shares in a limited liability company (sp. z o.o.) by:
- analysing the articles of association for any requirements and restrictions;
- discussing the procedure for the disposal of shares;
- drafting documents such as: the notice to the company of the planned disposal of shares, the notice to shareholders of the pre-emption right, statements on exercising or not exercising the pre-emption right to acquire shares, the resolution consenting to the disposal of shares, the minutes of the shareholders' meeting, the share sale agreement, the share donation agreement and the notice to the company that the shares have been disposed of;
- attending the conclusion of the agreement and taking part in notarial acts;
- preparing and filing the application for a change in the shareholder's details in the National Court Register (KRS).
See also: Legal Services for Companies
Shareholders' Rights
Holding a share carries the rights and obligations attached to the status of a shareholder. The most important rights include: the right to a dividend, the right to attend and vote at the shareholders' meeting, the right to challenge resolutions adopted at the shareholders' meeting, the right to demand the exclusion of a shareholder, the individual right of inspection, the right to the return of additional payments (dopłaty), the right to a share in the liquidation proceeds and the right to demand the transformation of the company (in Polish). A shareholder also has the right to dispose of shares freely (subject to the restrictions under the Commercial Companies Code and the articles of association).
The Form of a Disposal of Shares
Shares (a share or part of a share) may be transferred to other persons or entities and may be traded, for example, through a sale agreement, a donation agreement or an exchange agreement, a contribution in kind to another company, or a transfer of title by way of security. Under Article 180 of the Commercial Companies Code (CCC), a disposal of shares, whatever the type of agreement, must be made in writing with notarially certified signatures.[1] If this form is not observed, the legal act is invalid.
Shares may be disposed of to a natural person or a legal person, to an existing shareholder or a third party, and sometimes also to the company by way of redemption of shares. The price of a share is a matter for the seller and the buyer, who may set it freely, regardless of the nominal value of the shares being disposed of.
Restrictions on the Transferability of Shares and Consent to the Disposal of Shares (Before the Agreement Is Concluded)
For any disposal of shares in a limited liability company, the articles of association must be legally analysed in every case, as they often modify the provisions of the Commercial Companies Code. The articles of association may restrict the disposal of shares by, among other things: making the validity of the legal act conditional on the consent of the management board or the shareholders' meeting, setting the procedure for granting consent and the manner and time limits for informing the company of a planned disposal of shares, introducing a pre-emption right to acquire shares, and laying down special requirements on the attendance of members of the body and on the majority of votes when adopting the resolution consenting to the sale of shares.
See also: Legal Services for Businesses
In most cases, the articles of association contain provisions under which, to conclude an agreement (for example, a share sale agreement), the management board must be notified of the planned disposal of the shares. The notice to the management board states, among other things, the number of shares being disposed of, the identity of the buyer and the sale price.
Template notice:
[...], [...] 2024
[...]
Shareholder of [...] sp. z o.o.
[address]
Management Board of [...] sp. z o.o.
[address]
Notice to the Management Board of [...] sp. z o.o. of a Shareholder's Intention to Dispose of Shares
Acting under Article 182 of the Act of 15 September 2000, the Commercial Companies Code (consolidated text: Journal of Laws of 2022, item 1467, as amended) and § [...] paragraph [...] of the Articles of Association, I, the undersigned [...], a shareholder in the company under the business name [...] sp. z o.o. with its registered office in [...], KRS: [...], holding [...] shares with a value of PLN [...] each, i.e. a total value of PLN [...] (in words: [...] zloty 00/100), hereby give notice of my intention to dispose of [...] shares and request the Company's consent to the transfer of these shares to: [...] ([...] shares) and [...] ([...] shares). The price is PLN [...] per share, and payment for the shares is due on the date of conclusion of the sale agreement.
[signature]
On receipt of this notice, the management board informs the shareholders of any right of first refusal. The management board then adopts a written resolution consenting to the disposal of shares (in accordance with Article 182 CCC). The shareholders may also adopt the resolution in writing, without holding a shareholders' meeting, provided that all shareholders agree to a written vote. Where the articles of association confer the power to adopt the resolution consenting to the disposal of shares on the shareholders' meeting, the management board convenes an Extraordinary Shareholders' Meeting, which will adopt that resolution.
See also: Business Law (in Polish)
Notifying the Company of the Transfer of Shares (After the Agreement Is Concluded)
After the agreement disposing of the shares is concluded, the company must be notified of the disposal for the shares to transfer effectively to the other person or entity. The notice is given in writing by the seller or the buyer. The agreement (for example, a sale or donation agreement) may specify which party has the obligation to notify the company of the transaction.
Template notice:
[...], [...] 2024
[...]
Shareholder of [...] sp. z o.o.
[address]
Management Board of [...] sp. z o.o.
[address]
Notice to the Management Board of [...] sp. z o.o. of the Acquisition of Shares
Acting under Article 187 § 1 of the Act of 15 September 2000, the Commercial Companies Code (consolidated text: Journal of Laws of 2022, item 1467, as amended), I, the undersigned [...], hereby give notice of the acquisition of [...] shares with a value of PLN [...] each, i.e. a total value of PLN [...] (in words: [...] zloty 00/100), in the company under the business name [...] sp. z o.o. with its registered office in [...], KRS: [...] (evidence of the acquisition of these shares is attached).
[signature]
Filing the Changes With the KRS
A change in the company's ownership structure must be filed with the KRS. The agreement and an updated list of shareholders are submitted with the application for a change in the shareholder's details. The new shareholder is also entered in the share register kept by the management board. The cost of filing ownership changes in the company with the KRS is PLN 350 (a fee of PLN 250 and PLN 100 for the announcement of the change in the Court and Commercial Gazette (Monitor Sądowy i Gospodarczy)). The details of shareholders holding less than 10% of the shares in the company's share capital are not filed with the KRS.
[1] In the case of a company whose articles of association were concluded using a template agreement, a shareholder may also dispose of shares using a template made available in the IT system. The statements of the seller and the buyer are signed with a qualified electronic signature, a trusted signature or a personal signature. A law firm of attorneys-at-law (radcowie prawni) should support the whole process, so it is worth contacting one.
