Share Capital Increase in a Limited Liability Company

An increase in the share capital of a limited liability company (sp. z o.o.) consists in changing the company's capital structure through contributions that increase the company's assets. It takes the form of an increase in the number of shares or in their nominal value. The shareholders of a limited liability company may decide to increase the share capital, for example, when new shareholders join the company and acquire newly created shares in exchange for contributions made to the company. A share capital increase may also take place where the existing shareholders of a limited liability company decide to provide additional funding to the company.

How We Help With a Share Capital Increase

1. analysing the articles of association for any requirements and restrictions;
2. discussing the procedure for increasing the share capital;
3. drafting documents such as: the resolution amending the articles of association, the resolution increasing the share capital, the statement on exercising the right of first refusal, the shareholders' statement on taking up shares and the management board's statement that contributions covering the capital have been made;
4. taking part in notarial acts;
5. preparing and filing the application for a change in the National Court Register (KRS).

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In this article we discuss the most important issues relating to a share capital increase, namely:

1. Ways of increasing the share capital (creating new shares or increasing the nominal value of shares)
2. Sources of funds for the capital increase (contributions from shareholders or the company's own funds)
3. Procedures for increasing the share capital (amending the articles of association or the informal procedure, which requires no amendment)
4. The pre-emption right of existing shareholders to take up new shares
5. Registration formalities (the resolution increasing the capital, statements by shareholders and management board members, the application to the KRS)
6. Tax consequences of a share capital increase in a limited liability company
7. Alternative ways of injecting capital into a limited liability company

Ways of Increasing the Share Capital

The share capital of a limited liability company is increased by creating new shares (the company creates new shares at the nominal value of the existing shares) or by increasing the nominal value of existing shares (additional payments are made on existing shares, which do not increase the total number of shares but only increase the nominal value of each existing share in proportion to the amount of the capital injection). The two methods may be combined by simultaneously increasing the nominal value of existing shares and creating new shares at the new nominal value. Shares in the increased share capital may be covered by contributions in cash or in kind.

Shares may be taken up in the form of co-ownership in fractional parts or joint co-ownership, where the contribution is made by a civil-law partnership or by spouses (resolution of the Supreme Court of 22 May 1996, III CZP 49/96).

See also: Business Law (in Polish)

Sources of Funds for the Capital Increase

The funds for a share capital increase may come from two sources:

1. contributions in cash or in kind from existing or new shareholders, or
2. the company's own funds (funds from the supplementary capital or from reserve capitals created out of the company's profit).

A share capital increase consisting in an increase in the number of shares or in their nominal value involves making contributions and increases the company's assets, whereas a capital increase from the company's own funds does not increase the company's assets and only results in transfers between balance sheet items.

See also: Company Bankruptcy (in Polish)

Procedures for Increasing the Share Capital

A share capital increase may take place by amending the articles of association (the formal procedure) or without amending them (the informal procedure). As a rule, it requires an amendment to the articles of association and the form of a notarial deed (unless it takes place on the basis of the existing provisions of the articles of association).

However, where the articles of association provide for the possibility of a share capital increase and state the maximum amount of the increase and the deadline for it, the share capital may be increased without amending the articles of association in this respect.

Importantly, both of these elements (the amount and the deadline of the increase) must be stated in the articles of association. If the articles of association merely provide for the possibility of a share capital increase, without stating a deadline or amounts, the share capital may be increased only under the formal procedure.

Both the amounts and the deadlines of such a capital injection should be realistic and not distant in time. For example, where the company's share capital is currently, in 2025, PLN 300,000, this provision may read as follows: An increase in the share capital to PLN 500,000 by 31 December 2030 does not constitute an amendment to the articles of association.

See also: Company Audit (Due Diligence)

The articles of association may therefore contain provisions under which the share capital may be increased by a resolution of the shareholders' meeting and such an increase does not constitute an amendment to the articles of association.

Including provisions in the articles of association that allow the share capital to be increased under the informal procedure (without amending the articles of association) does not, however, rule out increasing the share capital by way of an amendment to the articles of association.

Share Capital Increase Without Amending the Articles of Association

Legal commentators point out that Article 246 § 3 CCC does not apply to a share capital increase without an amendment to the articles of association (the consent of all shareholders concerned is not required).

The resolution increasing the share capital should be in writing. Statements on taking up new shares should be in writing, on pain of invalidity.

A share capital increase under the informal procedure is conditional on all the shares being taken up. Otherwise, the resolution increasing the capital becomes ineffective.

See also: Legal Services for Companies

Share Capital Increase by Amending the Articles of Association

A share capital increase on the basis of the existing provisions of the articles of association of a limited liability company may take place by increasing the nominal value of existing shares or by creating new shares (resolution of a bench of seven judges of the Supreme Court of 17 January 2013, III CZP 57/12).

Under the procedure involving an amendment to the articles of association, a resolution must be adopted by a majority of 2/3 of the votes. As the case law rightly emphasises, a resolution of the shareholders of a limited liability company to increase the share capital by amending the articles of association does not require unanimity (judgments of the Supreme Court of 3 December 2008, V CSK 283/08 and of 6 November 2014, II CSK 53/14). The articles of association may provide for stricter conditions for adopting a resolution to increase the share capital.

Pre-emption Right

Unless the articles of association or the resolution increasing the capital provide otherwise, the existing shareholders have a pre-emption right to take up new shares in the increased share capital in proportion to their existing shares. The management board sends the shareholders notices stating that they may exercise the pre-emption right to acquire the new shares. The pre-emption right must be exercised within one month of the date of the notice calling for its exercise.

Registration Formalities

Under Article 262 § 1 CCC, the management board files the share capital increase with the registry court. The share capital is increased upon entry in the register (§ 4). This matters because you will be able to conclude a share sale agreement only after the court has registered these changes.

The following must be attached to the filing of the share capital increase:

1. the resolution increasing the share capital;
2. the shareholders' statements on taking up shares in the increased share capital, in the form of a notarial deed or, for an increase under the existing provisions of the articles of association, in writing;
3. a statement by all management board members that the contributions to the increased share capital have been made in full;

and additionally:

• a statement on joining the company, in the form of a notarial deed, if the shares are taken up by a person or entity that has not so far been a shareholder;
• a new list of all shareholders (the first name and surname or business name of the shareholder or shareholders and the number and nominal value of each shareholder's shares), signed by all management board members;
• the consolidated text of the articles of association, where the share capital increase required an amendment to the articles of association.

Tax Consequences of a Share Capital Increase in a Limited Liability Company

A capital increase is subject to tax on civil law transactions (PCC), but not to corporate income tax (CIT).

• PCC at 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), the tax applies to changes to the agreements listed in point 1 (for example, letter (k), articles of association), if they increase the tax base for tax on civil law transactions, subject to paragraph 3(4). Under Article 1(3)(2) of that Act, in the case of articles of association, a change to the agreement means, for a capital company, an increase in the share capital from contributions or from the company's funds, and additional payments (dopłaty).

• 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), revenue does not include revenue received to create or increase the share capital. This revenue is therefore not subject to corporate income tax (CIT).

See also: Family Foundation (in Polish)

Alternative Ways of Injecting Capital

Other ways of injecting capital into a company may include, for example, granting the company a loan or making additional payments under Article 177 CCC.

It is not possible, however, to increase the share capital by revaluing the contributions in kind made to the company to cover the share capital (resolution of the Supreme Court of 25 January 1995, III CZP 177/94).