Changes to the share capital in a limited liability company – Procedure, requirements and the role of the articles of association

This article answers the following questions:

• What is the definition of share capital?
• What are the benefits of increasing share capital?
• What does the process of changing share capital involve?

Share capital is one of the key components of the legal structure of a limited liability company (sp. z o.o.). It affects not only the company’s credibility, but also the security of its shareholders and the entity’s development potential. A change in share capital – whether an increase or a decrease – may be necessary in various situations, for instance when attracting an investor, restructuring the company or optimising costs. Therefore, when conducting business in Poland, it is worth understanding this procedure, the exact rules that govern it, as well as the risks associated with errors made during the process.

What is the share capital of a limited liability company?

Share capital represents the total nominal value of shares acquired by the shareholders and is covered by cash contributions or contributions in kind. It forms the basis of the assets of the legal entity that is the limited liability company, and it is disclosed both in the articles of association and in the National Court Register (KRS).

Under the Polish Commercial Companies Code (KSH), the minimum share capital of a limited liability company is PLN 5,000. Contributions may be either monetary or non‑monetary (in‑kind contributions).

It is also important to underline the role of share capital in the company’s operations:

• a higher share capital enhances the confidence of business partners (thus, increasing the share capital in a limited liability company strengthens its financial credibility),
• share capital serves as an element protecting the interests of creditors.

Increase or decrease of share capital – When and why?

The company’s governing bodies may decide either to increase or to decrease the amount of the share capital. 

A resolution to increase the share capital is typically adopted in order to:

• raise additional funds for growth – an increase in capital enables the company to finance new projects, investments or expansion into new markets,
• enhance the company’s credibility on the market – a higher share capital builds trust among business partners and financial institutions, which may facilitate obtaining loans or entering into major contracts,
• introduce a new investor or shareholder – increasing the share capital is often a prerequisite for admitting an investor who contributes funds in exchange for shares.

The most common reasons for reducing the share capital, on the other hand, include:

• the need to cover the company’s losses – if the company has incurred losses, a decrease in share capital may be necessary to balance the accounts and improve financial ratios,
• withdrawal of part of the contributions by shareholders – shareholders may decide to reclaim part of their contributions (for example, if the investment strategy changes or if there is a need to distribute capital),
• optimisation of the financial structure – a reduction in capital may form part of a restructuring process when the company seeks to adjust its liabilities to actual operational needs.

The reasons listed above are the most common, although the catalogue is not exhaustive.

Step‑by‑step procedure for increasing or decreasing share capital

Changing the share capital of a limited liability company is a four‑stage process:

1. Adoption of a shareholders’ resolution – The first step is the decision to change the share capital, which requires a resolution adopted by the shareholders’ meeting. The resolution must clearly specify the new amount of share capital and the method of changing it (whether the increase will be made through additional contributions, or the decrease through the return of contributions).
2. Notarial deed – As a rule, increasing or decreasing the share capital requires an amendment to the articles of association – and such amendment must be made in the form of a notarial deed. The exception is an increase of share capital without amending the articles of association (if such a possibility has been expressly provided for in the articles). In that case, a simple written form is sufficient.
3. Contribution of funds or return of part of the capital – When the share capital is increased, the shareholders are required to make additional monetary contributions or contributions in kind. When the share capital is reduced, part of the shareholders’ contributions is returned to them, in accordance with the terms of the resolution.
4. Filing with the National Court Register – This must be done within 7 days of changing the share capital. If the capital change requires amending the articles of association, it becomes effective only upon registration in the National Court Register. However, if the capital is increased under an authorisation already included in the articles of association (i.e. without amending them), the change becomes legally effective at the moment the relevant resolution is adopted by the Extraordinary Shareholders’ Meeting. The company must submit an application to register the changes in the KRS via the electronic Portal of Court Registers within 7 days from the date the notarial deed is executed, in order to avoid potential delays.

Documentation required to change share capital

To ensure that the procedure is carried out correctly and that the change to the company’s share capital becomes effective, the following documents are required:

• a resolution of the shareholders’ meeting, confirming the decision to change the share capital (including detailed information on its new amount and the method of changing it),
• an amended version of the articles of association, updated in the sections relating to share capital (which requires the form of a notarial deed),
• proof of contributions (in the case of a share capital increase) – confirmation of payment into the company’s bank account or proof of an in‑kind contribution is necessary for the registration of the change with the National Court Register,
• an application to the KRS (form Z3 with attachments) – a formal submission notifying the register of the change in share capital, together with the required documents such as the shareholders’ resolution, the amended articles of association and proof of contributions.

Amending the articles of association in the context of share capital

Which provisions of the articles of association must be updated?

Every change in the amount of share capital must be reflected in the articles of association and confirmed by a notarial deed, which verifies that the decision was taken in accordance with applicable regulations. This applies both to the total amount of share capital and to the number and nominal value of shares.

Importantly, each amendment must receive notarially certified approval from the majority of shareholders. Under the Polish Commercial Companies Code, such a change requires the consent of at least two‑thirds of the votes, unless the articles of association specify otherwise.

Shareholders’ decisions and voting on changes

Any increase or decrease of share capital requires a resolution adopted by the shareholders. In the case of an increase, shareholders may provide additional contributions or admit new shareholders. A decrease in share capital, however, must not infringe the rights of creditors (who may file an objection within the statutory deadline) nor destabilise the company.

Registration of the share capital change with the National Court Register

The following documents must be submitted to the KRS:

• KRS‑Z3 application form,
• the shareholders’ resolution,
• the amended articles of association,
• proof of contributions (in the case of an increase).

The change in share capital becomes effective only upon its entry in the National Court Register. Failure to register may result in the invalidity of the resolution and complications in settlements. It is also important to remember that, in addition to the court registration fees, the company must cover the cost of publishing the announcement in the Court and Commercial Gazette (Monitor Sądowy i Gospodarczy).

Summary and recommendations for entrepreneurs changing share capital in a limited liability company

A change in share capital in a limited liability company is a process that requires precise actions and familiarity with legal regulations. Mistakes may lead to delays, additional costs or even sanctions. For this reason, it is advisable to seek assistance from professionals offering corporate services for companies.