In this article, we will outline the details of the capital increase procedure, covering the various methods, the rules governing the subscription of shares by shareholders, and capital increases funded from the company’s own resources.
Why is it worth increasing the share capital?
Share capital is one of the fundamental structural elements of a limited liability company. The minimum amount is PLN 5,000, but in practice many companies start their operations with the minimum capital. However, as the company grows, there may be a need to increase it. An increase in share capital may be motivated by:
- increased investment opportunities,
- the need to improve financial liquidity,
- to improve creditworthiness,
- a desire to strengthen the confidence of business partners,
- preparation for business expansion,
- planned cooperation with new partners.
It is worth remembering that increasing the share capital is not merely a formal matter, but also a key element in building the company’s credibility.
Methods of increasing share capital
An increase in the share capital of a limited liability company (sp. z o.o.) may take place in two basic ways:
- On the basis of the provisions of the articles of association
If the articles of association contain appropriate provisions allowing for an increase in share capital without the need to amend them, the procedure is significantly simplified. The key elements of such a provision are:
- Maximum amount of the increase – the articles of association must specify the upper limit to which the share capital may be increased.
- Timeframe – it is necessary to specify the timeframe within which such an increase may be carried out.
In this case, the shareholders may pass a resolution to increase the share capital without amending the articles of association, which saves time and costs associated with the notarial procedure.
- By amending the articles of association
Where the articles of association do not contain provisions allowing for a simplified share capital increase, an amendment is required. This process requires:
- a resolution of the shareholders adopted by a two-thirds majority, unless the articles of association provide for higher thresholds,
- the drawing up of a notarial deed,
- notification of the amendment to the National Court Register (KRS).
Amending the articles of association involves more formalities, but allows for a more flexible adaptation of the capital structure to the company’s needs.
Methods of increasing share capital
The share capital may be increased in two ways:
- Issuing new shares – in this case, the shareholders subscribe to the newly issued shares, which may be paid up with cash or non-cash contributions (in-kind contributions). This solution allows for the admission of new shareholders to the company or an increase in the involvement of existing shareholders.
- Increasing the nominal value of existing shares – this method involves a uniform increase in the value of all existing shares. It is particularly useful when no new shares are created and the aim is for existing shareholders to inject additional capital into the company.
Increasing the share capital from own funds
An increase in share capital may also be achieved by transferring funds from the supplementary capital or reserve fund. This is a particularly attractive solution because:
- it does not require additional contributions from shareholders,
- it does not alter the company’s ownership structure,
- it improves the company’s financial ratios.
In such a case, a resolution by the shareholders amending the articles of association is required, specifying how the company’s own funds are to be used for the capital increase.
Subscription of shares by shareholders
A key element of the share capital increase procedure is the subscription of shares by shareholders. This process takes place in several stages:
- Resolution on the increase in share capital
The shareholders’ resolution must specify:
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- the amount of the increase,
- the method of subscribing to new shares (e.g. cash contributions, contributions in kind),
- the deadline for making contributions.
- Right of pre-emption
Existing shareholders have a right of first refusal to subscribe for new shares in proportion to the shares they already hold. However, this right may be excluded in the articles of association or in the resolution on the increase in share capital, which allows for the admission of new shareholders.
- Form of subscription
The subscription of new shares requires the shareholders to submit a written declaration. If the shares are paid up by way of a contribution in kind, it is necessary to specify its value and nature in detail. All documents must be filed with the National Court Register (KRS).
- Deadline for making contributions
The resolution on the increase should specify the deadline by which the shareholders are required to make contributions to cover the new shares. Failure to meet this deadline may result in the right to subscribe for shares lapsing.
Formalities relating to the increase in share capital
Any increase in share capital must be reported to the National Court Register (KRS), which involves:
- submitting an application containing the resolution on the capital increase,
- attaching the shareholders’ declarations regarding the subscription of shares,
- a statement from the management board regarding the contribution of capital.
This is a formal process, and the registry court examines the compliance of the notification with the law. It is worth remembering that an increase in share capital only becomes effective upon entry in the register.
Capital increase as a growth strategy
A share capital increase is an important strategic tool for companies seeking to grow and expand their financial capabilities. Thanks to the various procedures and methods involved in this process, companies can flexibly adapt their capital requirements to market conditions.
How can HWW assist with the share capital increase process?
Although formally complex, the share capital increase process can be carried out efficiently with the help of an experienced law firm. Contact HWW Hewelt Wojnowski Lindner and Partners to receive support at every stage – from drafting the resolution to registering the change with the National Court Register (KRS). Our team will ensure that the process runs smoothly, in accordance with the regulations and in the best interests of your company.
She specializes in commercial and civil law. She has gained experience in Warsaw law firms providing comprehensive services to companies and a law firm specializing in labor law. She has extensive experience in corporate consulting. She has participated in mergers and acquisitions at every stage of the process, from pre-transaction legal examination to fulfillment of regulatory requirements related to the transformation process. She prepares and reviews contracts entered into by clients and advises in cases of…
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