Reduction of share capital in a limited liability company

 The decision to reduce the share capital of a limited liability company may be made for various reasons. One of the reasons may be the imbalance between the tasks that the company wants to perform and the amount of the share capital. Another reason may be the desire to withdraw cash to invest in another way. A common case is also the reduction of the share capital due to the change in the composition of the company, which results from the redemption of shares of some partners. It may also happen that there is a need to regulate the amount of capital in line with the actual value of contributed contributions, when the value of in-kind contributions was, for example, inflated and as a result of this action the share capital was not fully covered. If the company is making losses, the company's balance sheet is to reduce the share capital.

 In order to reduce the share capital in a limited liability company, the shareholders of the company must first adopt a resolution to reduce the share capital. A resolution to reduce the share capital (change in the articles of association) must be included in the minutes drawn up by a notary public. The resolution should specify the amount by which capital is to be reduced and the manner of its reduction. Capital can be reduced in two ways. The first way is to redeem the company's shares, i.e. reduce the number of shares in the share capital, for example from 200 shares to 100 shares. The second way is by lowering the nominal value of shares, for example a reduction from 200 shares with a total nominal value of PLN 20,000, up to 200 shares with a total nominal value of PLN 10,000, ie a reduction of one share from PLN 100 to PLN 50. The minimum nominal value of a share in a limited liability company may amount to PLN 50.

It should be remembered that the resolution should include information on how the cash amount will be allocated after the share capital decreases. You can leave this amount in the company and transfer it to reserve capital. Another solution is the payment of funds to shareholders, but the payment of funds is possible only after the entry of the share capital reduction into the register of entrepreneurs. Before paying the shareholders the funds should be made sure that the financial situation of the company allows the transfer of funds, because according to the Code of Commercial Companies, shareholders cannot receive withdrawals from the company's assets if it is needed to fully cover the share capital.

Moreover, it is necessary to conduct convocation proceedings by the management board, which consists in notifying the company's creditors that the company's share capital is to be reduced. Only after three months from the publication of the announcement, the management board may submit a reduction of the share capital to the Register of Entrepreneurs. The reduction of capital becomes effective upon entry into the National Court Register.