Although additional contributions (dopłaty) to the capital of limited liability company can be a very useful solution, despite the fact they they are rarely taken into consideration.

Loands from the sahreholder are A popular way to finance a company. This has certain advantages in Polish companies – no tax on civil law transactions and the option of transfering money from the company through interest (which is beneficial tax-wise, subject to the restrictions under the provisions regarding the so-called thin capitalization).

However, a loan only helps with cash-flow problems (lack of cash in the company). Still, it does not improve the company’s financial condition from a balance point of view. While the company obtains cash, it also has new obligation (paying back the loan).

The use of additional contributions (dopłaty in Polish) may help to avoid this problem. Thus, additional contributions may be used to “fill up” the “hole” of negative equity and thus improve the company’s condition (e.g. in terms of credit).

As a rule, additional contributions in a limited liability company are also neutral in terms of income taxes. They result in obligation to pay tax on civil law transactions (0.5%).

Additional contributions are paid based on a resolution of the shareholders meeting, however, it is possible to execute such resolution only if it is allowed by the articles of association. Shareholders should think carefully about the rules for approving the contributions when they draft the articles. Adopting a resolution regarding the contributions obligates all shareholders to make additional contributions (regardless of whether they had voted in favor). It is therefore important to first of all decide what majority will be required to approve contributions.

The penalty for failure to make contribution is often compulsory redemption of shares. Such a provision may be very dangerous. Some shareholders may use this institution to get rid of a shareholder who, for some reason, will not be able to make an additional contribution at particular time.

Hence, it is important that the generally beneficial institution of additional contributions is properly regulated in the articles of association – so that it is a tool to improve the company’s financial situation, and not a weapon in in-house conflicts.