Prohibition on the return of contributions
What is the prohibition on the return of contributions?
As a rule, during the existence of a Polish limited liability company, contributions made by shareholders may not be returned to them in whole or in part unless KSH expressly provides otherwise. Shareholders may also not receive payments, under any legal title, from the company’s assets needed to fully cover its share capital. This does not mean, however, that a shareholder may receive only dividends. Other payments are permissible if they have a proper legal basis and comply with KSH, for example remuneration for services actually performed on commercially justified terms or repayment of a genuinely existing receivable. The legal basis and terms of each payment must always be assessed individually. A separate but analogous capital-protection rule applies to a joint-stock company: during the company’s existence, amounts paid for shares may generally not be returned to shareholders except in cases provided for by law.
What are the consequences of violating the prohibition?
In a limited liability company, a shareholder who receives a payment contrary to law or the articles of association is required to return it. Members of the company’s governing bodies who are responsible for such payment are jointly and severally liable with the recipient. If recovery from those persons is impossible, the remaining shareholders may be liable pro rata to their shares for the shortfall in the assets required to fully cover the share capital. As a rule, these claims become time-barred three years after the payment; the exception concerns a recipient who knew that the payment was unlawful. In a joint-stock company, a shareholder who receives a benefit contrary to law or the articles of association is generally required to return it, subject to the statutory protection for benefits received in good faith in the cases specified in KSH. Responsible members of the management board or supervisory board are jointly and severally liable with the recipient. Here too, the general limitation period is three years, except for claims against a recipient who knew that the benefit was unlawful. These rules should not be automatically transposed to a limited partnership. In commercial partnerships, the return or reduction of a contribution and the effect of such action on a partner’s liability are governed by different rules.
Legal basis: Articles 189 and 198 KSH (limited liability company); Articles 344 and 350 KSH (joint-stock company).
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