In-kind contribution to a limited-liability company when increasing the share capital: Practical problems | In Principle

Making an in-kind contribution (aport) to a limited-liability company accompanying an increase in the share capital is a commonly used device for restructuring enterprises, but it generates numerous controversies in the legal literature and court decisions. In commercial practice, major doubts arise concerning such issues as how to value the in-kind contribution, whether a separate in-kind contribution agreement is required, and whether an in-kind contribution can be made without amending the articles of association. To safely carry out an in-kind contribution, it is important to know how these issues are viewed by the courts and by commentators on the Commercial Companies Code.

In-kind contribution agreement—is it needed at all?

Under Polish law, one of the most controversial issues in the practice of making in-kind contributions when raising the share capital of a limited-liability company (sp. z o.o.) is whether it is necessary to conclude a separate in-kind contribution agreement (a bilateral act) between the shareholder and the company; or it is sufficient for the shareholders to adopt a resolution on increase of the share capital while the shareholder making the in-kind contribution submits a declaration on taking up the shares (without signing an in-kind contribution agreement).

Two conflicting views are outlined in the legal literature and the case law. Under the first view, the Commercial Companies Code governs only corporate matters related to increase of the share capital, while issues related to contributing assets to the company are governed by the Civil Code, and thus the provisions of both codes must be taken into account when making an in-kind contribution to a company.

Holders of the second view maintain that the Commercial Companies Code exhaustively regulates the issue of increasing the share capital in exchange for an in-kind contribution, and thus it is not necessary to resort to the Civil Code when carrying out this procedure.

The Supreme Court’s view—a separate in-kind contribution agreement is required

In the judgment of 19 October 2006 (case no. V CSK 215/06), the Supreme Court of Poland held that legal persons concluding agreements act in accordance with Civil Code Art. 38 via their authorities, which means that declarations of intent by a limited-liability company are made by the company’s management board. In the court’s view, the lack of such a declaration by the management board means that the agreement transferring ownership of the in-kind contribution to the company does not reach effect. And because the Commercial Companies Code does not require submission by the management board of a declaration accepting the subject of the in-kind contribution, this conception by the Supreme Court leads to the conclusion that the effectiveness of an in-kind contribution requires conclusion of an agreement between the company and the shareholder making the in-kind contribution.

A similar position was taken by the Province Administrative Court in Gliwice in its judgment of 11 December 2007 (case no. III SA/Gl 1030/07), holding that the in-kind contribution to a limited-liability company in the form of a technological production line, i.e. the company’s acquisition of ownership of the asset in question, required an agreement between the company and the shareholder taking up the shares with a value representing the value of the in-kind contribution, transferring ownership of the item in question to the company.

Opposing position—no separate agreement required

But some commentators dispute the need to conclude a separate in-kind contribution agreement.

In this view, taking up shares in a limited-liability company (as well as making an in-kind contribution for the shares) is not, by its nature, a bilateral agreement between the company and the shareholder. It is part of a complex process which is exhaustively regulated within the Commercial Companies Code. The declaration on taking up shares in a limited-liability company, and coverage of the shares (or the shareholders’ undertaking to make an in-kind contribution, as the case may be), is a unilateral declaration of intent by the shareholder.

Under this view, the management board of the company to which the in-kind contribution is made has no right to refuse to accept the in-kind contribution—its task is only to oversee whether the subject of the in-kind contribution was actually transferred.

If the management board finds that the subject of the in-kind contribution was not transferred to the company, the board members may refuse to sign the declaration that the contributions to the increased share capital were made in their entirety. In that case, the increase in capital will not be approved by the registry court (and the increase is only effective when it is entered in the commercial register).

Proponents of this view argue that because the management board is authorised to verify whether the shareholder has actually made the contribution to the company, and consequently can block the capital increase, from a practical point of view there is no need to conclude a separate agreement in this respect between the shareholder and the company (commentaries to Art. 261 of the Commercial Companies Code by M. Rodzynkiewicz (7^th ed., 2018) and M. Dumkiewicz (2^nd ed., 2024)).

Those supporting this view also claim that upon conclusion of a separate in-kind contribution agreement, i.e. before registration of the capital increase, the shares which the shareholder is to “receive” in exchange for making the in-kind contribution to the company do not yet exist in the commercial register in a legal sense. Therefore, the consideration to be received by the shareholder under the in-kind contribution agreement does not exist at the time the agreement is made.

We should add that the same authors point out that even though in their view the Commercial Companies Code exhaustively regulates the procedure for increasing the share capital, nonetheless, for the sake of legal certainty, if the Civil Code sets a higher standard for the form of the unilateral legal act of the declaration on taking up and covering the new shares, then those provisions of the Civil Code should be applied (for example, if real estate is contributed in kind, it would be proper for the declaration on taking up the shares and making the in-kind contribution to be made in the form of a notarial deed, even if that form is not provided for in the Commercial Companies Code).

Evolution of the Supreme Court’s decisions

In recent years there has been an observable evolution in the position of the Supreme Court of Poland. In the judgment of 7 August 2014 (case no. II CSK 740/13), the court held that the articles of association of a limited-liability company in which the shareholders make an in-kind contribution to cover the shares in the form of co-ownership of real estate belonging to them, this generally constitutes a legal act of taking on an obligation and making a disposition, and therefore obliges the shareholders to transfer, and at the same time transfers, ownership of the real estate to the newly created limited-liability company in organisation. 

In the judgment of 6 April 2016 (case no. IV CSK 403/15), the Supreme Court added that upon conclusion of the articles of association (like any other agreement with a dual effect for purposes of Civil Code Art. 510 §1), the claims contributed on this basis pass to the limited-liability company in organisation created as a result of this legal act.

It is true that both of the judgments were rendered in relation to a limited-liability company in organisation, but under Commercial Companies Code Art. 261 the provisions on making in-kind contributions to a company being formed also apply as relevant to an increase in share capital. It may thus be expected that the Supreme Court would take a similar position on an in-kind contribution to raise the share capital of an already-registered limited-liability company.

Practical consequences for businesses

From the perspective of commercial practice, the safer solution is to conclude a separate in-kind contribution agreement, particularly when the asset being contributed is real estate, an enterprise, or other items of property that require a special form for transfer of ownership.

If a separate transfer agreement is not concluded, the company’s acquisition of the assets that are the subject of the in-kind contribution may prove to be ineffective.

Parties to the in-kind contribution agreement, and representation of the parties

The parties to an in-kind contribution agreement should be:

• The shareholder making the in-kind contribution (e.g. of real estate), and
• The limited-liability company, represented by:
  • The company’s management board, in accordance with the company’s rules of representation—if the shareholder making the in-kind contribution is not a member of the management board
  • A proxy appointed by a resolution of the shareholders’ meeting (or the supervisory board, if one has been appointed in the company), as the rule stated in Art. 210 of the Commercial Companies Code will apply—if the shareholder making the in-kind contribution is a member of the management board.

If all of the shares in the company are held by the sole shareholder, or by the sole shareholder and the company, and the shareholder is also the sole member of the management board, the agreement between the shareholder and the company requires the form of a notarial deed (unless the agreement is concluded electronically, using the template provided in the official IT system).

Content of the in-kind contribution agreement

The in-kind contribution agreement should specify the subject of the contribution, the shareholder making the contribution, and the number and nominal value of the shares taken up in exchange for the in-kind contribution.

The Warsaw Court of Appeal held in the judgment of 25 January 2013 (case no. I ACa 933/12) that in the case of contribution of fixed assets in the form of machinery and equipment, the specification of the subject of the in-kind contribution should consist of an itemisation of the location of the objects, as well as a detailed description of the objects. This judgment had to do with the wording of the articles of association of a limited-liability company, but in our view it would be appropriate to apply it also in the wording of the in-kind contribution agreement.

Form of the in-kind contribution agreement

Although an in-kind contribution agreement does not require any special form, in our view, when the subject of the contribution is property rights whose transfer requires a special form (e.g. a notarial deed in the case of transferring title to real estate), it is recommended to conclude the in-kind contribution also in that special form.

Rules for valuing an in-kind contribution

According to the legal literature, the value of an in-kind contribution should be determined on the basis of its market value as of the date of adoption of the resolution on increase of the company’s share capital in exchange for the in-kind contribution (Commercial Companies Code, Art. 175 §1 in connection with Art. 261) (commentaries to Art. 261 by M. Chomiuk (ed. Jara, 29^th ed., 2025) and M. Goszczyk (ed. Opalski, 1^st ed., 2018)). This is relevant for the liability of the shareholder making the contribution, as well as the members of the management board, as they are jointly and severally liable to make up for a shortfall in the value of the in-kind contribution if the price for the asset is significantly inflated in relation to its market value.

In a limited-liability company (unlike in a joint-stock company) there is no obligation for an auditor to examine the value of an in-kind contribution. The shareholders themselves make an assessment of the in-kind contribution, stating its value in the resolution on increase of the share capital. Nonetheless, as indicated in the legal literature, the discretion of the shareholders in assessing an in-kind contribution is not unlimited, because:

• An in-kind contribution should be made at its market value on the date of adoption of the resolution on increase of the share capital (Art. 175 §1 in connection with Art. 261), and
• An in-kind contribution cannot be assessed at less than the nominal value of the shares taken up in exchange for the in-kind contribution (Art. 154 §3 in connection with Art. 261) (commentaries to Art. 158 by R. Pabis (ed. Bieniak, 9^th ed., 2024) and A. Opalski and A. Wiśniewski (ed. Opalski, 1^st ed., 2018)).

Do the company’s articles of association have to be amended?

Doubts continue to arise in practice concerning the possibility of making an in-kind contribution when increasing the share capital without amending the company’s articles of association, as well as the need to describe in-kind contributions in the articles of association.

In the case of an increase in share capital, Commercial Companies Code Art. 261 requires application as relevant of the provisions of Division I, “Limited-liability company,” concerning in-kind contributions among other things. One such provision is Art. 158 §1, which states that if the contribution to a company to cover shares is to be made in whole or in part by an in-kind contribution, the articles of association must specify the in-kind contribution, the shareholder making the contribution, and the number and nominal value of the shares taken up in exchange for the contribution. Some practitioners, notaries, and registry courts interpret this cross-reference to mean that when an in-kind contribution is made to cover shares in the increased share capital, a relevant amendment should be made to the articles of association.

The commentators pretty clearly regard this approach as groundless, because the information required by Art. 158 §1 may be included in the resolution on increase of the share capital, and not necessarily in the amended articles of association (commentary by J. Bieniak et al. (9^th ed., 2024)). Application of provisions “as relevant” does not mean mechanically carrying over all of the requirements under Art. 158 §1 to the articles of association, but adapting them to the specifics of the capital increase.

When the shares in the capital increase are covered in exchange for an in-kind contribution, the shareholders’ resolution on increase of the share capital should specify, applying Art. 158 §1 as relevant:

• The new or existing shareholder taking up the shares in the increased capital in exchange for an in-kind contribution
• The subject of the in-kind contribution, and
• The number and nominal value of the shares to be taken up in exchange for the in-kind contribution.

The purpose of Art. 158 §1 is only to determine that the decision on whether and under what conditions in-kind contributions are to be made to the company rests with the shareholders (a purpose that is fulfilled when the essential information is included in the capital increase resolution), not to inform other commercial actors that such contributions have been made to the company. Besides, it is still possible to obtain this information, even if the information is not introduced into the articles of association, because the shareholders’ resolution, like the articles of association, is part of the company’s registry file (A. Opalski (ed.), commentary on Art. 227–300 (vol. IIB, 1^st ed., 2018).

Most commentators condemn the practice of requiring an amendment to the articles of association to include information about an in-kind contribution.

Position taken by the courts

This is also confirmed in decisions by the courts. In the judgment of 22 May 2013 (case no. II FSK 2152/11), the Supreme Administrative Court pointed out that the articles of association in that case, from 2007, included a provision that “the company’s share capital may be increased under the conditions set forth by a resolution of the shareholders’ meeting up to PLN 500,000,000 on or before 31 December 2050, and such resolution shall not constitute an amendment to the articles of association. For this reason, in the court’s view, the detailed description of the subject of the in-kind contribution should be found specifically in the resolution on increase of the share capital.”

The Szczecin Regional Court took a similar view in the order of 13 November 2015 (case no. VIII Ga 326/15), overturning an order by the district court denying an application to register the capital increase due to the absence of an amendment to the articles of association for the purpose of providing information about the in-kind contribution. As the regional court held, “If the resolution on the capital increase provides for shares in the increased capital to be taken up in exchange for in-kind contributions, it is the resolution (and not the articles of association) that should contain a specification of these contributions, their value, the person obliged to make them.”

A practical approach

An in-kind contribution can be made to a limited-liability company if the following two conditions are both met:

• The articles of association provide for the possibility of increasing the share capital without amending the articles, while specifying the maximum amount of the capital increase and the deadline for the increase, and
• The resolution on the capital increase specifies the subject of the in-kind contribution, the shareholder making the in-kind contribution, and the number and nominal value of the shares taken up in exchange for the contribution.

Nonetheless, in view of the doubts in interpretation that continue to arise in commercial practice, particularly on the part of notaries and registry courts, in certain instances it may be worth considering increasing the share capital while simultaneously amending the articles of association to include the information about the in-kind contribution referred to in Commercial Companies Code Art. 158 §1.

This approach may seem unjustified in light of the legal literature and the decisions by the courts, but it may be considered particularly in situations where a quick and undisputed entry of the capital increase in the register is desired, and there is a justified concern that the registry court or the notary may raise objections to the lack of an amendment to the articles of association.

A decision to adopt this solution should be preceded in each case by a detailed analysis of the specific facts, including an assessment of the practice of the specific registry court and the notary preparing the deed, and also taking into account the nature of the in-kind contribution and the urgency of the entire operation.

Summary

Despite the apparent simplicity of the regulations, in practice making an in-kind contribution to a limited-liability company generates a number of serious legal doubts requiring special attention by the shareholders and the corporate authorities.

From the perspective of commercial practice, a safe solution would be to:

• Conclude a separate in-kind contribution agreement in the form appropriate to the subject of the in-kind contribution
• Make a fair assessment of the in-kind contribution based on market value, and
• Include all of the required elements concerning the in-kind contribution in the resolution on the share capital increase and in the articles of association.

With an awareness of the practical issues discussed above, and a familiarity with the current positions of commentators and courts, the procedure of in-kind contribution can be carried out effectively while minimising the legal risks associated with the operation.

Łukasz Śliwiński, attorney-at-law, Wiktor Zborowski, adwokat, M&A and Corporate practice, Wardyński & Partners