Liquidation of a limited liability company in Poland – a step-by-step guide to closing a company

What are the most common reasons for liquidating a limited liability company in Poland?

In practice, the most common reasons for the liquidation of a limited liability company are:

• the business is unprofitable or the company is in financial difficulty,
• a conflict between the shareholders,
• the completion of a business project,
• a change in the form of business activity,
• achievement of the objective for which the company was established,

It is worth remembering that the mere occurrence of a reason for the company’s dissolution or a decision by the shareholders to cease operations does not automatically mean the end of the company’s existence – “the actual dissolution of the company, as the final outcome of its liquidation, only takes place upon the company’s removal from the register of businesses” (A. Opalski (ed.), Polish Polish Commercial Companies Code. Volume IIB. Limited Liability Company. Commentary. Articles 227–300, 1st ed., 2018)

It is therefore necessary to carry out the liquidation proceedings described later in this publication.

Winding up a limited liability company – legal basis

Pursuant to Article 270 of the Polish Polish Commercial Companies Code, a limited liability company may be dissolved for the following reasons:

• reasons provided for in the articles of association,
• the shareholders adopting a resolution to dissolve the company or to transfer its registered office abroad,
• the company being declared bankrupt,
• other reasons provided for by law.

Dissolution of a limited liability company by resolution of the shareholders

The most common reason for the termination of a company’s operations is the passing of a resolution by the shareholders to dissolve the company. This occurs primarily when the company’s business ceases to be profitable and its continued operation leads only to further losses.

During an extraordinary general meeting of shareholders, in addition to passing the aforementioned resolution, the shareholders also appoint a liquidator, whose primary function will be to manage the company’s liquidation affairs and represent it during the liquidation period, as discussed in more detail later in this publication. Usually, the existing chairman of the company’s management board becomes the liquidator, as the person most familiar with the company’s affairs.

For companies incorporated via the S24 system, the procedure is simplified. Shareholders may adopt a resolution electronically by signing it with a qualified electronic signature, a trusted signature or a personal signature. In such cases, the involvement of a notary is not required.

Grounds for dissolution of the company specified in the articles of association

Sometimes, as early as the company formation stage, the shareholders wish to specify in advance the situations in which the company’s legal existence is to be terminated, which may eliminate potential disputes between the shareholders when deciding on its continued operation. The grounds for the company’s dissolution are then included in the articles of association, and the most common include:

• the expiry of the period for which the company was established,
• the achievement of a specific business objective,
• the death of a partner,
• the occurrence of events specified by the partners at the stage of establishing the company.

Winding up of a limited liability company following a declaration of insolvency

The declaration of a company’s bankruptcy may also constitute grounds for its dissolution. In such cases, the company’s legal existence is terminated as part of bankruptcy proceedings, the purpose of which is to satisfy creditors in accordance with the provisions of bankruptcy law.

Dissolution of a company by the registry court

The Polish Polish Commercial Companies Code also provides for the possibility of dissolving a limited liability company by court order. The registry court may dissolve a company, inter alia:

• at the request of a shareholder or a member of a company body, if the achievement of the company’s objective has become impossible or if there are other important reasons arising from the company’s affairs,
• at the request of the competent state authority, if the company’s activities, which are in breach of the law, threaten the public interest.

Furthermore, the registry court may initiate proceedings to dissolve the company ex officio if the company persistently fails to fulfil its registration obligations, in particular by failing to submit financial statements or to comply with the obligations arising from the provisions on the Polish Polish National Court Register.

How long does the liquidation of a company take under the Polish legal system?

The legislator has set a minimum duration for liquidation proceedings, which, pursuant to Article 286 of the Polish Commercial Companies Code, may not be less than six months from the date of the announcement of the commencement of liquidation and the summons of creditors, as the distribution of the company’s assets remaining after the satisfaction of creditors to the shareholders may not take place until that time.

The regulations do not explicitly specify the maximum duration of the liquidation of a limited liability company. The Polish Commercial Companies Code merely sets out certain deadlines for carrying out specific actions, namely:

• the liquidators’ announcement of the company’s dissolution and the commencement of liquidation, and the call for creditors to lodge their claims – within three months of the date of such announcement (Article 279 of the Polish Commercial Companies Code),
• submission to the shareholders’ meeting of a report on the liquidators’ activities and the financial statements at the end of each financial year (Section 281(2) of the Polish Commercial Companies Code).

In most cases, the entire process of winding up the company takes approximately 7–8 months.

The regulations indicate that the liquidation proceedings of a limited liability company may last longer than a year, during which time the company remains obliged to keep accounts and fulfil other reporting obligations.

How to commence the liquidation of a limited liability company in Poland?

Commencing the liquidation of a limited liability company requires following the formal procedure set out in the Polish Commercial Companies Code, comprising a series of successive legal and registration steps. It is a complex process leading to the winding up of the company, its settlement with creditors and its final removal from the Polish National Court Register.

Shareholders’ resolution to dissolve the limited liability company

As previously indicated, the first step in initiating the process of winding up a company is for the shareholders to pass a resolution to dissolve the company. The shareholders’ resolution must be drawn up by a notary public on pain of nullity, except in the case of a company formed using a model agreement, where a resolution signed by all shareholders with a qualified electronic signature, a trusted signature or a handwritten signature is sufficient.

The legislator has also specified in the Polish Commercial Companies Code the majority of votes required for the effective adoption of a resolution to dissolve the company, which is two-thirds of the votes (Article 246 of the Polish Commercial Companies Code), except in the case referred to in Article 233 of the Polish Commercial Companies Code (where the company’s balance sheet shows a loss exceeding half of the company’s share capital and the sum of the supplementary and reserve funds), in which case a simple majority of votes is sufficient.

A resolution of the shareholders to dissolve the company may have the following model wording:

“§ 1. The Extraordinary General Meeting of Shareholders of the company trading as “ABCDEF” limited liability company with its registered office in Warsaw, pursuant to Article 270(2) of the Polish Commercial Companies Code, hereby dissolves the Company and places it in liquidation.

§2. The company shall conduct the liquidation under the company’s name with the addition of the designation “in liquidation”, i.e. “ABCDEF” limited liability company in liquidation.

§3. This resolution shall enter into force upon adoption.”

Notification of the commencement of liquidation of a limited liability company to the Polish National Court Register

The next step is for the liquidators to notify the Polish National Court Register (KRS) of the commencement of the liquidation of the limited liability company within 7 days of the date on which the resolution was passed. The notification should also include the first names and surnames of the liquidators, their addresses or addresses for electronic service, as well as the manner in which the liquidators represent the company. Pursuant to Article 277 of the Polish Commercial Companies Code, the manner of representing the company during the liquidation period should also be specified even if the existing manner of representation remains unchanged.

The liquidators should also announce the dissolution of the company and the commencement of liquidation, calling upon creditors to lodge their claims within 3 months of the date of such announcement. The announcement is made via the Court and Economic Monitor (MSiG).

Duties of the liquidators – opening balance sheet and reporting

The liquidators should then prepare (or commission the preparation of) the opening balance sheet for the liquidation. This balance sheet must then be submitted to the shareholders’ meeting for approval. At the end of each subsequent financial year, the liquidators are also required to prepare and submit to the shareholders’ meeting a report on their activities and the annual financial statements.

Liquidation activities – winding up of business, recovery of debts and sale of assets

In the course of liquidation, the liquidators are required to carry out the following liquidation tasks:

• to wind up the company’s current affairs, i.e. to bring ongoing matters and transactions to a close and to refrain from entering into new commitments, except where necessary to conclude pending matters;
• collecting debts, i.e. pursuing and recovering amounts owed to the company by its debtors;
• realising the company’s assets, i.e. selling them or converting them into cash in order to satisfy creditors and distribute the remaining assets amongst the shareholders.

As a general rule, however, liquidators should not undertake new business ventures, unless this is necessary to complete the company’s ongoing affairs. It should be noted that if the company owns real estate, the liquidators should dispose of it by public auction, and by private sale only on the basis of a resolution of the shareholders, in which case the sale price may not be lower than that resolved by the shareholders.

Fulfilment and protection of creditors during the company’s liquidation

When managing the company’s assets, the liquidators should seek to satisfy or secure the claims of creditors who have come forward in response to the notice of commencement of liquidation; however, if the company is also aware of other creditors who have not come forward (or whose claims are disputed), the liquidators should deposit the relevant sums to satisfy or secure their claims with the court (Section 285 of the Polish Commercial Companies Code).

Preparation of the liquidation report

The penultimate step to be taken by the liquidators is the preparation of the so-called liquidation report, i.e. the financial statement as at the date preceding the distribution of the company’s assets remaining after the satisfaction or security of creditors amongst the shareholders, and its approval by the shareholders’ meeting. Pursuant to Article 286 of the Polish Commercial Companies Code, the remaining assets of the company are distributed among the shareholders in proportion to their shares, unless the articles of association specify different rules for distribution.

Deletion of the company from the Polish National Court Register (KRS) and completion of liquidation

In the final step, upon completion of the liquidation, the liquidators should publish the liquidation report at the company’s registered office and submit it to the registry court together with an application for the company’s deletion from the KRS.

How much does it cost to wind up a Polish limited liability company (sp. z o.o.)?

The basic costs associated with the liquidation of a limited liability company include:

• drafting a notarial record of the extraordinary general meeting of shareholders, including the shareholders’ resolution – approx. PLN 800–1,200 gross,
• notification of the commencement of liquidation and entry in the Polish National Court Register (KRS) – PLN 350,
• publication in the Court and Economic Monitor (MSiG) of a notice calling upon creditors – approx. PLN 300–400 (PLN 0.70 per character, min. PLN 60),
• application for the company’s removal from the Polish National Court Register – PLN 400.

In addition to the above costs, accounting and legal fees associated with the process of winding up the company must be taken into account. 

In addition to the court fees that the company must pay in connection with the opening of liquidation proceedings, one must take into account the costs associated with the remuneration of the liquidators themselves, which is determined at the discretion of the company’s shareholders (this may be, for example, monthly, quarterly or a one-off payment) and is paid from the company’s assets. However, given that the Polish Commercial Companies Code does not impose an obligation to pay remuneration to liquidators, it is also possible for the company’s shareholders to decide not to pay such remuneration.

It should also be noted that, during the liquidation period, the company must continue to settle its current liabilities (e.g. pay rent for office premises, pay staff salaries and settle social security contributions), as the mere fact of placing the company into liquidation does not suspend the obligation to settle these liabilities. The liquidators’ activities should be aimed at satisfying creditors and settling all liabilities from the company’s assets, so as to bring the entire process to a close as efficiently as possible and settle accounts with the shareholders.

What should you pay attention to when winding up a limited liability company?

The winding up of a limited liability company is a formalised, multi-stage process in which the correct fulfilment of obligations under the Polish Commercial Companies Code is of key importance. Particular care must be taken at every stage of the proceedings, as formal errors can lead to significant delays or complications in completing the process.

Maintaining the form of the minutes of the extraordinary general meeting of shareholders

When conducting liquidation proceedings, particular attention must be paid to the need to complete all formalities and comply with the requirements set out in the Polish Commercial Companies Code. The most important issue is to commence the liquidation process correctly and to ensure that the resolution to dissolve the company is recorded in a notarial minutes of an extraordinary general meeting of shareholders, where the company was not incorporated using a standard form of agreement. Drafting a resolution without observing this form will render it invalid, which the registry court will declare when refusing to make the entry, whereas the correct form will prevent unnecessary delays in the company’s liquidation process.

Correctly drafted and complete applications to the Polish National Court Register

The need to exercise due diligence also applies to applications submitted to the Polish National Court Register (KRS) for the notification of liquidation and the removal of the company from the register. Submitting an application that is incomplete or does not contain the required attachments, including proof of payment, may result in the registry court requesting that the deficiencies be rectified and prolonging the process.

Adding the designation “in liquidation” to the company name

Another important practical matter is the use of the appropriate designation for the company by adding the words “in liquidation” to the company’s name. This is a particularly important obligation aimed at protecting business partners by informing them of the ongoing liquidation process and the associated restrictions on the company’s ability to enter into new business ventures. Failure to comply with this disclosure obligation may give rise to liability on the part of the liquidators, who may be liable for the company’s liabilities with their entire assets.

Retention of the books and documents of a liquidated company

The issue of storing the books and documents of a liquidated company following its dissolution may also prove to be a seemingly insignificant yet problematic matter. As a general rule, these should be entrusted for safekeeping to a person designated in the articles of association or in a resolution of the shareholders; however, if no such person is designated, the registry court will appoint one. It is worth considering this matter in advance and, for example, adopting an appropriate shareholders’ resolution or adding an additional provision to the articles of association.

Summary

The process of winding up a limited liability company is quite formalised and requires proper preparation. Gathering the relevant documents, carrying out the necessary procedures, and correctly submitting applications to the registry court all affect the duration of the liquidation process, and thus enable creditors to be repaid and the remaining assets distributed more quickly.

Conducting a liquidation procedure correctly requires knowledge of the provisions of, amongst others, the Polish Commercial Companies Code and the Act on the Polish National Court Register; therefore, before commencing the entire procedure, it is advisable to seek professional legal assistance and consult on draft shareholder resolutions, or to commission the submission of an application to the Polish National Court Register, which is now carried out entirely electronically via the Court Registers Portal.

Obtaining appropriate legal assistance during the liquidation of a limited liability company will help liquidators to perform their duties correctly and make them aware of the liabilities associated with their role, whilst ensuring that shareholders benefit from the efficient winding up of the company in which they hold shares.