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Is there any risk in being asked to become a shareholder in a limited company in Poland?


spiritus 67 | 663
24 Feb 2017  #1
I have been asked by a close family friend to become a shareholder in her limited company.

The situation is quite complex as her boyfriend is currently the shareholder but their relationship is rocky and this is causing some occasional issues with the management of her business affairs.

If I were to become a shareholder in a limited company is there any way in which I could become liable for any outstanding or future debt ? Are there any obligations I have to fulfil ?

I am very wary as I know she has debt and I suspect the shareholding arrangement is a vehicle to avoid that.

I understand that a limited liability company by it's very name limits the liability of the shareholder but I'm still concerned.

Does anyone have any experience of this in Poland ? Would it have any tax implications for me either in Poland or the UK (which is where I live)
Harry
24 Feb 2017  #2
I understand that a limited liability company by it's very name limits the liability of the shareholder but I'm still concerned.

My understanding is that your liability is limited to the amount of the contribution you officially made for the shares (or the fair value thereof if that value is higher). BUT, and it is such a big but that I'm using capital letters and bold, you really should get professional legal advice about this; I very certainly would, even if the personal problems didn't exist.

Would it have any tax implications for me either in Poland or the UK (which is where I live)

I think that that might be your get out. Just say that you'd love to help but your tax adviser says it will be very complicated (and thus rather expensive). Sorry but at the end of the day they are adults and should be able to manage their affairs without putting you at any risk.
OP spiritus 67 | 663
24 Feb 2017  #3
Thanks but I don't think I have enough time to seek legal advice before giving my decision. Just so you know, I am very wary of accepting anyway but would prefer to be in some position of knowledge.
mafketis 20 | 7,182
24 Feb 2017  #4
The situation is quite complex

There are more red flags in your question than at a Chinese Communist rally. Run, do not walk, away from this situation as quickly as possible. Use the excuse of a tax adviser if necessary.
Harry
24 Feb 2017  #5
I don't think I have enough time to seek legal advice before giving my decision.

If my choices were either signing up to be a shareholder without getting any legal advice or telling them my tax adviser says no, I would no sooner sign up than I would, as Josiah Hardwood put it, place my john thomas in the hands of a lunatic with a pair of scissors.

some position of knowledge.

Friends are friends, family is family and business is business.
Ziemowit 12 | 3,492
24 Feb 2017  #6
I have been asked by a close family friend to become a shareholder in her limited company.

First things first:

1. How much is the funding capital (in Polish: kapitał zakładowy) of this limited company (in Polish: sp. z o. o.)? This would the limit of your liability, so it is essential to know (the minimal capital required for registering such a company is quite low, btw).

2. How is this capital divided between shareholders (you said there are two of them)?

3a. How would you become a new shareholder? By buying your share from one of the existing shareholders or from both of them?
3b. Or by raising the capital of the company through bringing yours to it and becoming a new shareholder in this raised-capital company?
OP spiritus 67 | 663
24 Feb 2017  #7
@Ziemowit
Is the funding capital of the company different to the shareholder's value of shares ? I thought the amount of the shares held by the shareholder was the limit of the liability ?

I suspect there might only be one share held by the boyfriend.

I believe the suggestion was to buy the share from the existing shareholder. It might be a nominal small amount but even if it isn't I have no intention of using my own money for this as my friend would have to give me the money to buy the share(s).

The chances of me accepting this are less than 1% but I would at least like to understand the implications.

And thank you for all your advice so far guys !
delphiandomine 83 | 17,626
24 Feb 2017  #8
Run a mile.

Polish law is insane in this respect, and if you don't understand exactly what you're getting into, it's best to stay well away from it. There are various nefarious things that someone can do with you being a shareholder, and without you having a sound knowledge of Polish business law, it's wise to stay away.

She could simply buy the shares herself if management is an issue. If you know her company name, feel free to PM me and I'll tell you about any specific warning flags that I can find.
OP spiritus 67 | 663
24 Feb 2017  #9
There are various nefarious things that someone can do with you being a shareholder

that just feeds my already paranoid mind and is exactly what I'm trying to understand.

Do you have any examples of these "nefarious" things ? I know it's only hypothetical but I'd like to know :)
Ziemowit 12 | 3,492
24 Feb 2017  #10
There are two types of, say 'bigger', companies in Poland. One is a limited liability company (Ltd.) type which in Polish is called sp. z o .o. (spółka z ograniczoną odpowiedzialnością). The other is 'Spółka Akcyjna' (S.A.) which is an equity company.

The capital of the latter one is divided into equal shares; the capital of the former may be not. You can check in a registrar to whom the capital belongs and in what proportion, e.g. 78,5% of it may belong to your friend's boyfriend and 21,5% to her. There are no shares issued either in paper or in electronic form in this kind of ownership.

Is the funding capital of the company different to the shareholder's value of shares ?

You do realize the difference between the book value and the market value of a share (or capital), don't you?

If you know her company name, feel free to PM me and I'll tell you about any specific warning flags that I can find.

You do realize that you have abused enormously and more than once the confidence put in you by members of this forum who were careless enough to communicate personal details in PM to you?
OP spiritus 67 | 663
24 Feb 2017  #11
You do realize the difference between the book value and the market value of a share (or capital), don't you?

Embarassingly.......no :(

I assumed the liability of the shareholder was limited to the value of the shares "purchased". So someone purchased 75% of the shares for a nominal amount of 1000 PLN then 1000PLN would be the liability of that particular shareholder.

Are you saying that this isn't necessarily true ?
Ziemowit 12 | 3,492
24 Feb 2017  #12
I've been out of the brokerage business for quite a long time and it is just now that I realized there are two different terms in English: stakeholder (limited company) and shareholder (equity company, plc). You are talking as a stakeholder, but thinking in terms of a shareholder. This is not the same.

I would guess every stakeholder in a limited company would be liable to the amount of the entire initial capital of that company in book value terms. This is because all stakeholders in a company are liable 'jointly and in solidarity' or something along these lines for the debts of the company. Of course, there are assets of the company which may be worth much more than its initial capital, but he problem arises when the liabilities exceed the assets.

It would be good to browse British law for the liability of a stakeholder in a limited company.It should be much the same in this respect as Polish law. Not without reason a "limited" company was invented. It was meant to "limit" something and of course this would have been debts rather than profits.
weg05
24 Feb 2017  #13
The question has to ask is why she 'needs' a share holder. If it is benign then she should give the shares to another family member -like her mother.
OP spiritus 67 | 663
24 Feb 2017  #14
@Ziemowit

It is possible, in fact very common, to be a shareholder within a limited company.

You are more knowledgeable than me on these matters but I have to disagree with your definition.

For the purposes of my scenario I am being asked to become a shareholder (possibly the sole shareholder). Shareholders in a limited company (both in the UK and Poland) are limited to their liability. That I do know.

The $ 64,000 question is what nefarious things could my friend do that that a shareholder may be unaware of ? The limited liability doesn't placate me as I always look for the worse case scenario and wonder "what if" ?

There is no upside to this arrangement for me it's purely being asked as a favour for a friend but I feel the protection of limited liability doesn't assuage my concerns.
Ziemowit 12 | 3,492
24 Feb 2017  #15
It seems you are right. There is simply no separate English word for a wspólnik in a Polish company sp. z o.o or an akcjonariusz in a Polish equity company. So the English term should indeed be 'shareholder' for both. There is another precise Polish equivalent to it: udziałowiec which can be applied both to a shareholder in a ltd company and in an equity one. On the other hand, the term 'stakeholder' is a very broad term indeed which can be rendered in Polish by interesariusz who is not necessarily the owner of capital in the company. Sorry, it was my mistake.

Shareholders in a limited company (both in the UK and Poland) are limited to their liability. That I do know.

Indeed, this is so.

The $ 64,000 question is what nefarious things could my friend do that that a shareholder may be unaware of ?

That is a Shakespearean question! But the Sp. z o. o. company enables the owners to have full of control over the actions of the management which is possibly done through some entries to the register, I should think.

I suppose she doesn't want to have any member of the family to be shown as the owner of the company if it is supposed to be a vehicle to avoid paying debt. She would then be challenged by the tax office or the debtors for having transferred the debt to a company which fictionally belongs to a member of the family.
delphiandomine 83 | 17,626
24 Feb 2017  #16
Do you have any examples of these "nefarious" things ? I know it's only hypothetical but I'd like to know :)

OK, for instance, do you understand Polish to know what you are signing? You could be placed as the 'representative' of the company, and with it, you could be listed as the one who has decision-making powers in the company. I can't explain this too well as it's a Polish concept, but it's possible that she could take on debts using your identity as the one who made the decision to take on those debts. For instance, let's say she orders something in your name. She doesn't pay for those goods, but when the time comes to pay, it's you that made the order on behalf of the company. That means that you will be held responsible, even though you thought you were only a shareholder and not a decision-maker.

That can then lead to criminal investigations, with your extradition to Poland to answer criminal charges, even for small amounts.

If she is honest, ask her to produce the financial statements from 2016 and 2015. That should be your first clue - if she refuses to produce them, then something is wrong. If you want, I can explain how to check some publicly available records which should give you insight into how the company is operating.

My strong, strong advice is not to get involved. I would be very reluctant to get involved, even as a Polish speaker living in Poland.
OP spiritus 67 | 663
24 Feb 2017  #17
I suppose she doesn't want to have any member of the family to be shown as the owner of the company if it is supposed to be a vehicle to avoid paying debt.

I think you may be right. I wasn't aware that Polish law allows the debtors to pursue relations if it can be proven the debt was moved just for the purpose of evasion.

My strong, strong advice is not to get involved. I would be very reluctant to get involved, even as a Polish speaker living in Poland.

You had me at "hello" :)
delphiandomine 83 | 17,626
24 Feb 2017  #18
I wasn't aware that Polish law allows the debtors to pursue relations if it can be proven the debt was moved just for the purpose of evasion.

Polish law is... well, have a read of this:

fifetoday.co.uk/news/kirkcaldy-filmmaker-facing-court-in-poland-1-4371584

As you can see, as he was a 'manager' in the company, they are going after him, even though he had nothing to do with the transaction.
DominicB - | 2,672
24 Feb 2017  #19
There is no upside to this arrangement for me it's purely being asked as a favour for a friend but I feel the protection of limited liability doesn't assuage my concerns.

That's a pretty big favor to ask. One which I would not have the faintest qualms or slightest hesitation of politely declining. Even to my closest and dearest friends. I'm sort of baffled why you would even consider it.

Some unasked for advice: when you do say "no", say that, and not a single word more. You're under absolutely no obligation to explain, and anything you say can and will be used against you. When pressed, just repeat "no", politely but firmly. Otherwise, you are going to end up in an endless and bitter war of attrition that will ultimately destroy your friendship or worse. Take it from someone who learned the hard way. Once you start explaining, you lose.
mafketis 20 | 7,182
24 Feb 2017  #20
Take it from someone who learned the hard way. Once you start explaining, you lose

Absolutely true. It's generally completely okay in Poland to say "No, I can't" to requests. If they want explanations then my intuition says they're up to something.

I'd also add, politely decline and do not give them the chance to try to change your mind. Letting people explain why they want something in Poland means "Okay, I'll probably give in if you beg and plead and threaten enough". Run away if you have to but don't listen to their explanations once you've decided to say no.
delphiandomine 83 | 17,626
24 Feb 2017  #21
Absolutely true. It's generally completely okay in Poland to say "No, I can't" to requests.

A bit more about Polish culture - do you think, generally speaking, Polish people would be looking for someone to buy shares in their small company if everything was fine? That alone seems suspicious to me.
mafketis 20 | 7,182
24 Feb 2017  #22
do you think, generally speaking, Polish people would be looking for someone to buy shares in their small company if everything was fine?

Or course not, but there are so many red flags here that it's hard to pick out just one...
delphiandomine 83 | 17,626
24 Feb 2017  #23
I went back and re-read what the OP said, and the thing that stands out is the issue of the boyfriend's shareholding causing problems. Could it be that he's blocking her attempts to load the sp. z o.o. with debt?
Ziemowit 12 | 3,492
25 Feb 2017  #24
The plot in this story as I read it is that her boyfriend has been a fictional owner (sole shareholder) of the company but the capital was her own from the very beginning. Now she wants to replace her boyfriend with someone else and the OP is a new candidate for that. But the OP is afraid of the chances of him being liable beyond the initial capital which is in fact hers, but beyond that his own money could be at risk. The question of the OP is: can it be really at risk or not?
jon357 63 | 14,122
25 Feb 2017  #25
Or course not, but there are so many red flags here that it's hard to pick out just one...

Exactly. You have to wonder why she's asking an expat - does she have no friends or family who would agree?
delphiandomine 83 | 17,626
25 Feb 2017  #26
The plot in this story as I read it is that her boyfriend has been a fictional owner (sole shareholder) of the company but the capital was her own from the very beginning.

If that's the case, she has no idea about how to run a company and he should run a mile. One of the most basic rules of opening an sp. z o.o. is that you always have two shareholders in order to massively reduce your ZUS bill.

The question of the OP is: can it be really at risk or not?

Absolutely. It's not the capital he has to worry about, it's the chance of being associated with fraud and by consequence, heavy-handed actions of the State.
DominicB - | 2,672
25 Feb 2017  #27
it's the chance of being associated with fraud

This is indeed the biggest problem I would have with this. Another red flag is that she was unable to find a fellow Pole who was willing to go in for this, so she had to resort to finding a (naive) foreigner.


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