Capital companies

Capital companies are a legal form which can be taken by organizations, most often businesses, to facilitate the conduct of their enterprise.

The Polish Commercial Code distinguishes between two types of capital company, the PLC and the limited company. The most significant feature of capital companies is that they possess legal personality.

Legal personality means that it is the company, not the individual shareholders or partners, which is the subject of rights and obligations. Capital companies act through theirorgans, they possess legal capacity and standing. Both PLCs and limited companies are separate legal entities from their shareholders and partners. This separateness is the reason why neither the shareholders nor the partners are responsible for the company’s liabilities. Legal personality is a construct which makes it possible to give the capital company, which is synthetic structurefeatures which make it similar in its functions to a natural person.

Responsibility, as it functions in PLCs and limited companies, is the reason why many businessmen choose to set up a capital company. However, the issue is in fact much more complex than a simple constatation that partners and shareholders are not responsible for the company’s liabilities. This is because it is necessary to look separately: at the responsibilities of the partners and shareholders for the liabilities of the company and their responsibilities towards the company. When a capital company is formed to run a family business, these issues most often overlap with the responsibilities of board members and the responsibilities of supervisory organs. One set of obligations governs the interaction of these individuals with regard to the company, another set governs their relations with third parties, and still another governs their relations with partners and shareholders. The combination of positions in the company may then have an enormous influence on the ultimate scope of responsibility of a given natural person.

One feature which should be of greater import when choosing the organizational form of a capital company than the issue of responsibility is the organizational capacity of the form. The goals which the company has set for itself are quantified primarily by the scope of the company’s operations. A limited company should only be set up for truly large projects. This is a structure which allows the creation of board bodies, two types of supervisory body, as well as the creation of branch offices both in Poland and abroad. By definition it is meant to allow the management and control of large groups of people. Running a limited company involves the necessity of maintaining extensive documentation, not only accounting documents (full accounting procedures), but also documents regarding the functioning of the company itself, and the necessity of submitting regular reports to the registry court. Additionally, double taxation can mean that running a limited company is quite expensive. The decision to set up such a company should not be undertaken lightly.

A PLC is appropriate for the largest enterprises, and also provides the widest possibilities for creating the internal structure of the company. Its creation, nevertheless, is rarely absolutely necessary. Legislators require such a form for making an IPO and for the operations of banks. In both of these cases, this requirement stems from the need for transparency in these operations. A PLC must meet the majority of requirements foreseen for a limited company, plus additional, more restrictive conditions. Many of the activities of a PLC require the creation of a protocol in the form of a notarized act.