– Approval of Financial Statements of a Polish Limited Liability Company (sp. z o. o.) by the Ordinary Shareholders’ Meeting – Common Mistakes

Incorrect convening of the Ordinary Shareholders’ Meeting

Incorrection in convening of the Ordinary Shareholders’ Meeting of a Polish limited liability company (sp. z o. o.) may result in the invalidity of that Meeting. If the purpose of such an Ordinary Shareholders’ Meeting is to approve the company’s annual financial statements, an error in convening it may consequently lead to the situation where the annual financial statements are not legally approved at all. The Shareholders’ Meeting should be convened by the company’s management board no later than two weeks before the meeting date. Since the company’s articles of association can modify the procedure for convening the Shareholders’ Meeting as prescribed by the Polish Commercial Companies Code (k.s.h.), it is easy to violate these provisions if one is unaware of or forgets the articles of association. There is an option to hold a Shareholders’ Meeting (and adopt resolutions) without formally convening it if the entire share capital of the company is represented (all shareholders or their proxies are present) and no one objects to holding the Meeting or including specific items in the agenda. However, in such cases, any shareholder may file an objection. This situation is very likely in the event of a conflict between shareholders. Therefore, it is advisable to ensure that the Shareholders’ Meeting of a Polish limited liability company is convened in advance. It is also important to note that the Shareholders’ Meeting of a Polish sp. z o.o. should be held at the company’s registered office (unless the articles of association specify another location or all shareholders give written consent). Shareholders must be provided with documents subject to approval at the Shareholders’ Meeting (financial statements – if subject to audit, including the auditor’s opinion, and the management report) at least 15 days before the Ordinary Shareholders’ Meeting.

Omission of the report on the activities of the limited liability company

As a rule, a Polish sp. z o. o. is required to submit a management report for the previous financial year. The report is prepared and signed electronically by the company’s management board. The deadline for submitting the management report is the same as for submitting the financial statements – for companies whose financial year aligns with the calendar year, approval must occur by June 30, and the report must be submitted within 15 days of approval. An exception to the obligation to submit management reports applies to Polish sp. z o.o. classified as micro or small entities under Polish Accounting Act regulations, provided they meet additional requirements specified in the Act.

Failure to Extend the Cadence of the Management Board

Generally, the term of office of each member of the management board of a Polish sp. z o. o. expires on the day of the Shareholders’ Meeting approving the annual financial statements for the last full financial year during which the member served (exceptions include provisions in the company’s articles of association or members appointed for an indefinite period). Therefore, when approving the financial statements, it is essential to adopt a resolution on appointing new board members or extending the term of the current members (appointing them for another term).

Failure to Grant Discharge to Members of the Management Board

Each year, the shareholders of a Polish sp. z o. o. should grant discharge to the management board members for the duties performed in the previous financial year. This obligation also includes former board members who served even for one day in the previous financial year. Shareholders should adopt a resolution granting discharge to each board member individually (it is not sufficient to grant discharge to the board as a whole). Shareholders can decide to grant or deny discharge (if the board member’s actions are negatively assessed). It is important to note that voting on the resolution to grant discharge to the management board members of a Polish sp. z o.o. is conducted by secret ballot (except for single-member sp. z o.o. companies). If a shareholder is also a board member, they do not participate in the voting as they cannot evaluate themselves. For the same reason, if a Polish sp. z o.o. has a sole shareholder who is also the sole board member, no resolution to grant discharge is adopted.

Failure to Adopt a Resolution on the Continuation of the Company

If the financial statements show that the Polish sp. z o. o. incurred a loss for the previous financial year, it is necessary to check whether there is a need to adopt a resolution on the continuation of the company. The obligation to adopt such a resolution arises if the loss exceeds the sum of the company’s supplementary and reserve capital and half of the share capital. The resolution is adopted by the shareholders of the Polish sp. z o.o. either immediately at the Ordinary Shareholders’ Meeting or at an Extraordinary Shareholders’ Meeting convened promptly.

Failure to Submit the Approved Financial Statements to the KRS on Time

The approved financial statements of a Polish sp. z o. o. must be submitted to the Polish National Court Register (KRS) within 15 days from the date of approval. The statements should be submitted electronically to the Polish Repository of Financial Documents by the persons authorized to represent the company (management board members) or an attorney.

If you need assistance in preparing the appropriate documentation (minutes of the general meeting, management board resolutions, shareholders’ resolutions) or submitting documents to the KRS, or if you have doubts about how the Shareholders’ Meeting of your Polish limited liability company should be convened and conducted – please contact one of our accounting offices of PRWT Księgowość i Obsługa Biznesu sp. z o. o., where we provide accounting services, payroll services, and legal support (business and commercial law) for your business activities.

Accounting/HR/legal services Warsaw:

TEL. +48 22 292 47 21
EMAIL: biuro.warszawa@prwt.pl

Accounting/HR/legal services Krakow:

TEL. +48 12 345 21 06
EMAIL: biuro.krakow@prwt.pl