Rules for donating shares in a limited liability company

This article will answer the following questions:

• What is a donation and what are its key elements?
• Is the trading of shares in a limited liability company unrestricted?
• What should you pay attention to before donating shares in a limited liability company?
• In what form should a share donation agreement in a limited liability company be concluded?
• What formalities must be completed after donating shares in a limited liability company?

Shares in a limited liability company can be the subject of legal transactions, and the most common ways of disposing of them are their sale or donation. Importantly, a donation is the only free form of transfer of shares. Unfortunately, even the free transfer of shares requires following certain procedures and completing certain formalities, the omission of which may result in the invalidity of such an action. So what should you pay attention to when deciding to dispose of shares by way of donation?

What is a donation?

A donation is an agreement in which the donor undertakes – at the expense of their property, i.e. without receiving an economic equivalent in return – to provide a free benefit to the recipient. Basically, a donation agreement is concluded when both parties make consistent declarations on this matter.

The subject of a donation may be various benefits, most often in the form of an action - performance by the donor. Asset transfers as part of a donation usually concern specific assets, including shares in a limited liability company. 

Does the donation of shares in a limited liability company require the company's consent?

In the context of the effective conclusion of a share donation agreement in a limited liability company, the issue of share trading and related restrictions becomes important. Trading shares is free unless the company’s articles of association require obtaining the company's consent or specify other rules limiting transferability.

Pursuant to Art. 182 § 1 of the Act of 15 September 2000, Commercial Companies Code (consolidated text: Journal of Laws of 2024, item 18, as amended) (hereinafter: CCC), the company’s articles of association may make the sale of a share, part thereof or a fractional part of a share, as well as the pledge of a share, subject to the company's consent or otherwise restrict it. 

The most common restriction included in articles of association is the need to obtain consent to donate shares. Some AoAs also clearly specify the procedure for granting such consent. Unless the articles of association provide otherwise – in accordance with Art. 182 § 3 of the CCC – consent to the donation of shares (or their sale) is granted by the management board in writing and requires a resolution of this body (Article 208 § 4 of the CCC). 

If the management board refuses to consent to the transfer of shares in the form of a donation, the registry court may allow it – provided that there are important reasons for doing so. 

The articles of association may, of course, specify differently the issues related to expressing consent to the disposing of shares. For example, due to the strong personal element in a limited liability company, the articles may provide for the need for consent from a body other than the management board – e.g. the shareholders' meeting. In such a case, consent will be given in the form of a written resolution adopted by the partners in accordance with Art. 227 § 2 of the CCC. The lack of such consent will not constitute grounds for the shareholder to apply to the registry court to obtain it (see Z. Jara [ed.], Kodeks spółek handlowych. Komentarz (Eng. Code of Commercial Companies. Commentary), 5th edition, Warsaw 2024).

At this point, we should also pay attention to the special situation of the shares of a partner obliged to make repeated monetary payments within the meaning of Art. 176 § 1 of the CCC. In this situation, the disposing of shares by way of donation may only take place with the consent of the company referred to in Art. 182 of the CCC – unless the company articles of association provide otherwise.

Consent to a donation may be granted both before, during and after the act, but the transfer of shares without the consent of the limited liability company is an ineffective act, both towards the company and in the relations between the parties. This means that the acquirer of the share (recipient) will not only not be entered in the share register, but will also not be able to exercise their corporate rights towards the company. Consequently, in such a situation, the donation agreement may become effective only when the appropriate permission is granted (Judgment of the Supreme Court of 7 September 1993, II CRN 60/93, OSNC 1994, No. 7-8, item 159).

Before you decide to donate shares, check whether the articles of association provide for additional restrictions

In addition to the need to obtain the company's consent to conclude a share donation agreement, the articles of association may provide for further subjective and objective restrictions that should be analysed before the act is carried out. Such restrictions may apply to all (or only selected) shares, or more precisely – to partners (see J. Bieniak, M. Bieniak, G. Nita-Jagielski, Kodeks spółek handlowych. Komentarz, 9th ed., Warsaw 2024). 

For example, the restriction may be the necessity for the acquirer (recipient) to meet certain conditions desired by the other partners (e.g. having a specific education and experience or having a specific degree of relationship with the other partners) or the priority right of the other partners in acquiring the shares if the person selling their shares intends to gift them to a third party. In the latter case, the consent of the other partners is expressed by waiving the right of priority. 

The conclusion of a share donation agreement violating the established restrictions is subject to the sanction of invalidity. There is no possibility of validation of such an act (see J. Bieniak, M. Bieniak, G. Nita-Jagielski, Kodeks spółek handlowych. Komentarz, 9th ed., Warsaw 2024).

Importantly, a limited liability company cannot prohibit trading in shares altogether*, either directly or indirectly (e.g. by providing an excessively long period for the disposal, leading to the "trapping" of the shareholder in the company)**.
* M. Allerhand, Kodeks..., op. cit., v. II, p. 30; J. Tomkiewicz, J. Bloch, Spółka..., op. cit., p. 55; T. Dziurzyński (w:) Kodeks, p. 207; A. Kidyba, Spółka z o.o. Komentarz, 2002, p. 228; M. Litwińska, Umowa..., op. cit., p. 129; J. Namitkiewicz, Kodeks..., op. cit., p. 94; I. Weiss, Prawo spółek, 2014, p. 364 ff.
** M. Rodzynkiewicz [w:] Kodeks spółek handlowych. Komentarz, 7th ed., WKP 2018, art. 182.

What is the right form for a share donation agreement? 

As a rule, the donor's declaration should be made in the form of a notarial deed (Art. 890 § 1 sentence 1 of the Civil Code). Meanwhile, the provisions of the CCC indicate that the agreement for the transfer (donation) of shares requires – under pain of nullity – written form, with signatures certified by a notary (Art. 73 § 2 of the Civil Code in connection with Art. 2 and Art. 180 § 1 of the CCC). 

Which form to choose? In practice, the prevailing view is that for an effective transfer of ownership of shares (and therefore also for their donation), it is sufficient to use the written form with notarially certified signatures. This solution is accepted by registry courts.

Out of an abundance of caution, a donation agreement can be concluded in a stricter form, but then you should expect a higher notary fee. The maximum fee for notarising a signature is PLN 300, while the cost of preparing a donation in the form of a notarial deed will depend on the value of the subject of the donation. 

An important exception to the above rules is a share donation agreement in a company, which was concluded using a template agreement, i.e. via the S24 system (Article 1571 of the CCC). In such a case, the transfer of shares may take place using the template provided in the IT system. Then, the declarations of the donor and the recipient are signed with a qualified electronic signature, a trusted signature or a personal signature (Article 180 § 2 of the CCC).

Remember! Donation of shares requires notifying the limited liability company

The mere signing of a donation agreement is not enough. In order for the transfer of shares to the recipient to be effective, it is necessary to notify the company of this fact and present the so-called proof of transfer (Article 187 § 1 of the CCC). Such proof will be the donation agreement.

Only from the moment of effective notification does the previous shareholder lose the status of a shareholder, and the recipient becomes a shareholder, assuming all the rights and obligations of the transferring donor (see Z. Jara [ed.], Kodeks spółek handlowych. Komentarz, 4th ed., Warsaw 2022). For example, the new shareholder may participate and vote at the shareholders’ meeting and obtain the right to a dividend (see J. Bieniak, M. Bieniak, G. Nita-Jagielski, Kodeks spółek handlowych. Komentarz, 9th ed., Warsaw 2024). The above notification will result in the need for the management board of the limited liability company to update the share register (Article 188 of the CCC).

After receiving notification of the conclusion of a share donation agreement, the company is obliged to update the entries in the National Court Register and the Central Register of Beneficial Owners

After receiving notification of the donation of shares, the management board of a limited liability company should, within 7 days, submit to the National Court Register an application to enter a change in the composition of the partners, which results from Art. 22 of the Act of 20 August 1997 on the National Court Register (consolidated text: Journal of Laws of 2023, item 685, as amended) (hereinafter referred to as the "NCR Act"). After each change is entered, the management board submits to the registry court a new list of partners signed by all members of the management board, together with information on the number and nominal value of the shares of each of them, and a note on the establishment of a pledge or use of the share (Art. 188 § 3 of the CCC).  

Making a donation may also result in a change of the beneficial owner and the need to update the company's entry in the Central Register of Beneficial Owners (CRBR). Information in the CRBR must be updated within 14 days from the date of making the change in the NCR, which results from art. 60 par. 1 of the Act of 1 March 2018 on counteracting money laundering and financing of terrorism (consolidated text: Journal of Laws of 2023, item 1124, as amended) (hereinafter referred to as the "AML Act"). 

The information on beneficial owners is reported by filling in a form on the website of the Ministry of Finance. In the case of a limited liability company, the body authorised to submit the notification is the company's management board, in accordance with the principles of representation applicable in the limited liability company. We wrote about who the beneficial owner is and how to identify them here. 

Donation of shares and the issue of the inheritance and donation tax 

Pursuant to the provisions of art. 1 par. 1 item 2 of the Act of 28 July 1983 on Inheritance and Donation Tax (consolidated text: Journal of Laws of 2024, item 596) (hereinafter referred to as the "Inheritance and Donation Tax Act"), the acquisition of shares in a Polish limited liability company by individuals is subject to inheritance and donation tax. 

The tax obligation arises from the moment of concluding the agreement (submitting declarations) (Article 6, par. 1, item 4 of the Inheritance and Donation Tax Act), and the tax base is the value of the acquired shares in the limited liability company, after deducting debts and liabilities (clear value), determined according to their status on the date of acquisition and market prices on the date the tax obligation arises (Article 7, par. 1 of the Inheritance and Donation Tax Act).

The amount of tax is determined depending on the tax group to which the acquirer belongs and the market value of the shares in the limited liability company acquired by way of a donation (Article 9 and Article 14, paragraphs 1-2 of the Inheritance and Donation Tax Act). The tax obligation itself lies with the party that received the shares in the limited liability company (Article 5 of the Inheritance and Donation Tax Act). 

The tax exemption applies to acquisitions from a spouse, descendants, ascendants, stepchild, siblings, stepfather and stepmother – provided that the receiving party reports the acquisition of shares in a limited liability company to the competent head of the tax office within 6 months from the date on which the tax obligation arises. 

Importantly, the acquisition of shares in a Polish limited liability company is not subject to inheritance and donation tax if, on the date of acquisition, neither the recipient nor the donor were Polish citizens and did not have a permanent place of residence or registered office in the territory of Poland (Article 3, point 1 of the Inheritance and Donation Tax Act).

The notification is submitted on an official form (SDZ-2 or SDZ-3) to the competent head of the tax office.

Donation and the tax on civil law transactions 

Civil law transaction tax applies to donation agreements in the part concerning the assumption by the recipient of the debts and burdens or liabilities of the donor (Article 1, par. 1, point d) of the Act of 9 September 2000 on civil law transaction tax, consolidated text: Journal of Laws of 2024, item 295) (hereinafter referred to as the "CLTT Act"). Therefore, if the recipient does not accept the debts and burdens or liabilities of the donor, such an agreement will not be subject to taxation (see T. Nierobisz, A. Wacławczyk, Podatek od czynności cywilnoprawnych. Komentarz. Warsaw 2011, Legalis). 

Safe donation of shares in a limited liability company requires appropriate preparation and knowledge.

Trading in shares in a limited liability company, although free in principle, is usually subject to certain restrictions. An effective donation of shares therefore requires a prior reliable analysis of the restrictions related to trading in shares in a limited liability company, obtaining the appropriate consents, concluding an agreement in the appropriate form and notifying the company and the competent authorities of this fact.

This process, although seemingly easy, requires a lot of attention and knowledge of the law. It is therefore worth considering professional support in the field of corporate consulting.