Limited liability company agreement is the foundation on which the entire mechanism of your business is built. Although the S24 system provides a simple, simplified model agreement, in practice it often proves insufficient. This is particularly evident when a company has more than one partner, plans to attract an investor, make contributions in kind, or needs solid protection against ownership conflicts.
Extended articles of association, prepared taking into account the specific nature of the company Commercial Companies Code and market realities, it not only protects the interests of shareholders. Above all, it organises internal relations and promotes stable growth of the company.
In this article, we discuss The 13 most important regulations, that are worth including in the articles of association of a limited liability company — from non-cash contributions, through restrictions on the sale of shares, to effective dispute resolution mechanisms.
Knowledge in a nutshell: You can also find many additional, free guides on starting and running a business at our legal blog.
1. Contributions (non-cash contributions) — precision means security
Non-cash contributions, i.e. reports, often constitute a key element of the new company's assets. These may include copyrights to software, specialised equipment, know-how or technologies. Therefore, their detailed description in the agreement is absolutely crucial.
General wording from online templates does not protect either the company or the other partners. A professional agreement should include detailed provisions concerning:
-
the type and value of the contribution,
-
the date of its submission,
-
liability for any physical and legal defects,
-
the consequences of failing to fulfil the obligation to make a contribution.
This approach provides the company with real protective tools. Remember: the more complex or valuable the contribution, the greater the need for precise regulation.
Check also: Why is it worth investing in a tailor-made contract? Read: Ltd. contract. - why should it be drafted by a professional?.
2. Shareholder privileges — control and decision-making
By default, all shares are equal, but limited liability company agreement. may (and often should) provide for their preferential treatment. This is the most effective tool for protecting founders from losing control of the company or strengthening the position of a strategic investor.
Preferential treatment of shares may apply to:
-
Voice strengths: increased number of votes at the shareholders' meeting (maximum 3 votes per 1 share).
-
Finance: preferential dividend (right to higher profits).
-
Access to shares: pre-emptive rights to acquire new shares.
-
Liquidation: preferential share in the distribution of the company's assets in the event of its closure.
-
Authority: personal rights to appoint members of the management board.
-
Organisation: the right to independently convene a shareholders' meeting.
3. Subsidies — flexible financing without bureaucracy
Every company needs capital for growth. Additional payments This is a simple and effective mechanism for recapitalising a company without the complicated procedure of increasing the share capital at a notary public.
The articles of association may:
-
require shareholders to make additional payments of a specified amount (e.g. a multiple of the value of their shares),
-
set deadlines for their submission,
-
anticipate the possibility of their repayment when the company's financial situation allows it.
This solution is not only flexible, but also tax-efficient (within certain limits). It allows partners to support the company „here and now”, without unnecessary formalities.
Important topic: Want to understand financial risks? Read our article: Liability for debts in limited liability companies.
4. Restrictions on the sale of shares — who will be your partner?
Do you want your partner to be able to sell their shares to anyone without your knowledge? If the partnership agreement is silent on this issue, the code allows it. To avoid random individuals or competitors joining the partnership, it is worth introducing control mechanisms:
-
Consent requirement: Disposal of shares subject to the consent of the company (Management Board or Shareholders' Meeting).
-
Right of first refusal/pre-emptive right: The other shareholders have priority in acquiring shares.
-
Tag Along Clause (right to join): If the majority shareholder sells their shares, the minority shareholder may „join” the transaction on the same terms.
-
Drag Along Clause (right of first refusal): The majority shareholder may compel minority shareholders to sell their shares in the event of an exit (investment exit).
Are you planning to start a business? See our step-by-step guide: How to set up a limited company?.
5. Inheritance of shares — succession planning
According to the law, shares in a limited liability company are subject to inheritance. This means that in the event of a partner's death, his or her heirs (e.g. minor children or a divided family) may join the company.
However, the articles of association may exclude or limit the succession of heirs, provided that repayment is guaranteed. It is crucial to precisely define the rules for valuing shares for repayment purposes in order to avoid financial paralysis of the company.
6. Redemption of shares — „divorce” from a partner
Sometimes partners go their separate ways. The agreement should provide for a procedure. share redemption — voluntary, compulsory or automatic (punitive).
It is particularly important to take care of provisions concerning automatic write-offs. This may occur in strictly defined situations, such as:
-
breach of non-competition,
-
disclosure of trade secrets,
-
loss of professional qualifications necessary for the company's operations.
7. Convening meetings and adopting resolutions
As a rule, meetings are convened by the management board. However, in crisis situations, the agreement may also grant this right to other persons (e.g. a specific partner or proxy).
It is also worth considering quorum and majority of votes. You can tighten the code requirements for key decisions, such as:
-
amendment to the articles of association,
-
sale of an enterprise or an organised part thereof,
-
dissolution of the company,
-
significant change in the business profile.
This gives you the assurance that strategic decisions will not be made without your involvement.
8. Increasing share capital — a fast track to growth
Every visit to a notary public involves costs and time. Introducing an authorisation to increase the share capital into the articles of association by virtue of a shareholders' resolution alone (without amending the articles of association) significantly simplifies the procedure. This is an ideal solution for companies planning dynamic growth.
9. Rules of operation of the management board — powers and responsibilities
Who represents the company? How are decisions made in a multi-member management board? Precise regulation of these issues in the agreement minimises the risk of decision-making paralysis.
It is worth specifying:
-
method of representation (single-member or joint),
-
term of office (e.g. appointment for an indefinite period),
-
the chairperson's casting vote in the event of a tie,
-
list of matters requiring a resolution by the management board.
10. Non-competition and confidentiality (NDA)
The statutory non-competition clause mainly applies to members of the management board. The articles of association may (and should) extend it to partners. Protecting know-how, customer databases and strategies is a priority.
A good-quality clause should include:
-
definition of competitive activity,
-
prohibition on participation in competing entities,
-
contractual penalties for breach of the prohibition,
-
linking the infringement to the compulsory cancellation of shares.
11. Copyright — IP protection
In technology companies, software houses, and marketing agencies, this is intellectual property (IP) is the most valuable asset. If a partner creates code, graphics or texts, the partnership agreement should regulate the transfer of property copyrights to the entity. The lack of such provisions is one of the most common causes of disputes and problems in company valuation (due diligence).
Stay up to date: Check what has changed in the regulations: Changes to the Commercial Companies Code – what will they cover?.
12. Dispute resolution — mediation and arbitration
Court is a last resort. Commercial proceedings in Poland take years. Introducing mediation clauses or arbitration provisions into contracts allows conflicts to be resolved faster, more cheaply and, importantly, confidentially.
13. Supervisory board — additional control
Although not mandatory in small limited liability companies, establishing a Supervisory Board or Audit Committee can significantly enhance the transparency of management activities and provide shareholders (especially those not involved in operations) with better insight into the company's finances.
Do you want a partnership agreement that truly protects you?
Every company has different dynamics, objectives, and ownership structure. Therefore, good articles of association for a limited liability company. should always be „tailor-made”. Ready-made solutions from the internet rarely work in crisis situations.
Our law firm specialises in drafting, analysing and negotiating company agreements tailored to specific business needs. Contact us if you wish to:
-
prepare a professional contract that goes beyond the standard S24,
-
safeguard your interests and those of your partners,
-
introduce effective exit and dispute resolution clauses.
Please call us or write to us: BKT Law Firm contact form.
E-mail: sekretariat@bktkancelaria.pl
Tel: +48 606 608 089
Contact: https://bktkancelaria.pl/kontakt/
