How to Exit a Limited Liability Company (Sp. z o.o.)?

When should you start planning your exit from an Sp. z o.o.? Right at the stage of thinking about founding it.

Considering the admissibility and method of exiting a limited liability company (Sp. z o.o.) is a key element of strategic business planning, combining legal and tax aspects. Already at the stage of forming the company or deciding to acquire shares in it, potential shareholders should consider the possibilities and consequences of exiting it in the future. The options for exiting an Sp. z o.o. are diverse and can be dictated by many factors, both positive and negative.

Reasons for Exiting the Company:

• Positive motivations: The growth in the company’s value is a common reason for the decision to sell shares. Investors who entered the company with the intention of a capital investment may decide to sell their shares to realize a profit.
• Negative motivations: Persistent internal conflicts, disagreement on the direction of the company’s development, or misunderstandings between shareholders are frequent reasons for the decision to exit the company. Such situations can result in a lack of effective cooperation and lead to a decision to resign from shares.

Methods of Exiting the Company:

• Disposal of Shares:
  • The simplest form of exiting the company, allowing the transfer of ownership rights to other people. This can be a sale, donation, exchange, or contribution of shares as an in-kind contribution (aport) to another company.
• Redemption of Shares: 
  • This is a process in which the company acquires its own shares and then redeems them, resulting in their extinguishment. This requires the consent of the majority of shareholders and is often used in specific situations, such as during company restructuring.

Judicial Methods of Exiting an Sp. z o.o.

Judicial methods of exiting an Sp. z o.o. are complicated and time-consuming processes that are applied when other methods fail. These methods, although rarely used, may be necessary in case of serious internal conflicts or other fundamental problems in the company’s functioning.

Lawsuit for Shareholder Exclusion:

• Procedure: The process begins with filing a lawsuit with the court by the remaining shareholders. A capital majority is required—the shares of those filing the lawsuit must constitute more than half of the company’s share capital.
• Legal Basis: The lawsuit must be based on important reasons, such as actions by the shareholder that harm the company, violation of the company’s articles of association, or conduct contrary to social coexistence principles within the company.
• Legal Effects: If the lawsuit is successfully heard by the court, the shares of the excluded shareholder are transferred to the remaining shareholders or to third parties. The price of the shares is determined based on their actual market value on the date the lawsuit was served.

Judicial Dissolution of the Company:

• Application: Ta metoda jest stosowana, gdy istnieją ważne powody uniemożliwiające dalsze funkcjonowanie spółki, takie jak niemożność realizacji celu spółki lub trwały konflikt umożliwiający efektywne zarządzanie.
• Court Process: Requires filing an appropriate lawsuit by a shareholder or a member of the company’s body. The court examines whether there are grounds for dissolving the company, taking into account the interests of all parties.
• Consequences: In the event of a favorable ruling, the court orders the dissolution of the company, which leads to its liquidation. The liquidation process involves satisfying creditors, dividing the company’s assets among the shareholders, and the final removal of the company from the register.

Important Aspects of Judicial Exit Methods:

• Time and Cost: These processes can be lengthy and generate significant costs, including court fees and attorney fees.
• Risk and Uncertainty: There is a risk that the court will not agree with the arguments of those filing the lawsuit, which may lead to the prolongation of the conflict and further complications in the company’s functioning.
• Publicity of Proceedings: Court proceedings are public, which may affect the reputation of the company and its shareholders.

In summary, judicial methods of exiting an Sp. z o.o. should be treated as a last resort, applied only when other methods fail. They require thorough consideration, preparation of an appropriate legal strategy, and readiness for long-term and potentially costly court proceedings.

Out-of-Court Methods of Exiting an Sp. z o.o.

In addition to traditional methods of exiting an Sp. z o.o., there are also other, less conventional scenarios worth considering. Each of them has its specific features and requires a precise understanding of their legal and business consequences.

Possible Resolution on Company Dissolution:

• Procedure: The process of dissolving an Sp. z o.o. begins with the adoption of a resolution by the shareholders, typically requiring a two-thirds majority of votes. This resolution must be confirmed in the form of a notarial protocol.
• Application: This method is used in cases where shareholders decide to cease the company’s operations, e.g., for strategic, financial reasons, or due to changing market conditions.
• Consequences: Company dissolution entails a liquidation process, including satisfying creditors, dividing the company’s assets, and removing the company from the register.

No Squeeze-Out:

• Limitations: In an Sp. z o.o., there is no possibility of compulsory buy-out of minority shares by majority shareholders (squeeze-out), as is the case in joint-stock companies.
• Amendment to the Commercial Companies Code (k.s.h.): change in regulations in October 2022, however, introduced the possibility of buying out shares in an Sp. z o.o. that is part of a group of companies. According to Article 2111 of the k.s.h., shares may only be acquired by the dominant company in the group.
• Warunki: The buy-out of minority shares is possible only under specific conditions, and the decision to buy out must be made in compliance with corporate law regulations and the protection of minority shareholders’ rights.

Additional Scenarios for Exiting an Sp. z o.o.:

Company Transformation: 

• Shareholders may decide to transform the Sp. z o.o. into another legal form, e.g., a joint-stock company, which may open up new possibilities in terms of management and share trading.

Mergers and Acquisitions (M&A)

• An Sp. z o.o. can also be the subject of a merger or acquisition by another company, which constitutes an alternative path for shareholders who wish to exit the company or change its capital structure.

Liquidation Without Dissolution

• In some cases, e.g., when the company has no obligations to creditors, it is possible to liquidate the company without a formal dissolution process.

In summary, the remaining scenarios for exiting an Sp. z o.o. offer alternative solutions in situations where traditional methods are insufficient or unsuitable. However, they require a precise legal and financial analysis to ensure they align with the shareholders’ business goals and legal regulations.

What Are the Potential Tax Consequences of Exiting an Sp. z o.o.?

The tax consequences of different methods of exiting an Sp. z o.o. can vary depending on the chosen path and individual circumstances. Here is an overview of potential tax consequences for specific methods:

Disposal of Shares

• ncome Tax (PIT/CIT): Income from the sale of shares may be subject to Personal Income Tax (PIT) or Corporate Income Tax (CIT), depending on the seller’s tax status.
• Tax on Civil Law Transactions (PCC): The sale of shares transaction may also be subject to PCC, unless it qualifies for an exemption.

Redemption of Shares

• PIT/CIT: If the redemption of shares occurs for remuneration, it may generate taxable income.
• PCC: Share redemption may also be subject to PCC, depending on the circumstances.

Lawsuit for Shareholder Exclusion

• Income Tax: If remuneration is received for the transfer of shares resulting from a court judgment, such a transaction may generate taxable income.
• PCC: Transactions carried out as a result of court rulings may be exempt from PCC, but this requires individual analysis.

Judicial Dissolution of the Company

• Liquidation Tax: In the case of company liquidation, the eventual profit from the sale of company assets may be subject to taxation.
• Dividend Tax: The distribution of assets among shareholders after liquidation may be treated as a dividend and be subject to taxation.

Resolution on Company Dissolution

• Liquidation Tax: Similar to judicial dissolution, profits from liquidation may be subject to taxation.
• Dividend Tax: The distribution of assets after liquidation may be taxed as a dividend.

No Squeeze-Out and New Regulations:

• Income Tax: In the case of the amendment allowing the buy-out of minority shares, income from the sale of shares may be subject to taxation.
• PCC: Buy-out transactions may be subject to PCC, unless appropriate exemptions are applied.

It is important to remember that tax consequences may vary depending on the specific circumstances of the transaction and the tax status of the parties. Consultation with a tax advisor is recommended to precisely understand and optimize the tax burden associated with the chosen method of exiting the company. In such a situation, we suggest contacting Biura Rachunkowego Precyzja, where we will assist in conducting all financial and tax operations.