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Share capital – what is it? Definition of the term

Share capital is the capital that a company owns. Share capital is the financial resource that a company invests in its development. Learn more about it.

What is share capital? Definition of the term

Share capital in a company is, according to the Commercial Companies Code, cash and intangible assets intended for business operations. They are paid by shareholders in the form of contributions to the share capital. The amount of share capital is specified in the company’s deed or articles of incorporation. The minimum amount of share capital is PLN 5 thousand.

Share capital is a means of guaranteeing that the company will be able to bear losses and that it will be able to function. Share capital is also used to pay dividends to shareholders

Share capital – what is the purpose?

Share capital is the cash or other assets that an owner (or partner) contributes to a company. Share capital also determines the nominal value of the company’s shares. Share capital plays an important role in the operation of a company, as it provides a kind of guarantee for creditors. The amount of share capital is determined by the Law on Protection of Consumer Rights and the Law on Protection of Competition and Consumers.

Thus, share capital is a means of guaranteeing creditors that the company has the means to cover its obligations. This is very important because creditors can be assured that their money is safe. Share capital is also important for the company itself, as it allows the company to better plan its operations.

What counts as share capital?

Share capital is the company’s own contribution, which can be in cash or in kind. Share capital includes:

  • the company’s own contribution,
  • funds raised from the issuance of shares or stocks,
  • funds obtained from loans,
  • funds obtained from other sources (e.g., grants, subsidies).

An enterprise’s own contribution is the funds contributed by its owner or partners. It can be in monetary or non-monetary form. The own contribution includes:

  • cash,
  • in-kind contributions,
  • cash contributions in the form of bonds.

Funds raised from the issuance of shares are the funds that the company obtains from the sale of shares. These funds can be used for the development of the enterprise or its operations.

Minimum share capital

Theminimum share capital is the amount that must be contributed by shareholders in order for a company to be registered. Currently, it amounts to PLN 5,000. This is the amount that guarantees that the company will be able to cover its possible losses.

It is worth remembering that the minimum share capital is not equivalent to the initial capital that is needed to start a business. Initial capital is the amount that is needed to purchase the necessary equipment, rent premises and hire employees.

Minimum initial capital is mandatory for all types of companies, such as general partnerships, partnerships and limited partnerships. For joint-stock companies, the capital must be at least PLN 100,000.

Payment of the minimum share capital is not the only requirement that must be met by shareholders wishing to establish a company. It is also necessary to sign a memorandum of association and establish the amount of shares of each shareholder.

Registration of the company is possible only if all the required documents are delivered to the relevant office. Once the company is registered, its shareholders can start doing business.

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