Liability of Shareholders in a Limited Liability Company

In a limited liability company, it is not the shareholders who are liable for the company’s obligations, but the company itself – as a separate legal entity. However, there are exceptions to this rule.

General Rules of Liability in an LLC

One of the key structural principles of a limited liability company – and one that significantly increases its attractiveness as a business form – is the exclusion of shareholder liability, provided for in Art. 151 § 4 of the Polish Commercial Companies Code (k.s.h.).
Under this provision, the company itself, as a legal person, is liable for its obligations. It bears this liability independently and with all of its assets.

Shareholders therefore do not bear liability for the company’s obligations; instead, they bear risk only up to the value of the contributions they have made, and any additional commitments (e.g., supplementary payments, recurring non-cash contributions).

Importantly, Polish law does not recognize piercing the corporate veil as applied in the United States, where shareholders may become liable if they abuse the company form to commit unlawful acts, especially to harm creditors.

This does not mean that shareholders of a limited liability company can never be held personally liable. It is, however, an exception that may arise only from explicit provisions of the Commercial Companies Code or from special legislation.

Specific Liability Rules Concerning Shareholders

Exceptions to the principle of exclusion of shareholder liability in a sp. z o.o. include the following situations:

1. Incurring obligations before company registration (Art. 13 k.s.h.)

Liability varies depending on whether the shareholder acted personally on behalf of the company:

If a shareholder (a natural person) was authorized to act personally on behalf of the company, they are fully liable for obligations incurred in this period, jointly and severally with the company and other acting persons (Art. 13 § 1).

If the shareholder did not act personally, they are liable only up to the value of their unpaid contribution (Art. 13 § 2).

2. Contributing defective or overvalued non-cash contributions (Art. 14 § 2, Art. 175 § 1 k.s.h.)

For contributions with legal or physical defects, the shareholder must compensate the company for the difference between the agreed value and the real market value, unless the articles of association provide otherwise.

For significantly overvalued contributions, both the contributing shareholder and board members who knowingly filed for registration are jointly and severally liable for the missing value.

3. Damage caused during company formation (Art. 292 k.s.h.)

A shareholder is liable if they cause damage to the company through fault, e.g.:

paying remuneration for incorporation services from capital required to cover share capital,

overvaluing contributions,

improper drafting of the articles of association,

obtaining benefits disproportionate to incurred expenses.

Liability Arising from Shareholding

The Commercial Companies Code also provides for:

joint and several liability of the transferor and transferee of shares for outstanding obligations associated with the transferred shares (Art. 186 § 1 k.s.h.),

joint and several liability of co‑holders of shares (Art. 184 § 1 k.s.h.).

This applies to obligations related to shares, such as recurring non-cash contributions or supplementary payments.

Liability of a Shareholder Who Is Also a Management Board Member

Art. 151 § 4 k.s.h. does not exclude the liability provided in Art. 299 § 1 k.s.h. for board members – including those who are also shareholders. This was confirmed by the Supreme Court (Judgment of 14 February 2003, Case No. IV CKN 1779/00).

Thus, a shareholder’s limited liability can be overridden if they simultaneously serve as a management board member.

Liability for Actions Damaging the Company

A shareholder may also be liable for their own fault-based actions if they:

harm the company,
harm third parties,
commit an offense.

The Supreme Court (Judgment of 24 November 2009, Case No. V CSK 169/09) emphasized the need to distinguish between:

personal liability of a shareholder for their own wrongful acts, and
liability for the company’s obligations.

Civil Liability of a Shareholder

A shareholder is liable to the company under general civil law principles, including for:

non-performance or improper performance of obligations arising from:
– the articles of association (e.g., recurring non-cash contributions – Art. 176 § 1 k.s.h., additional obligations – Art. 159 k.s.h.),
– civil contracts between the company and shareholder (e.g., service agreements, lease, supply),
– a shareholders’ agreement regulating mutual obligations.

Shareholder Liability Related to Company Transformation

A shareholder may be liable for the company’s obligations in cases of mergers involving a partnership (spółka osobowa), e.g.:

when an LLC absorbs a partnership, or

when a new LLC is created through merger.

Shareholders who were previously partners of the merging partnership remain liable for 3 years from the merger date, on previous terms, subsidiarily to the creditors of the former partnership.
Liability is shared jointly with the LLC.

The same rules apply when transforming a partnership into an LLC – shareholders remain liable for 3 years from the transformation date.

Shareholders liability before the Registry Court

If shareholders fail to appoint a management board despite being obliged to do so, or the board is appointed incorrectly (e.g., missing members), the registration court may:

call on shareholders to correct the irregularities,

impose fines, which may be repeated.

Liability for Binding Instructions Issued by the Parent Company

On 2 September 2021, a government bill amending the Commercial Companies Code introduced regulations on group company law (holding law).

New rules regulate, among others:

direct liability of the parent company towards shareholders for reduced share value if the subsidiary followed binding instructions,

liability of the parent company for consequences of binding instructions – towards the subsidiary, its creditors, and shareholders.

The bill also introduces a squeeze-out mechanism in LLCs, allowing a parent company holding at least 90% of the subsidiary’s share capital to buy out minority shareholders.

These provisions aim to strengthen corporate supervision and streamline group management.

See also: Draft changes to holding law.

Liability of LLC Shareholders – Summary

As shown above, shareholder liability in an LLC is not completely excluded.
There are circumstances where shareholders may be jointly and severally liable with the company towards creditors.
Additionally, a shareholder may be liable towards the company itself, for example: