Covering a Limited Liability Company’s Balance Sheet Loss Through Shareholders’ Additional Contributions and Loans

A negative financial result in a limited liability company (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) is a clear warning signal. It requires both the management board and the shareholders to analyse the causes and make deliberate decisions aimed at stabilising the company’s financial situation. Although losses may be settled against future profits, in practice it is often necessary to strengthen liquidity more rapidly.

The most commonly used instruments for this purpose are additional contributions (dopłaty) and shareholder loans. Both mechanisms consist of injecting additional funds into the company, yet their legal, accounting and tax consequences differ significantly. The choice between them is a strategic one — it affects not only the company’s current condition, but also internal relations and future growth prospects.

Additional Contributions – Internal Capital Reinforcement

Additional contributions are a form of financing regulated by the Commercial Companies Code, enabling shareholders to recapitalise their company. They constitute an important tool for supporting liquidity, but their use is subject to specific legal and formal requirements.

• Requirement of the articles of association – the possibility of imposing additional contributions must be expressly provided for in the company’s articles of association. Without such a provision, shareholders cannot rely on this instrument.
• Refundable in principle – as a rule, additional contributions are refundable. This means that, once the company’s financial situation stabilises, they may be returned to shareholders, and their payment does not constitute taxable income for the company.
• Shareholders’ resolution – additional contributions are imposed and refunded through a resolution specifying the amount and timing. This resolution is a key procedural element ensuring transparency throughout the process.

Shareholder Loan – Flexible Liquidity Support

An alternative to additional contributions is a loan granted to the company by a shareholder. In such a scenario, the shareholder acts as an external creditor and the financial relationship is governed by the provisions of the Civil Code.

• Always repayable – a loan always constitutes a liability of the company towards the shareholder. Regardless of its purpose, it must be repaid under the terms set out in the loan agreement.
• Written agreement and transfer tax – in order to be valid, a loan agreement must be concluded in writing. As a rule, the transaction is subject to transfer tax (tax on civil law transactions, PCC — the term transfer tax is a direct translation of the Polish concept), though certain statutory exemptions may apply.
• Balance sheet implications – a loan increases the company’s current assets through an inflow of cash, but simultaneously creates a liability on the liabilities side of the balance sheet. It therefore does not cover a loss in the accounting sense, but provides short-term liquidity and time to rebuild profitability.

Summary – A Strategic Decision

The choice between additional contributions and a shareholder loan goes beyond the company’s immediate financial needs. It forms part of a broader strategy for managing stability and long-term development.

Additional contributions serve as a form of lasting capital reinforcement — they improve balance sheet ratios and enhance credibility in the eyes of banks or investors, though they also require shareholders to commit real, often non-refundable funds.

Shareholder loans provide the company with quick access to liquidity and remain a more flexible solution, though they increase indebtedness and do not actually cover the loss in accounting terms.

The final choice of instrument should result from a conscious analysis of both the company’s financial situation and the long-term interests of its shareholders. This is where legal, accounting and business considerations intersect, making the decision a key element of responsible management in a limited liability company.