Abstract

The Decision of the Regional Court in Łódź of 16 May 2015 (file no.: XIII Ga 644/13) refers to a problem, which is rarely resolved by courts but is of great practical importance, namely the sources of financing compensation for redemption, which may be argues to be highly controversial for the practice.

It is acknowledged in the statement of the judgment that Art. 199 § 6 and Art. 199 § 7 of the Commercial Companies Code (CCC) does not enumerate two exclusive sources of funding compensation for redeemed shares, whereas net profit specified therein and the amount of a decreased share capital are not the sole sources of funding compensation paid out to shareholders and thereby do not represent the upper limit of such compensation.

The article sha present two views of the doctrine in this respect, namely that of those who oppose admissibility of using share premium for funding compensation for redemption, in whose assessment Art. 199 § 6 and Art. 199 § 7 of the CCC limit the sources of financing compensation exclusively to the amounts released by the decrease of share capital or the amounts to be paid out to the shareholders as profit (Art. 192 of the CCC) and those who advocate a functional interpretation of the above mentioned provision in whose assessment it indicates solely how such compensation is to be paid.

The article answers the following questions: How can share redemption be funded, i.e. whether redemption repayment may be funded solely by way of decreasing share capital, or from net profit?; Is it admissible to determine the amount of compensation for such redeemed shares otherwise in excess of net profit calculated according to Art. 192 of the CCC and the permissible decrease of the share capital?; and May such compensation for redemption be funded also from the share premium reserve, namely do Art. 199 § 6 and Art. 199 § 7 of the CCC indicate only the sources of funding such compensation thus limiting them exclusively to the amounts released by the decrease of share capital or amounts that may be paid out to the shareholders as profit within the meaning of Art. 192 of the CCC)?

The author believes that acceptance of the reasoning of the Regional Court to the effect that Art. 199 § 6 and Art. 199 § 7 of the CCC do not enumerate two exclusive sources of funding compensation for redeemed shares, whereas net profit and the nominal amount of decreased share capital are not the sole sources for funding compensation due to shareholders and do not represent the upper limit of such compensation may lead, under the existing legislation, to the situation of illegal payment within the meaning of Art. 198 and Art. 350 of the CCC.