Transformation of an LLC into a Simple Joint-Stock Company

Transformation of an LLC into a simple joint-stock company allows for changing its corporate structure. At the same time, it preserves the company’s assets, rights, and benefits. Such a procedure takes time and financial resources. The Commercial Companies Code regulates the process. What are the requirements for the transformation of an LLC into a simple joint-stock company? What is the difference between a transformation plan and a resolution on transformation? Find answers to these questions in the article below.

Table of Contents

• Transformation of an LLC into a Simple Joint-Stock Company – general rules
• Transformation of an LLC into a Simple Joint-Stock Company – requirements
• Transformation of an LLC into a Simple Joint-Stock Company –  transformation plan
• Transformation of an LLC into a Simple Joint-Stock Company – Resolution on Company Transformation
• Transformation of an LLC into a Simple Joint-Stock Company – Registration of the Simple Joint-Stock Company
• Summary

Transformation of an LLC into a Simple Joint-Stock Company – general rules

According to the Commercial Companies Code, an LLC can be transformed into a simple joint-stock company. The transformation becomes effective after the registration of the simple joint-stock company. At the same time, the registration court automatically removes the LLC from the register.

A simple joint-stock company is entitled to all the rights and obligations of an LLC. This results from the continuity principle. In particular, it is subject to the permits, licenses and concessions that were granted to the LLC before transformation. There can be some exceptions when the law or the decision granting the permit, concession, or benefit specifies otherwise.

The shareholders of an LLC become shareholders of the simple joint-stock company on the date of transformation.

The transformed company cannot be formed using the contract template.

The rights and obligations of the LLC’s shareholders that do not comply with the provisions of the Act on the Simple Joint-Stock Company expire on the date of transformation.

Transformation of an LLC into a Simple Joint-Stock Company – requirements

The transformation of an LLC into a simple joint-stock company is regulated by the CCC. According to the provisions of the Commercial Companies Code, the transformation requires:

1. Preparation of the transformation plan. It should include necessary attachments and the opinion of a certified auditor.
2. Adoption of a resolution on the company’s transformation.
3. Appointment of members of the bodies of the simple joint-stock company. Alternatively, the determination of shareholders responsible for its affairs and representation.
4. Entry of the simple joint-stock company into the register and removal of the LLC.

Moreover, the LLC must have approved financial statements for at least the last 2 financial years. If it has been operating for less than two years, the financial statement should cover the entire period of its activity not covered by the annual financial statement.

The share capital of the simple joint-stock company cannot be lower than the nominal capital of the LLC.

Transformation of an LLC into a Simple Joint-Stock Company – transformation plan

According to the CCC, the management board of the LLC or all shareholders conducting its affairs prepare the transformation plan.

As a rule, the plan of transformation shall be drawn up in writing under pain of nullity. In the case of a single-person company, the transformation plan is prepared in the form of a notarial deed.

The transformation plan must include, at least, the determination of the balance sheet value of the LLC’s assets on a specified day in the month preceding its presentation to the shareholders.

It must also include the following attachments:

1. A draft resolution regarding the company’s transformation.
2. A draft agreement of the simple joint-stock company.
3. Financial statements prepared for the purpose of transformation. It should comply with the same methods and layout as the last annual financial statement.

In the case of transformation into a simple joint-stock company, the transformation plan is subject to publication.

Transformation of an LLC into a Simple Joint-Stock Company – Resolution on Company Transformation

The transformation of an LLC into a simple joint-stock company requires a resolution. It should be adopted by the shareholders’ meeting or the general meeting. The legislator introduced very restrictive voting requirements for such a resolution. It is adopted if the transformation is supported by shareholders representing at least half of the registered capital and a majority of 3/4 votes unless the agreement or statute specifies stricter conditions. The resolution can be adopted at both an ordinary and extraordinary general meeting.

The resolution on the transformation into a simple joint-stock company should include at least:

1. The type of company into which the LLC is transformed.
2. The amount of share capital in the case of transformation into a simple joint-stock company.
3. The scope of personal rights granted to partners participating in the transformed company, if provided.
4. In the case of transformation into a capital company, the full names of the management board members of the transformed company.
5. Approval of the wording of the transformed company’s articles of association.

The adoption of a resolution on transformation replaces the conclusion of the articles of association of the transformed company. Moreover, it also replaces the appointment of its governing bodies.

The company informs its shareholders twice about the intention to adopt the resolution.

The notification should:

• Include basic elements of the transformation plan.
• Specify the place and time when the partners of the LLC can become familiar with the full content of the plan. This period cannot be shorter than 2 weeks before the planned date of adopting the transformation resolution.

Transformation of an LLC into a Simple Joint-Stock Company – Registration of the Simple Joint-Stock Company

According to the Code of Commercial Companies, the application for the entry of the transformation of an LLC into a simple joint-stock company should be submitted by:

• All members of the management board of the transformed company or
• All shareholders authorized to represent the transformed company.

The application shall be accompanied by a statement of all members of the management board that all the shares of the shareholders who requested repurchase have been repurchased.

The announcement of the company’s transformation is made at the request of:

• The management board of the transformed company or
• All shareholders conducting the affairs of the transformed company.

Summary

An LLC can be transformed into a simple joint-stock company. The Commercial Companies Code governs the principles of such transformation. The transformation becomes effective upon registration of the simple joint-stock company. As part of the transformation, LLC shareholders become shareholders of the simple joint-stock company. The transformation follows several steps. It requires, among others, drawing up a transformation plan, adopting a resolution on transformation and making relevant entries in the register.

Are you considering the transformation of an LLC into a simple joint-stock company?  We provide assistance in this area. Our law firm can offer both legal advice and support during the entire transformation process. Feel free to contact our experts.