Share capital or share premium in your Dutch firm?

You’ve gotten integrated and registered a Dutch enterprise and want to fund it with fairness. Must you capitalize the corporate with share capital or share premium? On this article each choices might be mentioned.

Definitions

Share capital and share premium (in Dutch: agio) are each thought of to be a part of the capital of a Dutch restricted legal responsibility firm and subsequently each are in principal a tax impartial instrument. Share capital could be introduced into an organization by paying up issued shares in money or in form. Share premium could be introduced into an organization by a contribution in money or in form on the payed up shares of a BV.

Beneath Dutch GAAP (RJ 240.403), all transactions of an organization with its shareholders that have an effect on the monetary relationship between these events are to be accounted for immediately within the fairness. Share issuance and share premium contribution ought to each be thought of as fairness. Beneath Dutch GAAP share capital and share premium won’t affect the Revenue or Loss account.

Based on the Dutch Accounting Requirements funding of a BV by share challenge might be recorded within the Fairness as Share Capital. Dutch Accounting Commonplace RJ 240.221 states that capital contributions made by present shareholders on account of their monetary relationship to the entity which can be executed performed with out precise disbursement of recent shares (or rights to obtain or name shares) are to be acknowledged as share premium. Within the Monetary statements funding below share premium contribution might be proven in Fairness below Share Capital.

Improve of fairness

Rising the capital of a BV via capital requires the execution of a deed by a Dutch civil legislation notary. For the execution, the notary would require a decision from the shareholder which additionally features a energy of lawyer. Moreover, an influence of lawyer from the corporate might be obligatory. Usually, the notary takes look after drafting the notarial deed, energy of lawyer and backbone.

When the shareholder of a Dutch firm is a international authorized or pure particular person, the notary would require a legalized decision. Beneath sure circumstance additionally with an apostille and an authority assertion (in some instances, the formality of legalization and apostille could be averted by having the Dutch notary determine the signer. This identification solely has to happen as soon as).

After the execution of the shares the notary will handle the registration of the rise of share capital on the Dutch commerce register. Earlier than or after the execution of the deed, the newly issued shares could be paid up by the shareholder via a switch to the corporate’s checking account.

A share premium contribution requires a share premium contribution settlement concluded between the shareholder and the BV, together with a shareholders decision. There is no such thing as a registration of share premium with the Dutch commerce register or within the shareholders register. After the conclusion of the share premium contribution settlement and adoption of the decision, the share premium could be paid by the shareholder to the corporate via a switch. As quantity of formalities is restricted, a share premium contribution can, in case of urgency, be executed inside a day.

In scenario the place repetitive share premium contributions are deliberate, it’s smart to conclude a share premium contribution facility settlement whereby the shareholder and the corporate can agree on share premium contributions as much as a capped quantity. This can assist the concerned events to keep away from conclusion of a number of agreements and resolutions and can give flexibility in case the necessity for capital cannot be assessed prematurely.

Share premium and share capital redemption

Each kinds of capital can below sure circumstances be redeemed with none dividend withholding taxes being levied. A situation for tax impartial reimbursement of share premium to its shareholders is that the corporate shall have distributed all its income and doesn’t anticipate any income inside the subsequent two years. This situation is commonly utilized in case of liquidation of an organization. In case the circumstances talked about above can’t be met, it’s nonetheless potential to repay the share premium with none dividend withholding taxes levied. The share premium shall first be transformed via a deed of a civil notary right into a share capital.

In case of liquidation, redemption of share capital could be executed with none formalities and in a tax impartial manner. In case the corporate might be continued, the share capital redemption can solely be executed in a tax impartial manner via reducing the nominal worth of the shares. Such lower of the nominal worth can solely be realized via a notarial deed. For example: in case of a lower of the nominal worth of the shares with 50 per cent, an quantity equal to 50 per cent of the preliminary share capital could be distributed to the shareholder. This distribution might be exempted from dividend withholding tax.

Conclusion

For accounting and taxation functions, share capital and share premium are each thought of to be a part of the fairness and are handled in an analogous manner. Due to this fact, it’s recommendable to utilize share premium after firm registration as it may be utilized extra simply. A contribution of share premium takes much less time, doesn’t should be registered with the commerce register and saves notarial bills.

As funding of an organization and the reimbursement of capital can have a number of tax penalties, e.g. potential taxation for dividend withholding tax functions, it’s advisable to have a tax advisor information the method of share capital redemption.