The share capital of companies is made up of contributions to the company made by the partners.
In return for what he brings to the company, each partner will receive shares or shares entitling him to a share of the dividends paid by the company as well as voting rights at general meetings.
The company contribution can take one of the 3 forms below:
- The cash contribution
- Contribution in kind
- Contribution to industry
Let’s see more in detail.
The cash contribution
Contributions in cash refer to monetary contributions made by the partners. This is the type of contribution that is most frequently encountered both at the time of the creation of the company and during any subsequent capital increases.
The cash contribution process takes place in 2 stages.
Initially, the partners undertake to participate in the capital of the company. This is called the subscription of capital. Their commitment is then recorded in the company’s balance sheet in the social capital account on the liabilities side and in the subscribed capital account not called up in the assets.
Then in a second step, the partners proceed to the payment of their contributions in cash into a bank account in the name of the company. This is called the liberation of capital.
The rules governing the release of cash contributions vary depending on the legal form of the company and are generally included in the articles of association.
For example, at the time of creation, a public limited company must have at least 50% of the sum of the financial contributions announced by the shareholders, while the minimum to be released is only 20% of the capital for an LLC. All cash contributions must then be paid within 5 years after registration of the company.
Contribution in kind and role of the contribution auditor
The term contribution in kind refers to material non-monetary and intangible contributions.
The scope of this type of contribution is very wide. It can be both real estate such as commercial premises, vehicles, a patent, a trademark, or even equipment or stocks of goods.
Contributions in kind need to be assessed in order to determine their value both for the distribution of shares and for inclusion in the balance sheet.
The valuation of contributions in kind must generally be carried out by a contribution auditor and documented in the company’s articles of association.
Except in SARLs and EURLs, partners can, if they wish, do without the services of the statutory auditor on conditions:
- that the value of the goods does not exceed 30,000 euros,
- that the value of the contribution in question represents less than half of the share capital.
When they decide to dispense with the contribution auditor, the partners engage their responsibility for 5 years concerning the value they have attributed to the property.
The method of appointing the contribution auditor varies according to the legal form of the company and the context (incorporation of the company or capital increase). In general, it is done either by unanimous vote of the partners or by decision of the commercial court.
The contribution in kind fully contributes to the constitution of the company’s share capital. However, we cannot create a company solely with contributions of this type. Contributions in kind must also be released immediately.
Contributions in kind can take different forms:
- full ownership contribution: full ownership of the property is transferred to the company
- benefit: the company has the use of the property for a fixed period
- contribution in bare ownership: the company owns the property but has neither its use nor the income it provides
- contribution in usufruct: the company does not own the property but has its use and the income it generates