Does your company need a shareholder contribution?
When a company needs additional funds to cover losses, invest in new projects, or improve liquidity, shareholders can contribute through a shareholder contribution. This is a non-repayable injection of capital that strengthens the company’s financial position. It’s particularly beneficial when the company wants to avoid taking loans or issuing more shares.
A shareholder contribution involves shareholders injecting money into the company without expecting repayment or compensation. Unlike a loan, the contribution doesn’t create debt for the company. The purpose is to strengthen the company’s finances and improve its financial situation.
Types of contributions
There are two main types of shareholder contributions: conditional and unconditional:
- Conditional
This is when the shareholder provides funds with the condition that the money will be repaid if the company’s finances allow it, such as in the case of profits or dividends. Such conditions must be carefully documented to ensure the right to repayment. - Unconditional
In this case, the shareholder provides capital without any repayment requirements. The funds are simply added to the company’s equity and can be freely used to cover losses or make investments.
Several benefits
A shareholder contribution is an excellent way to strengthen the company’s equity without increasing its debt. Some of the benefits include:
- Improved financial position
By increasing the company’s equity, you enhance its creditworthiness, making it easier to secure external financing. - No interest costs
Since this kind of contribution isn’t a loan, there are no interest expenses for the company. - Flexibility
The company can freely use the funds to cover losses or invest, without pressure for immediate repayment.
What we help with regarding shareholder contributions
Legal consultation
We provide legal advice to help you understand and execute shareholder contributions correctly, including preparing necessary documents and conditions.
Drafting necessary agreements and documents
We’ll help you draft the agreements and documents you need for the contribution and make sure that they meet all legal requirements.
Reviews of past contributions
If you’ve previously made contributions, we’ll review the documentation to make sure it complies with current laws and regulations.
Get legal help today
Do you need help with shareholder contributions? You can always get in contact with our lawyers within just 24 hours when you need quick answers to your questions. Or you can email or call us whenever you need to hire a lawyer for legal assistance.
FAQ about shareholder contributions
Does a shareholder contribution need to be repaid?
A conditional one may be repaid if the company’s financial situation allows it. An unconditional one, however, doesn’t need to be repaid.
Can a shareholder contribution affect the company’s taxation?
Yes, it can impact the company’s taxation, particularly regarding loss deductions. It’s important to consult a tax expert to understand all tax implications.
How does a shareholder contribution affect the shareholder’s ownership share?
Generally, it doesn’t affect the shareholder’s ownership stake in the company, as it doesn’t involve issuing new shares.
