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Increase your share capital

Increase your share capital

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How do you increase the share capital of your BV or NV?

 

Due to current legislation, a minimum capital of € 0.01 is sufficient to start a Dutch Private Company such as the BV. However, this kind of capital won’t get you far…


It may therefore be advisable to increase the issued share capital of the BV. In that case, investments can be paid from your own resources. It can also be important for the bank or for contract parties that the BV deals with, that the share capital is increased. This increases the possibilities for recourse, which lowers the threshold for doing business with the BV.


The capital of your Dutch BV can be increased by issuing shares or paying a share premium. Shares can only be issued by notarial deed.


Why would you increase the share capital of your Dutch company?


  • increasing the resilience of the company

  • replacing debt with equity

  • dividend stabilization

  • expansion of activities


By increasing the issued share capital you increase the creditworthiness of the BV. The BV also has more room to invest with its own resources. If you have sufficient (share premium) reserves in your BV, you may convert them into share capital. Without an auditor's report!

Options to increase your share capital

 

It's not usual to increase the share capital of a Netherlands company or amount of shares, if effectively no extra shareholders are involved. The informal share capital (share premium) is a very common alternative.


Share capital and share premium are both considered to be part of the equity of a BV and there is no difference in the tax consequences. Share capital can be increased by issuing new shares, and by paying up issued shares in cash or in kind. 


Share premium can be brought into a company by a contribution in cash or in kind on the existing shares of a company. This cash can be simply brought into the company by means of a bank transfer, with the appropriate payment description (capital deposit, by such shareholder).


Under Dutch accounting standards, all transactions of an entity with its shareholders that affect the financial relationship between these parties  should reflect in the equity of the company. The issuance of shares for the Dutch company and share premium contribution should both be considered as equity. Either option, will not impact the Profit or Loss account.

According to the Dutch accounting standards, capital contributions made by current shareholders on account of their financial relationship to the entity that are executed conducted without actual disbursement of new shares (or rights to receive or call shares) are to be recognized as share capital premium (in Dutch: agio). In the Financial statements the incoming capital under ‘share premium contribution’ is visible under ‘Equity’ on the balance sheet.


Share premium and share capital redemption


Both options to deposit the capital can be redeemed at a later stage  without any dividend withholding taxes being levied.


In case of liquidation, redemption of share capital can be executed without any formalities and in a tax neutral way. In case the company will be continued, the share capital can only be executed in a tax neutral way by means of a decrease of the nominal value of the shares. This decrease of the nominal value can only be realised by means of a notarial deed.  In case of a decrease of the nominal value of the shares with 50 per cent, an amount equal to 50 per cent of the initial share capital can be distributed to the shareholder.


A contribution of share premium will require a share premium contribution agreement concluded between the shareholder and the company, plus a shareholder’s resolution.  There is no registration of share premium with the Dutch trade register or in the shareholders register. After the conclusion of the share premium contribution agreement and adoption of the resolution, the share premium can be paid by the shareholder to the company by means of a transfer. As there are not many formalities, a share premium contribution can, in case of urgency, be executed within a day.

How to increase your company’s capital via a Dutch notary

 

The increase of a company’s share capital requires the involvement of a Dutch notary.


After the execution of shares transfer, or issuance of new shares,  the notary will take care of the registration of the increase of share capital at the Dutch trade register. After the execution of the deed, the newly issued shares can be paid up by the shareholders by means of a transfer to the company.


New shares: You can increase the share capital of the BV by issuing new shares. This is possible up to the amount of the authorized capital as stated in the articles of association of the BV. If the issued capital of the BV is € 18,000, the authorized capital can never exceed € 90,000. If the intention is to issue shares above that amount, the articles of association of the BV will first have to be amended.


Shareholder meeting resolution: The resolution to issue new shares must be taken at the meeting of shareholders. That decision must be recorded in writing! It should be clearly stated how many shares are issued and at what price. This is usually at 100%, so equal to the nominal value of the shares.

Pay up your new share capital

 

It is also necessary to decide how the new shares will be fully paid up. This is possible by payment in cash. No bank statement is required for the issue of shares after the BV has been established.

However, the shares can also be paid up by transfer of goods (in kind contribution) to the BV. This can be, for example, machines, means of transport or commercial premises.


A claim that the shareholder has on a third party can also be transferred to the BV. In that case, however, an auditor's report is required. The auditor must then certify that the value of the property or claim is at least equal to the value of the new shares.

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