How Does a Shareholder Current Account Work?

What is the Purpose of a Shareholder Current Account?

To address significant investments or to meet expenses specific to its activity, a company has various financing options. Utilizing a shareholder current account is one such approach. This account allows shareholders or company executives to contribute funds as advances or loans. The company then becomes liable for the amounts allocated by the shareholders, which are recorded as liabilities.

It's worth noting that the amounts recorded in a shareholder current account can also be used to increase the company's capital. This financial arrangement, implemented through accounting entries, can offer certain advantages to the concerned shareholder. They may benefit from an income tax reduction based on subscribing to the capital of a small or medium-sized enterprise (SME).

Shareholder current accounts provide flexibility in utilizing funds contributed by shareholders. This approach helps avoid standard procedures such as general meetings or amendments to bylaws. The main limitation, however, is that these contributions cannot enhance a shareholder's equity stake in the company.

Functioning of a Shareholder Current Account

Shareholders can make deposits into the account. But what happens to these amounts afterward? The contributions are converted into financial debt for the company, which must then proceed with repayment. The terms of repayment can be specified in writing through a repayment agreement. Indeed, shareholders can request repayment of the amounts contributed at any time... unless a signed contrary provision or cash flow difficulties prevent it.

It is possible to compensate the amounts left in the current account (though not obligatory), provided that the company's capital is fully paid up. It should be noted that the interest earned by a shareholder (individual) is subject to social security contributions and income tax.

Our Advice

Is this solution beneficial for you? How can you establish a shareholder current account and leverage its advantages for your company? To find out, you can rely on the expertise of a chartered accountant, who can guide and advise you on optimizing this account.