Understanding the Types of Share Capital Contributions

What is a Contribution to Share Capital?

When we talk about contributions, we are talking about sums of money, but it can also be about tangible assets (such as a vehicle) or intangible contributions, like a patent. These contributions are made available to a company and help form its share capital.

Contributions to Share Capital: How Does It Work?

In exchange for the contributions they make, shareholders (or shareholders) receive a counterpart (through ownership rights of the company). It can be in the form of shares or in the form of stocks, depending on the legal status of the company. Depending on the importance of the contribution made, it is also possible to receive powers (such as voting rights) or even remuneration, including a share of the profits of the company. Contributions have a dual role: they are there to help a company in its formation to start its activity but also to constitute the need for working capital (BFR). It is also a tool that demonstrates the solidity of a project by bringing several investors into the capital or by accepting contributions that have a strong value. Note that some legal forms do not require a minimum contribution; it is therefore possible to create a company with only one euro. However, having a stronger capital will help start the company and reassure potential partners and clients.

What Are the Different Types of Possible Contributions?

There are three main types of contributions to share capital. These are cash contributions, industry contributions, and finally, contributions in kind.

• Cash Contributions:

Cash contributions are contributions made in cash. However, it is not possible to contribute sums of money entirely freely. The money must be deposited into an account in the name of the company, where it is then blocked until the moment of effective registration. It is possible to make a partial release of the capital. The remainder is then contributed, and this is called "capital release," within a timeframe provided by law.

• Industry Contributions:

Industry contributions refer to contributions in the form of work performed by a partner. This type of contribution does not add to the formation of the company's share capital. Indeed, the industry contribution entitles the contributor to receive shares or stocks in exchange for the work performed. How to determine the value of an industry contribution? By evaluating the amount that the company would have had to spend to obtain the same work as that performed by the contributor.

• Contributions in Kind:

Contributions in kind can take various forms. It is possible to make contributions in equipment, customer base, or even in the form of patents or trademarks. These contributions will contribute to forming the share capital of a company. How? Through an evaluation to determine the value of each contribution in kind. While it is straightforward to evaluate a cash contribution, the contribution in kind requires a prior evaluation, which will then be equivalent to the number of shares or the number of stocks in an asset transfer. An appraiser must then present a report on the value retained in this transfer agreement for companies with shares. He will note that these contributions are not overvalued and that they are at least equal to the value of the securities received in return.