Shares Of Dutch Companies Or Share Premium?

Shares of Dutch companies or share premium?

You have established and registered a Dutch enterprise and hope to provide capital with shares. Should you use capital or capitalize the company at a stock premium? This document describes these two options.

definition

Capital and stock premium(Dutch: agio) are both considered as part of the capital of Dutch limited liability companies, so both are tax neutral instruments in principle. Capital may be introduced into the Company by paying for the issued shares in cash or in kind. The stock premium can be brought into the Company through BV’s cash or in kind contribution of the paid stock funds.

According to Dutch GAAP(RJ240.403), all transactions between the Company and shareholders that affect the financial relationship of both parties should be directly included in equity. Both share issuance and share premium contributions should be treated as equity. According to Dutch GAAP, capital and stock premiums do not affect the profit and loss account.

According to Dutch accounting standards, the capital issued by BV through shares will be written into equity as capital. According to the Dutch accounting standard RJ240.221, when existing shareholders make capital contributions due to their financial relationship with the entity, they should recognize the share premium when they execute without paying the actual new shares(or the right to receive or buy back shares). In the financial statements, the capital under the capital contribution item of stock discount will be reflected in the equity under the stock item.

Increase in equity

To increase BV’s capital through capital, a Dutch civil law notary must sign a contract. For enforcement, the notary will ask for a resolution of the shareholders, which also includes a power of attorney. In addition, a corporate power of attorney is required. Generally speaking, notaries are responsible for the basis of notarial certificates, power of attorney and resolutions.

If the shareholders of a Dutch company are foreign legal persons or natural persons, the notary public will request a legal resolution. In some cases, you can use comments and authoritative statements(in some cases, you can avoid the process of legalization and comments by letting Dutch notaries recognize the signers, which only needs to be recognized once).

After the signing of the shares, the notary is responsible for registering the increase in the share capital in the Dutch Business Register. The newly issued shares before or after the signing of the contract can be settled by transferring them to the bank account of the company.

Share premium contribution requires shareholders to sign a share premium contribution agreement with BV in combination with shareholders’ resolutions. There is no share premium registered in the Dutch Business Register or the Register of Shareholders. After signing the share premium contribution agreement and passing the resolution, the shareholder can pay the share premium to the company by means of transfer. Due to the limited number of procedures, in an emergency, additional shares can be issued within one day.

In the case of repeated stock discount contributions, it is wise to sign a stock discount contribution loan agreement, and shareholders and the company can reach an agreement on the maximum amount of stock discount contributions. This will help interested parties avoid contracts and decisions and provide flexibility when capital needs cannot be assessed in advance.

Stock premium and capital repurchase

Under certain conditions, both types of capital can be repurchased without taxation on any dividend source. One of the conditions for paying the share premium to shareholders is that the company may have distributed all the profits and is expected to have no profits in the next two years. This situation is generally used for company liquidation. If the above conditions are not met, the stock appreciation can still be repaid without any dividend source tax. The stock premium should first be converted into share capital through the certificate of a civil notary.

For liquidation, shares can be repurchased in a tax neutral manner without any formalities. If the Company continues to operate, share capital repurchase can only be implemented in a tax neutral way by reducing the par value of shares. This decline in nominal value can only be achieved through notarization. For example, if the par value of shares is reduced by 50%, you can distribute an amount equal to 50% of the initial capital to shareholders. The distribution will be exempt from tax on dividend sources.

conclusion

For accounting and tax purposes, both equity capital and stock appreciation are treated as part of equity and in a corporate like manner. Therefore, it is recommended that the company use stock installment after registration. Because it’s easier to apply. It takes less time to pay the share installment, and there is no need to register in the commercial registry, saving notarization fees.

Corporate financing and capital repayment will lead to various tax consequences, such as possible taxes on dividend deduction items. Therefore, it is recommended that tax advisers guide the stock repayment process.