Share capital
Share capital is the nominal value of issued shares that forms part of a company's equity.
What does share capital mean?
Share capital is the nominal value of issued shares that forms part of a company's equity.
Payments above the nominal value are share premium (agio). Nominal capital says little about the current market value or liquid assets of the business.
How does it work?
On the balance sheet, the first item of equity is issued capital (art. 2:373(1)(a) DCC): the number of issued shares times the nominal value. There are also authorised capital, a maximum set in the articles of association that is optional for a BV (art. 2:178(1) DCC), and paid-up capital, the part that has actually been paid. If not everything has been paid up, the balance sheet states the paid-up capital or, if payments have been called, the paid-up and called-up capital (art. 2:373(2) DCC).
A BV (private limited company) has no statutory minimum capital; the articles of association state only the nominal amount per share. For an NV (public limited company) a minimum of € 45.000 of issued and paid-up capital applies (art. 2:67(2) and (3) DCC).
Example
A BV is incorporated with 1.000 shares of € 0,10 nominal value. The founder pays in € 100. Journal entry: bank € 100 debit, issued capital € 100 credit. Two years later an investor takes 250 new shares at € 40 each and pays € 10.000. Issued capital rises by 250 × € 0,10 = € 25 to € 125; the other € 9.975 is share premium. The share capital of € 125 says nothing about the € 10.100 paid in altogether.
In the annual accounts
Equity on the balance sheet; breakdown according to the statutory presentation.
Difference from share premium
Share capital is only the nominal amount of the issued shares. What a shareholder pays above that is share premium (agio) and appears on a separate line (art. 2:373(1)(b) DCC). For an NV the distinction weighs more heavily than for a BV: the NV may not make distributions at the expense of its paid-up and called-up capital (art. 2:105(2) DCC), whereas the BV's balance sheet test protects only the statutory reserves and the reserves required by the articles.
Common mistakes
- Adding share premium to nominal capital
- Treating issued capital as cash
What to look out for
- Compare the amount on the balance sheet with the shareholders' register and the latest notarial deed of issue or amendment of the articles. A difference points to an issue or cancellation that has not been booked.
- A micro entity shows equity as a single amount (art. 2:395a(4) DCC); from small upwards, capital appears on a separate line (art. 2:396(3) DCC).
- Repaying capital requires a capital reduction resolution of the general meeting, with the same board test as for dividends (art. 2:208(1) and (6) DCC).
Legal basis and source
art. 2:373 DCC
Frequently asked questions
How much share capital must a BV have?
The law sets no minimum. A BV with a single share of € 0,01 is possible; the nominal amount per share is stated in the articles of association. A minimum capital of € 45.000 applies only to the NV (public limited company).
Is share capital the same as money in the bank?
No. It is a liability-side item showing how much has been committed or paid up at nominal value on the shares. The money paid in has since been used in the business and may have gone into inventory, equipment or losses.
Can the share capital of a BV be denominated in a foreign currency?
Yes, article 2:178(2) DCC allows this. If that currency differs from the currency of the annual accounts, you also state the exchange rate and the amount in the statutory currency next to the item (article 2:373(5) DCC).
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Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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