Share premium reserve (agio)
The amount paid above nominal value when shares are issued. Agio forms part of equity and can be distributed under conditions.
What does share premium reserve (agio) mean?
The amount paid above nominal value when shares are issued. Agio forms part of equity and can be distributed under conditions.
Agio is the payment above the nominal value of shares. It forms a separate component of equity. Repayment or distribution requires an assessment of the articles of association, the available reserves and, for a BV (private limited company), the statutory distribution test.
How does it work?
Agio arises on issue: the subscriber pays more than the nominal amount because the share is worth more than what the articles of association state. The difference is shown as a separate item under equity (art. 2:373(1)(b) DCC). Agio can also arise without new shares: if an existing shareholder contributes capital without receiving shares for it, that amount is booked to agio (RJ 240).
Agio is not a statutory reserve; art. 2:373(4) DCC does not list it. A BV may therefore distribute it, provided equity remains above the statutory reserves and reserves required by the articles of association and the board approves the distribution (art. 2:216(1) and (2) DCC). For tax purposes it is different. A repayment counts as income for dividend withholding tax insofar as there is pure profit, unless the general meeting resolved on the repayment in advance and the nominal value of the shares was reduced by the same amount through an amendment of the articles (art. 3(1)(d) Dutch Dividend Withholding Tax Act 1965).
Example
A BV issues 100 new shares with a nominal value of € 1 to an investor, who pays € 101 per share. The BV receives 100 × € 101 = € 10.100. Of this, 100 × € 1 = € 100 is share capital and 100 × € 100 = € 10.000 is agio. Journal entry: bank € 10.100 debit; issued capital € 100 credit and share premium reserve € 10.000 credit.
In the annual accounts
Equity on the balance sheet; for micro-entities it may also be shown in combined presentation.
Difference from a shareholder loan
Agio is equity: the BV does not have to repay it, pays no interest on it and it counts towards solvency. A loan from the same shareholder is debt with a repayment obligation, and the interest is an expense. Record in writing for every payment which of the two it is.
Common mistakes
- Booking agio as turnover
- Assuming it can be distributed without a test
What to look out for
- Support every movement with the issue resolution or contribution resolution and the bank statement. An informal payment without a resolution is hard to tell apart from a loan years later.
- Issue costs that you do not capitalise are deducted directly from agio and not through profit (RJ 240).
- In a micro balance sheet agio is not visible: it is included in the single equity amount (art. 2:395a(4) DCC). Keep track of the balance in your records then.
Legal basis and source
art. 2:373 and 2:216 DCC
Frequently asked questions
Can a BV (private limited company) repay agio to its shareholders?
Yes, with a resolution of the general meeting, within the balance sheet test and after approval by the board (art. 2:216 DCC). Work out beforehand whether 15% dividend withholding tax is due: it is if the BV has pure profit and the repayment is not made by reducing the nominal value.
What is an agio contribution without an issue of shares?
The shareholder transfers money as equity and receives no new shares for it. The amount is added to the agio. Record the contribution in a shareholder resolution, so that it is clear it is not a loan.
Is agio profit for the BV?
No. A payment on shares is not income of the business and does not pass through the profit and loss account. It increases equity directly.
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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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