Nominal value (nominale waarde)
Nominal value (nominale waarde) is the amount per share as laid down in the articles of association. It differs from the issue price and the economic value.
What does nominal value mean?
Nominal value (nominale waarde) is the amount per share as laid down in the articles of association. It differs from the issue price and the economic value.
Issue above nominal creates share premium. A share with a low nominal value can have a much higher market price; this does not change the accounting split.
How does it work?
The articles of association of a BV state the nominal amount of the shares, per class if there are several classes (art. 2:178(1) DCC). A BV has no minimum capital, so a nominal value of one cent is possible. An NV (public limited company) does have a minimum capital: € 45.000 (art. 2:67(2) DCC).
When a share is taken, the nominal amount must be paid up, unless it has been agreed that payment follows later (art. 2:191(1) DCC). The number of issued shares times the nominal value is the issued capital, the first item of equity (art. 2:373(1) DCC). What is paid above nominal is share premium.
Example
On the incorporation of a BV the founder takes 1.000 shares of € 0,10 nominal and pays € 10.000. Issued capital: 1.000 × 0,10 = € 100. Share premium: € 9.900. Three years later an investor takes 250 new shares at € 200 each. Capital: 250 × 0,10 = € 25 added. Share premium: 250 × 199,90 = € 49.975 added. Issued capital is now € 125, while € 60.000 has been paid up on the shares.
In the annual accounts
Share capital and share premium under equity.
Difference from intrinsic value
Nominal value is a fixed amount from the articles of association that changes only by amending them. Intrinsic value is equity according to the balance sheet, divided by the number of shares, and changes every year with the result. In the example the nominal value is € 0,10; with equity of € 150.000 the intrinsic value is € 120 per share.
Common mistakes
- Reading nominal value as market value
- Booking the full issue price as capital
What to watch for
- Reconcile the issued capital on the balance sheet with the shareholders' register and the Business Register extract.
- When calculating the distribution per share, only the amount of the mandatory payments on the nominal amount counts, unless the articles provide otherwise (art. 2:216(6) DCC).
- From small upwards, issued capital appears as a separate item on the balance sheet; a micro entity combines all equity into one amount (art. 2:395a(4) DCC).
Legal basis and source
art. 2:178(1) DCC (BV) and art. 2:67(1) DCC (NV); presentation: art. 2:373(1) DCC
Frequently asked questions
Can I change the nominal value of my shares?
Yes, with an amendment of the articles of association before a notary. A reduction is a capital reduction (art. 2:208 DCC); on repayment to shareholders the same tests apply as for a distribution.
Why do founders choose a low nominal value?
Because the nominal amount must be paid up, also on every share issued later. With a low nominal value many shares can be issued; the real capital comes in as share premium.
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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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