Simple joint-stock company

What it means

The simple joint-stock company was created for businesses with investors. Registered capital starts at one euro, shares are dematerialised and can carry different rights: to dividends, to votes, to liquidation proceeds.

Its main advantage is enforceable shareholder arrangements: pre-emption, tag-along and drag-along rights are entered in the register and can be enforced.

It differs from a joint-stock company in that its shares may not be offered to the public or admitted to trading on an exchange, and its bodies are simpler: a board of directors is enough, a supervisory board is optional. It is built for private funding, not for going to the capital market.

How it works in practice

In practice startups choose it before an investor comes in, as do companies preparing an employee share scheme. Entry terms are agreed in a term sheet and written into the articles.

The bookkeeping is that of any capital company. The difference lies in the share register and in a convertible loan converting into different share classes.

When profit is distributed, several share classes often meet: the investor holds a preferred dividend, the founders ordinary shares. We therefore prepare the profit distribution proposal from the articles and the share register, not just from the ratio of contributions, and work out the dividend tax for each shareholder separately.

What to watch out for

It is administratively heavier than an s. r. o.: dematerialised shares mean depository fees and changes to the articles need a notary. Without an investor it does not pay off.

Registered capital of one euro does not mean the company needs no own funds. With low equity it quickly falls into crisis, and shareholder loans then cannot be repaid until it is out of it - funding for the loss-making period has to be planned in advance.