Shareholder’s contribution

What it means

A shareholder’s contribution is the money or other assets a shareholder provides to a company when it is founded or on a share capital increase. The contributions of all shareholders make up the share capital, and each contribution determines the shareholder’s ownership interest unless the articles provide otherwise.

For an s.r.o., the Commercial Code sets a minimum contribution per shareholder and a minimum share capital. Before the registration application is filed, a statutory portion of each cash contribution, and in total at least half of the minimum share capital, must be paid up. In-kind contributions must be paid in full.

A contribution may be in cash or in kind, such as property, machinery, a receivable or a business. An in-kind contribution must be capable of valuation and is usually valued by an expert. It must be distinguished from a contribution outside share capital, which does not change ownership stakes.

How it works in practice

When setting up an s.r.o., we explain to clients that the contribution is not a registration fee but the company’s money. Once the company exists it can be used in the business, for example to buy equipment or pay rent. It need not sit in the account, but its use must be documented.

Payment is confirmed by the contributions administrator in a written declaration attached to the registration application. We recommend paying cash contributions into an account that will later serve the company and keeping clear proof of payment.

In the accounts, the contribution is booked to share capital and, until paid, as a receivable from the shareholder. Any unpaid portion is shown in the balance sheet, and the shareholder must pay it within the period set in the articles and no later than the statutory deadline.

What to watch out for

A shareholder is liable for the company’s debts up to the amount of their unpaid contribution as registered. If the contribution has not been paid in full, creditors can pursue the shareholder directly if the company runs into trouble. Once fully paid and registered, that liability ends.

A contribution cannot be returned to a shareholder while the company exists. Money can flow back only through profit distributions, a lawful reduction of share capital or when the company is dissolved. Withdrawing the contribution “back” to a private account breaks the law.