Shareholder contribution - Step by step

Shareholder contribution - Step by step

Table of Contents

• What is a Shareholder contribution?
• Step by Step Guide
• Tax Law Aspects
• Legal Aspects
• Examples from practice
• Summary

What is a Shareholder contribution?

Shareholder contributions are a common tool for strengthening a company's financial position. This means that shareholders add capital to the company without receiving new shares in exchange, which is different from a new issue. There are two main types of shareholder contributions: unconditional and conditional. Shareholder contributions are used to improve the company's equity and can be provided by both shareholders and other parties, both natural and legal persons.

Step by Step Guide

1. Assess the Need

The first step is to assess why the company needs a supplement and what type of supplement is most suitable. An unconditional contribution is best when the capital need is permanent, while a conditional contribution may be more appropriate if there are expectations of future improvements in the company's finances.

2. Decision at the General Meeting

In order to carry out a shareholder contribution, a decision is required at the general meeting. It is important to record this decision carefully. At a general meeting, it must be clear who participates, what decisions are made and on what grounds.

3. Create Agreement

For conditional shareholder contributions, an agreement is required that regulates the conditions for repayment. The agreement must be clear and specify the conditions under which repayment can take place, e.g. that the company shows free equity. For unconditional contributions, a document confirming that the contribution is made without the need for repayment is sufficient.

4. Implement the Supplement

The shareholder contribution is transferred to the company and booked in its balance sheet. An unconditional contribution is booked directly against equity, while a conditional contribution may initially be booked as a loan until the conditions for its conversion to equity are met.

5. Accounting

It is important to report the addition correctly in the company's accounting. For unconditional contributions, this means an increase in the company's equity without tax penalties for the recipient. For the donor, the cost amount for the shares in the receiving company increases. Conditional contributions are reported as a liability until the repayment conditions are met.

Tax Law Aspects

According to Swedish tax law, unconditional shareholder contributions are not tax-deductible for the donor, nor are they taxable for the recipient. On the other hand, they increase the donor's cost amount for the shares in the company. Contingent contributions are treated as loans and repayment is not taxed as profit distribution but as repayment of debt.

Legal Aspects

There is no specific legislation that regulates shareholder contributions, but jurisprudence and doctrine have developed the framework for how these should be handled. Important legal cases and practice have dealt with issues such as conversion of conditional contributions to unconditional and capital gains taxation in such conversion.

Examples from practice

Case law has established that unconditional contributions must be treated as a gift and not repaid. A known case is when repayment conditions in conditional contributions must be met in order for the contribution to be counted as equity. Judgments from the end of 2002 have also dealt with capital gains taxation of shareholdings in the case of conversion of claims and contributions.

Summary

Shareholder contributions are a flexible tool for strengthening a company's finances. It requires careful planning, clear documentation and accurate accounting to ensure that the contribution meets both civil and tax requirements. By following the above steps, shareholders can effectively contribute to the company's financial stability.

For more details and assistance in implementing a shareholder contribution, it is recommended to consult legal and financial experts.