Company share capital: definition and explanations

Are you starting up your own business but are at a loss when it comes to determining your share capital?

A company's share capital refers to the total amount of money and assets contributed to the company by its shareholders or partners , depending on the type of business. These contributions are made in exchange for rights to shares in the company.

Does the amount of share capital have to correspond to a particular level? What does it consist of? And finally, who owns share capital?

In this article, we'll try to shed some light on these grey areas!

How do you define the amount of share capital?

Establishing share capital is often a mystery to new entrepreneurs. There are a few criteria to bear in mind.

First of all, it should be pointed out that the determination of a company's minimum share capital is generally left up to the partners and shareholders.

Only in certain cases, such as public limited companies (Sociétés Anonymes or SA), where the law sets a minimum amount, are there any obligations to pay a minimum amount.

Despite this, there are a few criteria that must be considered when determining the amount of share capital:

• Obtaining external financing, such as a bank loan, may require substantial share capital.

• Certain activities, such as investments, the release of working capital or research and development, may require a certain amount of share capital.

• A high level of share capital also ensures that the company's partners work together efficiently. In fact, it also guarantees short payment terms, for example.

• Finally, in the event of difficulties, shareholders or associates may be held liable if the amount of share capital appears to be inadequate to meet the company's financial needs.

What is a company's share capital made up of?

A company's share capital is made up of two different contributions, called "contributions in kind" and "contributions in cash" :

• Contributions in kind refer to assets that shareholders or associates can make directly available to the company. These may be "tangible" assets such as machinery, equipment or buildings, or "intangible" assets such as shares in a company, patents or goodwill. The latter may be subject to valuation by a contribution auditor.
• Cash contributions are contributions of money, again made by shareholders and associates. In exchange, they receive shares in the company, depending on the type of business, giving them voting rights at shareholders' meetings, as well as rights to the company's profits.

Be careful not to confuse these with contributions to a "partner's current account", which are quite similar but do not offer shares in return.

Who owns share capital?

Finally, who is entitled to own share capital ? Share capital is an obligation for any company.

However, this varies from company to company:

• The minimum share capital required for a public limited company is €37,000.
• For other companies, such as non-trading companies, SARLs, SASs and SNCs, there is no minimum capital requirement. However, a share capital is still required for these companies.

In conclusion, determining a company's share capital requires a certain amount of thought.

This decision must be taken with care, and included in an overall process of reflection involving the choice of business form in relation to the needs of the project, potential contributions in relation to the associates or shareholders of the future structure, and finally future strategic moves such as fund-raising, which may involve the possession of a certain amount of share capital.