Share Capital SRL: How It Works and How to Pay It
The share capital of the SRL is the cash value of the contributions made by the shareholders. Let’s see together what it is, how it works and how to pour it.
What is the share capital in SRL?
The limited liability company have separate equity from the shareholders. Therefore, it is necessary to equip the company with an initial capital in order to guarantee the business activity and its future operations. This capital is called share capital and is made up of all the contributions of the shareholders.
The contributions are the contributions of members to the formation of the initial assets of the company and can be made in cash or any other asset that has an economic assessment. In particular, the shareholders can confer benefits in kind (e.g. the working partner who performs work or services), goods (e.g. real estate) and rights (e.g. credit rights). In this case, the attachment of a sworn report by an expert (e.g. accountant, real estate appraiser, etc.) is required to certify the value of these contributions.
The minimum capital
The minimum share capital for SRL has been significantly reduced compared to the past. Law no. 99 of 9 August 2013 introduced the possibility of establishing any type of SRL with 1 euro of initial share capital. Until a few years ago, however, the capital in a limited liability company could be less than € 10,000 only in the case of the simplified SRL and the limited capital SRL (now repealed).
The maximum capital
The share capital of an ordinary SRL can be unlimited, there is no maximum limit. This is one of the main differences between SRL and SRLS, in fact, an SRLS has a limited share capital of € 9,999.99 while an ordinary SRL has no limits.
The payment of the share capital for the establishment of the company
How much share capital must be paid?
At the time of incorporation, the shareholders must pay at least 25% of the contributions, necessarily in cash. For the remaining 75%, however, it is possible to commit to pay them also at a later time. In this case, we speak of “subscribed contributions” which can also be performed with services in kind or rights.
How should cash contributions be paid?
The contributions in cash may be paid with any form of payment. Generally, the payment in cash is made: in cash (not more than € 3,000), by bank draft or by bank transfer. This payment can also be replaced by a bank or insurance guarantee.
The rules on contributions provide that the payment of the capital must be made in the hands of an administrator. In practice, however, it is also possible to pay the contributions to one or more persons specifically appointed (e.g. notary) or to a current account in the name of the company to be established.
How does the share capital work in limited, single-member and simplified SRLs?
For the SRL with a capital of less than € 10,000, the single-member SRL, and the SRLS, the legislator has provided for special rules on share capital. The capital must be paid up immediately and in full at the time of incorporation and the contributions can only be paid in cash.
What happens if the shareholders do not pay the subscribed contributions (so-called default of the shareholder)?
If the shareholders do not respect the commitment to pay the contributions they signed at the time of incorporation, the administrators must warn the shareholder to complete the payment. In the event that the shareholder continues to fail to pay the amount due, his share will be sold until he is excluded from the company.
The increase and reduction of the share capital
During its life, the company can increase or reduce the entity of the share capital, with modification of the articles of association.
The share capital increase can be carried out for a fee or free of charge. In the first case, it takes place through the contribution of new contributions by shareholders or third parties who purchase shares in the company. In the second case, however, the shareholders transfer the reserves or funds of the company’s assets to the share capital, for example, allocating all or part of the profits for this purpose.
The reduction of the share capital is provided for by law upon the occurrence of certain conditions, with a view to protecting creditors (compulsory reduction). For example, when the company’s losses exceed 1/3 of the share capital. It may also be possible for the reduction to be decided by the members (voluntary reduction). For example, in the event of an excess of capital compared to the real needs of the companies, the shareholders may decide to divide the excess between them.