Ancillary capital contributions
The company's articles of association may require all or some of the members to make contributions to the share capital in addition to the contributions to pay up the initial share capital. These contributions can be provided through an amendment to the articles of association, but, in such a case, the increase of contributions will only be effective for members which give their consent thereto.
Usually, ancillary contributions, which may be gratuitous or remunerated (if there is, or not, a counterpart to the shareholder) can consist of:
- Capital contributions in cash (ex.: loan of a given sum);
- Providing the company with the right to use a specified asset (ex.: motor vehicle or an office);
- Rendering specified services (ex.: a management position).
The requirement for ancillary capital contributions terminates with the winding up of the company, and unless a contractual provision states otherwise, the failure to comply with ancillary contributions obligations does not impact the status of a member, as such.
Supplementary capital contributions
A private limited company often uses supplementary capital contributions to increase the company´s capital without having to resort to raising the share capital, which can be an expensive, bureaucratic and slow process.
The main differences between supplementary capital contributions and increases in capital are as follows:
- Supplementary capital contributions do not provide voting rights nor the right to dividends;
- Supplementary capital contributions are always in cash;
- Recovery by members of supplementary capital contributions may only occur if, in doing so, the company’s liquidity does not fall below the sum of the capital and statutory reserves, and if the member has already paid in its quota.
Other characteristics of supplementary capital contributions:
- Supplementary capital contributions are carried out simply, through a members’ resolution, which should fix their amount and deadline;
- Supplementary capital contributions may only be demanded if the memorandum of association establishes their use (the memorandum must define the overall amount, the members required to pay and the criteria for dividing supplementary capital contributions amongst them);
- No interest is payable;
- They cannot be reimbursed if the company is declared bankrupt;
- Reimbursement must be allocated amongst the members in proportion to the input contributions;
- If a member does not pay the supplementary capital contribution the same may be subject to removal from the company and partial or total loss of the quota held.