Updated
GL-S-06
Glossary · Structures and trusts
Share capital - the members' contributions a bank judges your company by
01 / In 30 seconds
The short answer
- What it is
- Capital formed from members’ contributions in exchange for shares
- Why it is needed
- It is the company’s initial own funds and the basis for allocating shares
- How it is paid
- In money or property; the procedure and deadlines are set by the country’s law
- Minimum amount
- Set by law in some jurisdictions, absent in others
- A practical point
- Nominal capital with large turnover raises questions with banks
02 / In plain words
What Share capital means
Share capital is the funds that members contribute to a company in exchange for shares. It is the company’s initial own funds and at the same time the basis for allocating rights: as a rule, the size of the contribution determines the size of the stake, and hence the number of votes and the right to profits.
The requirements differ significantly. Some jurisdictions set a minimum amount that must be paid in on formation and evidenced with documents. Others have no minimum, and a company can be registered with a nominal sum. Payment may be made in money or property, and a contribution in kind often requires an independent valuation.
There is a practical point that is underestimated. Nominal share capital combined with significant turnover creates an imbalance that is noticeable to banks, counterparties and tax authorities: the company lives mainly on borrowed funds. This can complicate opening an account and raising finance, and can become grounds for applying thin capitalisation rules.
A case from practice
A client’s company had been registered with minimum capital but was operating on substantial turnover funded by loans from the owner. When an account was being opened, the bank asked questions about the financing structure — the proportion had to be put in order.
When it matters
- Company registration
- A partner or investor joining
- Determining members’ stakes
- Opening a bank account
- Raising finance
- Business immigration requirements
03 / What it covers
What to take into account
Amount
- The legal minimum
- The business’s real needs
- Ratio to turnover
Payment
- In money
- In property, with a valuation
- Payment deadlines
Shares
- Allocation among members
- Voting rights
- Right to profits
Perception
- Banks and counterparties
- Thin capitalisation rules
- Programme requirements
04 / How it works
How to determine the amount
Find out the jurisdiction’s requirements
The minimum, payment deadlines, rules for contributions in kind.
Assess the business’s needs
How much capital the business and the bank need.
Agree the members’ stakes
Who contributes how much and what rights they get.
Pay in and evidence the payment
Money into the account or a valuation of assets, with supporting documents.
Register the details
The capital details are entered in the register.
05 / Key facts
What you need to know
01What it is
Contributions for shares
Members' money in exchange for shares. The size of the contribution usually sets votes and profit rights.
02Minimum
It depends on the country
Some laws set a minimum paid and proven at formation; elsewhere a token sum is enough.
03How it is paid
In cash or in kind
A contribution in kind usually needs an independent valuation.
04Practical point
Token capital
With large turnover funded by the owner's loans it raises questions from banks and tax authorities and triggers thin capitalisation rules.
Common mistakes
Using token capital with large turnover
Match the capital to the scale of the business before opening an account.
Not proving the contribution was paid
Keep the bank statement or the asset transfer deed.
Funding the company only with the owner's loans
Combine capital and loans in a structure the bank understands.
Not checking the programme's requirements
Find out the business route's capital requirements before registering.
06 / Expert advice
How to prepare in advance
The amount of capital is determined not only by the statutory minimum but also by the business’s real needs and how the company will look to the bank. Payment of the contribution is evidenced with documents. If the company is being set up for a business immigration route, the programme’s capital requirements are checked before registration.
What we do for you. We look at the company’s capital structure from the bank’s point of view too: an imbalance between nominal capital and real turnover is a typical cause for questions. Such things are easier to put right in advance.
Anna KovalevskayaLead lawyer for EU citizenship and residency, 12 years of practice
07 / Questions
Frequently asked questions
The funds contributed by members to a company in exchange for shares. It is the company’s initial own funds.
It depends on the jurisdiction: in some countries a minimum is set by law, in others there is none and a nominal sum is enough.
As a rule, yes, but a contribution in kind often requires an independent valuation and compliance with the established procedure.
Usually, yes: the size of the contribution determines a member’s stake, and hence the number of votes and the right to distributed profits.
Not in itself, but with significant turnover it creates an imbalance that is noticeable to banks and tax authorities.
Business immigration routes may have requirements on the amount of capital and the company’s structure. They are checked before registration.
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
