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Increasing your share capital; Via share premium, or capital increase?

It's not usual to increase the share capital of a Netherlands company or amount of shares, if effectively no extra shareholders are involved. The informal share capital (share premium) is a very common alternative.

Share capital and share premium are both considered to be part of the equity of a BV and there is no difference in the tax consequences. Share capital can be increased by issuing new shares, and by paying up issued shares in cash or in kind. Share premium can be brought into a company by a contribution in cash or in kind on the existing shares of a company. This cash can be simply brought into the company by means of a bank transfer, with the appropriate payment description (capital deposit, by such shareholder).

Under Dutch accounting standards, all transactions of an entity with its shareholders that affect the financial relationship between these parties should reflect in the equity of the company. The issuance of shares for the Dutch company and share premium contribution should both be considered as equity. Either option, will not impact the Profit or Loss account.

According to the Dutch accounting standards, capital contributions made by current shareholders on account of their financial relationship to the entity that are executed conducted without actual disbursement of new shares (or rights to receive or call shares) are to be recognized as share capital premium (in Dutch: agio). In the Financial statements the incoming capital under ‘share premium contribution’ is visible under ‘Equity’ on the balance sheet.

Share premium and share capital redemption

Both options to deposit the capital can be redeemed at a later stage without any dividend withholding taxes being levied.

In case of liquidation, redemption of share capital can be executed without any formalities and in a tax neutral way. In case the company will be continued, the share capital can only be executed in a tax neutral way by means of a decrease of the nominal value of the shares. This decrease of the nominal value can only be realized by means of a notarial deed. In case of a decrease of the nominal value of the shares with 50 per cent, an amount equal to 50 per cent of the initial share capital can be distributed to the shareholder.

Increase of the company’s capital (equity)

The increase of a company’s share capital requires the involvement of a Dutch notary.

After the execution of shares transfer, or issuance of new shares, the notary will take care of the registration of the increase of share capital at the Dutch trade register. After the execution of the deed, the newly issued shares can be paid up by the shareholders by means of a transfer to the company.

A contribution of share premium will require a share premium contribution agreement concluded between the shareholder and the company, plus a shareholder’s resolution. There is no registration of share premium with the Dutch trade register or in the shareholders register. After the conclusion of the share premium contribution agreement and adoption of the resolution, the share premium can be paid by the shareholder to the company by means of a transfer. As there are not many formalities, a share premium contribution can, in case of urgency, be executed within a day.

In case of repetitive share premium contributions, it is reasonable to conclude a share premium contribution facility agreement whereby the shareholder and the company can agree on share premium contributions up to a certain capped amount. This will provide flexibility to involved parties and avoids conclusion of multiple agreements and resolutions, in case the need for capital can not be anticipated in advance.


In relation to accounting and taxation, share capital and share premium are both considered to be part of the equity and are treated in an equal way. Therefore, it is recommendable to make use of the type of equity that can be applied most easily. A contribution of share premium takes less time and brings less legal expenses and paperwork.

As funding of a company and the repayment of capital have several tax aspects, e.g. possible taxation for dividend withholding tax purposes, it is advisable to have a tax adviser to guide the process.

Therefore we can involve our colleague Emiel, our tax lawyer to help you with this topic if necessary.

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