The share capital of the S.A. is the sum of the value of the contributions (in money and in kind) of its shareholders. There is no S.A. without such contributions. In fact, it is required that they add up to a minimum amount: the legal minimum capital. The share capital of the SA is divided into shares. The sum of the nominal value of the shares equals this share capital. Share capital is particularly important in the operations of the SA. It is therefore worth looking into its key parameters.
Share capital vs Property of the SA
The concept of share capital is often confused with that of corporate property. But-as a rule, the only moment in time when the two concepts are identical, in terms of value, is at the time of the initial payment of the share capital; immediately, i.e., after the incorporation of the company.
However, these are two concepts that are clearly distinguishable from each other.
The share capital, on the one hand, “…constitutes an “unchangeable” mathematical quantity that is written in the company’s articles of association and which, at the time of its establishment, corresponds to the sum of the value of the contributions” (: Memorandum to the Law of S.A.s-4548/2018). This fixed sum can be changed as long as the strictly formal procedures for its reduction and/or increase are followed, according to the law. An amendment to the SA’s statute is always required in these cases.
Corporate property, on the other hand, includes all of the company’s assets (eg real estate, receivables, deposits, etc.). Corporate property is, as a rule, constantly changing, in contrast to the “invariant mathematical quantity” of the share capital.
The Purpose Of the Share Capital
The share capital of the SA contributes (sometimes decisively) to the achievement of the company’s objects. In any case: it is a means of financing its activity. Also: an important indication of its solvency.
The importance of the share capital is linked to the nature of the SA as a capital company. Precisely because of its specific nature, shareholders are not personally liable for its debts. The company itself remains liable to its creditors, exclusively – except in exceptional cases.
The share capital (Memorandum to the Law 4548/2018): “…has traditionally been reduced to a basic means of protection for creditors”. However, it is pointed out, then, that “… in recent decades it has been subjected to strong criticism, which focuses on the ineffectiveness of this protection and the costs of the mechanisms to ensure the payment and preservation of the capital. Other ways of protecting creditors are therefore proposed by legal science, in particular through a “solvency test”’. The conclusion is that: “… given that capital issues are still regulated by the “second” company directive (Directive (EU) 2017/1132), the scope for circumventing the capital rules is very narrow and definitely it is not appropriate to have double protection, both through the EU capital protection rules and through a solvency test”.
The Minimum Amount of Share Capital
One of the provisions which, as required by law, must be included in the articles of association of an SA, is the one concerning the amount of its share capital, which is defined as an absolute number (Article 5 §1 f. d’ Law 4548/2018). In fact, any omission of the above provision renders the company defective. This, in other words, means that it is possible, in this case, to declare its establishment invalid by a court decision (Article 11 §1 f. a’ Law 4548/2018).
The shareholders of the SA are not completely free to determine the amount of the share capital. They are bound, by the law – as already mentioned, in terms of its minimum limits. Any non-observance of the specific minimum limits also renders the SA defective.
The minimum capital of the SA is set (Art. 15 §2 Law 4548/2018) at the amount of €25,000 and must be paid in full upon the formation of the company. Special legislative regulations specify at higher levels the share capital of special categories of SAs (e.g. insurance, banking SAs, investment companies, etc.).
Under the previous regime, the minimum share capital was set at €24,000. The increase by €1,000 is for the compliance of the relevant national provision with the corresponding provision of Article 45 of Directive 2017/1132/EU.
Furthermore, the share capital of the SA must be expressed in euro (Article 15 §1 Law 4548/2018). As pointed out in the Memorandum to the Law, “any reference to the statute of another currency (subject to special provisions) is not permissible”.
The Type Of Contributions
The share capital of the SA is formed, as we have already mentioned, from the shareholders’ contributions, usually in cash and sometimes in kind.
Contributions in kind should be valued in money. The performance of work or the provision of services cannot constitute a contribution in kind, based on an express provision of the law (Article 17 §3 Law 4548/2018). However, it is possible to grant Common Founding Shares, during the establishment -only- of the SA, to those who undertake the provision of work or other services.
Contributions in kind (for which, in more detail, find our following article) are allowed, but they must be paid validly. They should also be assessed: (a) by two independent certified chartered accountants or (b) an auditing firm or, as the case may be, (c) by two independent Certified Appraisers, who carry the necessary guarantees of independence and reliability.
The law defines in detail the procedure to be followed for the valuation of contributions in kind (Article 17 of Law 4548/2018). Furthermore, however, it also provides for certain exceptions; that is, it lists some cases for which assessment of contributions in kind is not required (Article 18 of Law 4548/2018). When, e.g., the contributions consist of money market instruments or securities.
Finally, it is pointed out that, under the relevant provisions of the law, it is prohibited: on the one hand, any exemption from the obligation to pay contributions, on the other hand, the return of said contributions (Article 22 of Law 4548/2018).
The Coverage Of Share Capital
The coverage of share capital should not be confused with its payment. These are concepts that are related but different from each other. Specifically:
Coverage of the share capital means the assumption by the shareholders of the obligation towards the SA, for the contribution of property equal, at least, to the amount of the share capital (art. 16 of law 4548/2018). Coverage, specifically: either of the initial share capital, undertaken to be paid in full at the time of the company’s establishment, or of that determined in each subsequent increase.
The share capital can be covered by the founders of the SA (at the time of establishment) and/or by specific third parties or, in special cases, by a public offering (at the time of an increase).
The extraordinary importance of the coverage of the share capital is also shown by the following: the shareholder status is originally acquired by the assumption of the obligation to pay the share capital (subscription contract) (:4293/2006 Court of Appeal of Athens).
The Payment Of Share Capital
The payment of the share capital is directly linked to its coverage (Articles 20 & 21 Law 4548/2018).
The term payment of the share capital means the fulfillment of the obligation to pay the share capital, undertaken by the shareholder at the time of the assumption of the relevant obligation. It is even possible for it to take place, under conditions (for which see our following article) and with the offset of an equal amount of the company’s debt.
In any case, the actual (and timely) payment of the share capital is extremely important for the SA. Precisely for this reason, its determination takes place through the (strictly defined) certification process (art. 20 §§5-8, 10 law 4548/2018).
The payment of the share capital can be either immediate or total or partial. Especially in terms of immediate or full payment:
During the establishment of the SA, the payment of the share capital should take place “…upon the establishment of the company” (Article 21 §1 Law 4548/2018). The wording of this provision is problematic.
Until the completion of the establishment process of the SA (ie: its registration in the Business Registry), the latter does not have legal personality. Therefore, it is not possible to pay contributions to it (e.g. the transfer of property ownership to it, in the case of a contribution in kind).
Therefore, it is supported by part of the legal theory (correctly in our view) that the payment in this case can take place after the formation of the SA and until the expiry of the two-month period for its certification.
After the decision to increase the share capital, the payment deadline is set by the body that decided on the increase. However, the law sets minimum and maximum limits on the competent body. Specifically, this deadline “…cannot be less than fourteen (14) days nor more than four (4) months from the day this decision was registered in the Business Registry ” (Art. 20 §2 Law 4548/2018).
The certification of payment, in this case, must take place within one month of the expiry of the deadline for payment of the amount of the increase. We will also deal with certification in our following article.
The share capital of the S.A. constitutes one of the key parameters for achieving its corporate purpose. It is governed, therefore, by a series of regulations regarding, among other things, the coverage, payment and type of the relevant contributions, the proof of their processing and also the assurance of certain minimum limits.
Common ground of the regulations related to the capital: Ensuring the legal minimum limits, the smooth operation of the SA and, as far as possible, securing its creditors. This is where the interest of the shareholders, the managers, the statutory bodies of the SA, the State (and all of us) in the relevant regulations is found, for which we refer you to our following article.
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (February 20th, 2022).
Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.