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Contribution in kind

Special mission of the statutory auditor

The capital of a company can be increased in different ways, via a cash injection or via a contribution in kind. A contribution in kind is a capital increase that is not in cash: e.g. incorporation of liabilities in equity, contribution of assets, of a business, receivables or goodwill and which is remunerated by issuance of new shares (either at incorporation of a new company or an increase in share capital). The Companies Code provides specific procedures applicable for a public limited liability company, a partnership limited by shares, a private limited liability company and a cooperative limited liability company.

If a company does not have a statutory auditor, it will have to appoint an auditor (member of the IBR / IRE) on an ad hoc basis.

Responsibilities of the board of directors

The board of directors has to prepare a special report justifying the contribution in kind and its valuation to the shareholders. They will, if needed, explain why they diverge from the conclusions of the auditor. The reports of the auditor and of the board are presented to the shareholders; the capital increase through contribution in kind is effective only after approval by the shareholders, in a meeting in the presence of a notary and transcribed in an official notary deed.

Responsibilities of the auditor

The audit program, the form and content of the report and the duties of the auditor have been specified in a standard by the IBR / IRENormen inzake controle van inbreng in natura en quasi-inbreng / Normes relatives au contrôle des apport en nature et quasi-apports. The auditor may not express an opinion on the value of the contribution nor its remuneration, but only on the valuation methods used by the company. The auditor may not express a fairness opinion on the operation either. 

In summary, the auditor has to:

  • Describe the contribution
  • Validate the ownership title to the assets contributed
  • Review the valuation methods used for the asset and liabilities
  • Indicate that the result of the valuation methods used are at least equal to the remuneration (shares and other if applicable).

Exemptions to the involvement of an auditor

Provided that the board considers the value did not significantly change since then and is not subject to significant changes and provided that the board files a declaration describing the contribution, valuation methods and remuneration granted, no auditor’s report is required when:

  • The contribution in kind valuation is based on the average listing price of financial instruments contributed (in the past 3 months).
  • The contribution in kind valuation has already been reviewed by an auditor (in the past 6 months)
  • The contribution in kind valuation is based on the last audited financial statements, if the audit report was unqualified