Contribution in kind


Contribution in kind

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 or of a business and which is remunerated by issuance of new shares (either at incorporation of a new company or an increase in share capital).

The Law of 10 August 1915 on commercial companies, as amended, 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.

Any shares issued against contributions other than cash must be paid-up within a period of five years after the time of incorporation.  

Contribution in kind - Summary

At the time of the company’s incorporation

Report of an independent auditor

  • In case the share capital is paid by contribution in kind, there is a legal requirement to provide the Luxembourg public notary with an independent auditor’s report.
  • The independent auditor has to be appointed by the founders (among the members of the Institut des Réviseurs d’Entreprises)

The report must:

  • Be issued before the incorporation
  • Give a description of each of the proposed contributions
  • Describe the valuation methods used
  • Give an appreciation of such methods
  • Contain a conclusion

Value of the contribution

  • The value is determined by the founders (not by the independent auditor)
  • The auditor only has the obligation to perform procedures to determine if the value of the assets contributed by the founder at least equal to the nominal value or to the par value of the shares (to be issued in exchange for the contribution), in including any share premium.
  • In consequence, no legal requirement to contribute at fair market value
  • The value mentioned in the incorporation deed will definitively bind the shareholders

Subscription to the new shares

The shareholder must pay-up the amount of at least 25% of the subscribed shares/such shares must be entirely paid-up within 5 years of the incorporation date

Exception as to the independent auditor’s report

No independent auditor’s report will be required in case at least 90% of the share capital to be issued is paid by contribution(s) in kind (article 420-10(9)) , subject to the following conditions:

  • The founders must consent to waive the issuance of the report
  • The waiver must be recorded in the incorporation deed
  • The contributing companies need to have reserves and such reserves need to be at least equal to the par value or to the nominal value of the shares (issued against the contribution(s) in kind)
  • The contributing companies must guarantee the debts of the receiving company up to an amount equal to the par value or the nominal value of the shares (issued against the contribution(s) in kind) until 1 year after the publication of the first financial year. During this period, shares shall not be transferred
  • The contributing companies must allocate a sum which is equal to the par value or to the nominal value of the shares (issued against the contribution(s) in kind) into a blocked reserve for 3 years (since the publication of the first financial year)

At the time of the company’s share capital increase

  • The formalities/conditions provided for an S.A.’s incorporation shall apply for a share capital increase by means of new contributions
  • In this case, the board of directors will appoint an independent auditor
  • The shareholder must pay-up the amount of at least 25% of the subscribed shares/such shares must be entirely paid-up within 5 years of the share capital

Implementation of a contribution in kind for an S.à.R.L.

  • No legal obligation to issue an independent auditor’s report as to the contribution value (Section 710 of LCC)
  • If the parties choose to have an independent auditor’s report, the same rules as for an S.A. are applicable (for the incorporation and for the share capital increase)
  • Determination of the contribution value:
    • Determined by the partners
    • The related valuation will bind the parties (both for an incorporation and a share capital increase)
    • Shareholders cannot revise the contribution value without the consent of the contributor

Practical considerations

The public notary will generally request to be provided with the following documents for the purpose of enacting the incorporation/share capital increase deeds:

  • A recent balance sheet (not older than 6 months) of the contributed company certified as true and correct by its management body
  • A declaration from the contributing company of ownership and free transferability of the contributed assets
  • A declaration from the contributed company of free transferability of the contributed shares

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Marco Crosetto

Marco Crosetto

Partner | Audit CIPS Leader

Marco, a partner, has 20 years' experience with a large expertise in external auditing of commercial, industrial and services companies, financial structures of international groups and the private eq... More

Andreas Meier

Andreas Meier

Partner | Audit & Assurance

Andreas is audit Partner in the Deloitte Luxembourg office where he is leading the German Business Community. Andreas is a qualified Luxembourg Réviseur d’entreprises agréé and German Wirtschaftsprüfe... More

Karl Haase

Karl Haase

Director | Audit & Assurance

Karl is a Director within Deloitte Luxembourg's Audit department. He first joined the firm in 2005 in the Johannesburg office, where he has been promoted to Audit Manager in 2008. Karl is specialised ... More