Share capital is of paramount importance for a company. All companies are therefore obliged to set up a share capital. Moreover, entrepreneurs should normally be aware of the need to fix the amount of capital when setting up the company.
DEFINITION OF SHARE CAPITAL
The share capital of a company is related to the total amount of money and property realized by the shareholders or partners in exchange for the company’s rights. In general, contributions relate to the assets offered to the company in incorporation, or more specifically, contributions in kind and in cash. The latter may take the form of shares, a trademark or even movable assets. They can also be knowledge and know-how. Without forgetting that the establishment of a company also involves contributions to the company.
WHAT CAN SHARE CAPITAL BE USED FOR?
The capital of a company is primarily used to finance the initial investments following the formation of the company. It therefore translates into a means of financing. In addition, share capital can be used to prepare a capital base to avoid a huge reduction in equity capital. On the other hand, it is also an effective element in the distribution of power, since the shareholders’ voting rights are related to the amount of capital held. The same applies to the amount of dividends. Moreover, the share capital of a company is also a means of communication. The amount of capital is seen as a reassuring indicator, especially for creditors.
WHO ARE CONCERNED BY THE SHARE CAPITAL?
Generally speaking, only sole proprietorships, i.e. auto-entrepreneurs, do not have share capital. All companies are thus involved. In addition, it is essential during the registration of a company to choose the amount of share capital. Thereafter, the capital will be recorded in the articles of association of the company. On the other hand, it will also be necessary to make a deposit of the capital to the bank. This step is essential to facilitate the registration of the commercial company. At this stage, it will be recommended to bring a certificate of commitment of funds completed and approved by the receiving bank. With a high share capital, creditors will be particularly reassured about the financial soundness of the company. This will then allow the share capital to be used to support the initial capital outlays.