The share capital of a limited liability company is also known as registered capital, representing the company’s monetary value of subscribed contributions. Therefore, during the company incorporation in Belgrade, it is vital to specify the value of share capital (the minimum is 100 dinars or less than one euro).
Share capital can be expressed in:
- Monetary contribution – when it is paid into the LLC,
- Non–monetary contribution – when it is invested in the company.
Differences Between Subscribed and Paid-in Capital
In practice, it often comes to confusion regarding subscribed and paid-in capital, so it is important to emphasize these differences. During the setup of a company, share capital doesn’t have to be paid–in, but it must be subscribed. The founders are not obliged to give the money during the setup, but they can do that during a specified deadline. The deadline by which the LLC or founder members will pay in or invest capital is defined in the Memorandum of Association (MoA).
Monetary and Non-monetary Contribution in Share Capital of the LLC
The share capital of a company consists of monetary and non-monetary contributions, and there are important differences between the two. As the word says, the monetary contribution is expressed in money or must be paid in cash. Non-monetary contributions are invested in the company and are expressed in things and rights.
During the investment of non-monetary contributions, there must be a certain evaluation of its value, expressed in dinars. The review of non–monetary contributions to the company can be done by:
- One member of the company,
- As determined by the agreement between all the members,
- By a competent and authorized person under the Law. (expert witness, auditor, etc.).
The foreign founders can invest share capital and monetary contribution in foreign currency, which must be accounted for in domestic currency. So, suppose the monetary contribution is paid in foreign currency. In that case, it is necessary to account for that amount in dinar counter value according to the average exchange rate of the National bank of Serbia. The accounting of the amount is done on the day of payment on the company’s business account.
HLB T&M Consulting agency can ease its clients through the whole process with bureaucracy and procedure related to the setup of the company, the preparation of the MoA, investing monetary and non-monetary contributions in the company, as well as the accounting of the foreign contributions.
Share Capital in the Memorandum of Association
During the set up of the company and creation of the memorandum of association, this legal act defines these things: capital contributions of the limited liability company; all the decisions about the change of share capital – increase and reduction of share capital as well as deadlines for investing in the company. By that, monetary and non–monetary contributions must be paid in or invested in the LLC within the deadline determined in the foundation act.
The deadline for investing share capital starts when the memorandum of association is officially registered ( or on the day of passing the legal action). After that, the founders are obliged to pay in or invest contributions in the company within five years deadline. If the contribution is monetary, then the determined amount must be paid. If it is non-monetary, the value invested in the LLC is evaluated. The payment deadline mustn’t be longer than five years.
The company members get their stake in the capital as soon as they assume obligations to pay share capital or invest the contribution. All the monetary and non–monetary contributions paid or invested in the LLC move into their own and become the company’s property.
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In that case, the property consists of all the things and rights owned by the company. Therefore, the property involves net property, which represents the difference between the total value of the property and the company’s commitments.
Creating the memorandum of association is the first step in setting up the LLC and one of the most important legal acts of the company. HLB T&M Consulting provides the services of founding the company and preparing and creating the memorandum of association.
Share Capital as a Part of the Company’s Capital
When a particular contribution is invested in the LLC, it becomes a stake in share capital. Following the Law, one member can own only one stake, and the total value of the individual stake is expressed proportionally and in percent. When one member has more than one stake, they connect with the present stake and become one.
The company’s stakes aren’t and don’t have the character of bonds, which means that they can’t be acquired or disposed of in this way. However, the founders can acquire stakes in the company in proportion to their contributions to the LLC.
Responsibilities and Consequences of Noninvesting the Shareholding Contribution
In case when founders don’t meet their duty and invest their stake of share capital, they are obliged to pay the damage to the company because of missing or delaying in fulfilling the commitment.
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The MoA can include specific penalty clauses if the founder of the member doesn’t meet their duties related to investing in share capital. The company can notify the member in writing about fulfilling the commitment in the additional deadline, and they are obligated to inform them about the consequences of missing to respect the obligation.
For all the questions and advice about registering the company and payment of monetary and non-monetary contributions in the company’s share capital, HLB T&M Consulting accounting company is at your disposal.
