Kapitalizace pohledávek a peněžité příplatky mimo základní kapitál

When a Company Needs a Financial Injection: Strategic Choices for Owners

At such a moment, you face a strategic decision. It's not just about how to get money, but how to structure the financing for long-term stability and prosperity. You could go the route of a traditional bank loan, but that will increase your debt. You could go through the formal and costly process of increasing your share capital. Or you can choose the smarter, faster, and more flexible solutions that modern corporate law offers.

We will focus on these effective tools—debt capitalization and contributions outside the share capital. Both can strengthen a company's equity without formally increasing the share capital registered in the Commercial Register, and they bring significant strategic advantages.

At ARROWS, we daily assist business owners like you in choosing the best financing strategy tailored to their goals, whether it's preparing for an investor's entry or optimizing the balance sheet. Our experience from long-term collaboration with over 150 joint-stock companies and 250 limited liability companies allows us to see around the corner and prevent problems before they arise.

Debt Capitalization: How to Elegantly Clean Up the Balance Sheet and Strengthen Capital

If your company owes you money as a shareholder (for example, from previous loans), debt capitalization is a tool to convert this debt into equity. In essence, you "pay" for the increase in your share with the receivable you have against the company. The result is a healthier balance sheet, a reduction in liabilities, and an enhanced credibility of the company in the eyes of banks and business partners.

What Exactly is Capitalization, and Why is it Not the Same as a Contribution of a Receivable?

Herein lies the first and fundamental difference, the ignorance of which can lead to unnecessary complications and costs. Although the two terms may seem similar, from a legal and procedural point of view, they are two different worlds. Many entrepreneurs make the mistake of confusing these two instruments, which can even lead to the invalidity of the entire transaction.

A classic non-monetary contribution of a receivable is a complex process. The Business Corporations Act (ZOK) requires that the value of such a contribution be determined by an expert opinion from a court-appointed expert. This means additional costs, administration, and time delays.

In contrast, the capitalization of a receivable is, in fact, a much simpler process. It is not a non-monetary contribution, but a monetary contribution that is paid by a set-off. While Section 21(3) of the ZOK prohibits a shareholder's receivable against the company from being the direct subject of a contribution, the very next sentence allows it to be set off against the company's claim for payment of the contribution. This is an elegant legal mechanism that allows the same economic goal to be achieved without the need for an expert valuation.

Our Prague-based lawyers at ARROWS will help you structure the transaction as an effective set-off, thus avoiding unnecessary costs and the lengthy process of expert valuation. We will ensure that the entire process is in accordance with the law and that the result is legally sound.

What is the Correct Corporate Procedure Step by Step?

For the capitalization of a receivable to be valid and effective, a precisely defined procedure must be followed. Any deviation can lead to it being challenged. The process we routinely handle for our clients is as follows:

1. Decision of the General Meeting: The first step is to convene a General Meeting, which will decide on increasing the share capital with new monetary contributions. This decision must be adopted by a qualified majority and must be in the form of a notarial deed.

2. Approval of the Set-off: The key point is that the General Meeting must also approve the possibility of paying this new contribution by setting off an existing shareholder's receivable. The resolution must also include the approval of the draft set-off agreement.

3. Conclusion of the Set-off Agreement: After approval by the General Meeting, a written set-off agreement is concluded between the company and the shareholder. At this moment, the mutual receivables are extinguished, and the contribution is considered paid.

4. Entry into the Commercial Register: The final step is to file an application for the registration of the share capital increase in the Commercial Register. Only with this registration is the entire process formally completed, and the capital increase becomes effective towards third parties.

At ARROWS, we will handle the preparation of the complete documentation for you quickly and flawlessly, from the materials for the General Meeting and the draft set-off agreement to securing the notarial deed and filing with the Commercial Register.

Tax Implications: When is the Operation Neutral, and When is There a Risk of a Tax Assessment?

Ideally, the capitalization of a receivable is a tax-neutral operation. If a shareholder capitalizes their own receivable at its nominal value (e.g., from a previously provided loan), no tax liability arises for either the shareholder or the company. However, this is precisely where several tax traps are lurking, which can lead to unexpected assessments from the tax authority.

Taxable income for the shareholder (contributor) arises in three key situations:

1. Receivable acquired at a discount: If the shareholder previously purchased the receivable against the company from a third party for a price lower than its nominal value and now capitalizes it at its full nominal value, the difference between the purchase price and the nominal value is subject to income tax.

2. Existing allowances: If statutory (tax-deductible) allowances have been created for the receivable in the past, their amount becomes taxable income upon capitalization. The reason is that the shareholder has already received a tax benefit and is now realizing the value of the receivable.

3. Receivables from contractual penalties: If the capitalized receivable arose from contractual penalties, default interest, or other sanctions that have not yet been taxed (because they were not paid), their capitalization (by set-off) triggers their taxation.

These rules are intended to prevent tax optimization that would circumvent the taxation of real economic profits. For the company and its shareholder, this means one thing: before starting the capitalization, it is absolutely necessary to conduct a thorough analysis of the origin and nature of the receivable.

Before recommending capitalization, our tax experts at ARROWS will conduct a thorough analysis of your receivable to identify any tax risks and protect you from unexpected back taxes and penalties. This initial consultation can save you hundreds of thousands or even millions of crowns.

Capitalization of a Receivable

The following table summarizes the most common risks associated with the capitalization of receivables and shows how we at ARROWS can specifically help you avoid them.

Contribution Outside the Share Capital: A Fast and Flexible Way to Strengthen the Company

The second elegant tool for financing a company is a contribution outside the share capital. This is a very flexible and administratively simple way for a shareholder to provide the company with additional funds, whether monetary or non-monetary. Unlike an increase in share capital, this transaction is not recorded in the Commercial Register, which makes it significantly faster and cheaper.

Why is a Contribution Often More Advantageous Than a Loan from a Shareholder?

At first glance, it may seem that a loan from a shareholder and a contribution serve the same purpose. However, from an accounting and strategic perspective, there is a vast difference between them. A loan is an external source for the company, i.e., a debt. It increases its indebtedness and worsens its image in the eyes of banks and investors.

A contribution outside the share capital, on the other hand, becomes part of the company's equity (it is booked to other capital funds, typically account 413). This "cleans up" the company's balance sheet, increasing its financial stability and credibility. This has a direct impact on a key tax mechanism known as the thin capitalization test.

This test, regulated in Section 25(1)(w) of the Income Tax Act, limits the tax deductibility of interest on loans and borrowings from related parties. Simply put, if a company is overly financed by debt from shareholders and has low equity, it cannot deduct all the interest paid as tax-deductible expenses.

Making a contribution increases equity, which allows the company to deduct a larger amount of interest, thereby reducing its tax liability.

Our Czech legal team will help you analyze your capital structure and calculate the impact on the thin capitalization test to maximize the tax deductibility of interest and strengthen your company's financial health.

Voluntary vs. Mandatory Contribution: When to Choose Which?

The law distinguishes between two types of contributions, the choice of which depends on your strategy and the relationships between shareholders.

• Voluntary contribution (Section 163 of the ZOK): This is the most common and flexible form. A shareholder can make a contribution at any time based on a simple agreement with the company, with the consent of the executive. There is no need to amend the articles of association, and the whole process is very quick.

• Mandatory contribution (contribution obligation, Section 162 of the ZOK): This option must be explicitly enshrined in the articles of association. The General Meeting can then impose an obligation on the shareholders to make the contribution. This tool can be abused by majority shareholders to put pressure on the minority – whoever does not pay can be expelled from the company.

We will alert you to the risks associated with a mandatory contribution obligation in the articles of association and help you set the rules to protect your interests, whether you are a majority or minority shareholder.

Can a Shareholder Get Their Money Back? The Reality of Returning a Contribution

This is one of the most common myths. Unlike a loan, where the shareholder is entitled to the return of the principal, a contribution becomes the property of the company, and the shareholder has no legal claim to its return. It is an investment in equity, not a debt.

Another key fact is that the contribution is tied to the business share, not to the person of the shareholder who provided it. If you sell your share, the right to any future return of the contribution passes to the new owner. If this fact is not correctly reflected in the purchase price of the share, you could lose the value of the entire contribution.

The decision on any return of a contribution is made exclusively by the General Meeting, and only if strict legal conditions are met:

1. Balance sheet test: Only the amount by which the contribution exceeds any accumulated loss of the company can be returned [Section 166 of the ZOK].

2. Insolvency test: The company must not cause its own insolvency by returning the contribution [Section 40 of the ZOK]. Executives bear personal property liability for violating this rule.

Before any decision to return a contribution, we will conduct the necessary legal tests for you and prepare documents that will protect the executives from the risk of personal liability for damaging the company.

The Tax Trap When Returning a Contribution

Even if all the legal conditions for returning a contribution are met, a tax liability still awaits the shareholder. Since 2015, the return of a contribution outside the share capital is considered taxable income for the shareholder.

The company is obliged to deduct and pay a 15% withholding tax from the amount paid out. However, the tax base can be reduced by the acquisition price of the share, provided the shareholder proves it to the payer (the company). For the original shareholder who made the contribution, the acquisition price was increased by this contribution, so the tax liability can be zero. However, the situation is more complicated for a new shareholder who bought the share, as their acquisition price is based on the purchase price.

Our tax advisors will accurately calculate the tax base for the withholding tax, take into account the acquisition price of the share, and ensure that the entire process is compliant with the law and as tax-efficient as possible.

Contribution Outside the Share Capital

The following table summarizes the most common risks associated with contributions outside the share capital and shows how we at ARROWS can help you.

Financing with an International Element: The Role of ARROWS International

In today's global world, it is common for a shareholder of a Czech company to be a foreign person or for a Czech company to be part of an international holding structure. In such cases, other variables come into play: double taxation treaties, different tax regimes, and potential conflicts of legal systems of different countries.

A solution that is optimal in a purely Czech environment may not be advantageous in an international context. An incorrect procedure for capitalization or return of a contribution can lead to double taxation or a violation of foreign legislation.

Thanks to our global ARROWS International network, built over more than a decade, we handle cross-border transactions on a daily basis. We ensure that your company's financing is in compliance not only with Czech law but also with international treaties and the law of relevant foreign jurisdictions.

Comprehensive Solutions from ARROWS: Your Certainty in Corporate Law

As this article shows, both debt capitalization and contributions outside the share capital are powerful tools. At the same time, however, they are fraught with legal and tax pitfalls. Trying to navigate these waters without an experienced guide is a false economy, where the risk of penalties, invalid transactions, and personal liability of executives far outweighs the cost of quality legal and tax advice.

Our experience speaks for itself. We have been providing long-term legal services to more than 150 joint-stock companies, 250 limited liability companies, and 51 municipalities and regions. We understand the dynamics of large and medium-sized companies and pride ourselves on speed and top quality.

We provide our clients with a comprehensive service that includes:

• Strategic legal consultations to protect you from fines and inspections.

• Preparation and review of contracts and all corporate documentation.

• Preparation of internal directives to ensure compliance with legislation.

• Representation before courts and administrative authorities in case of disputes.

• Expert training for your management or employees, including certification, so your team understands the risks.

At ARROWS, we see law as a tool for your business. We are not just suppliers of legal documents; we are your partners. We are happy to listen to your business ideas and connect you with other clients from our portfolio if we see interesting business or investment synergies.

Conclusion: Take the Next Step with Confidence

Are you facing a similar situation in your company? Do you need to strengthen capital, clean up the balance sheet, or optimize your tax structure? Are you unsure which procedure is the most advantageous and safest for you?

Contact us. We will be happy to discuss your options in a non-binding consultation, and our experienced lawyers and tax advisors will find a tailor-made solution for you. Take the next step in your business with the certainty that you have a strong and competent partner behind you.