Valuation of Non-Monetary Contributions and Their Requirements Under the Business Corporations Act

A non-monetary contribution outside registered capital represents an alternative form of strengthening a company's equity without having to change the structure of the registered capital or increase indebtedness. This instrument can be particularly attractive for companies that cannot or do not wish to use external financing.

Types of Contributions

For limited liability companies, the law distinguishes between mandatory and voluntary contributions.

Mandatory contributions can only be provided in monetary form, and their allocation is based on the partners' shares, unless the articles of association provide otherwise.

Voluntary contributions can take both monetary and non-monetary forms. Their advantage is lower administrative complexity -- typically, the consent of the company's managing director is sufficient.

For joint-stock companies, contributions are provided exclusively on a voluntary basis, but legal opinions on the scope of possible contribution obligations in this form are not uniform among experts.

Process

The process of providing a non-monetary contribution should be properly documented, especially when assets or rights are being transferred. The legal regulation of contributions outside registered capital is contained in Sections 162 to 166 of Act No. 90/2012 Coll., on Business Corporations (Business Corporations Act). Section 163(2) then refers to Section 143(3) and (4) of the Business Corporations Act, which, among other things, allows the non-monetary contribution to be valued using the procedure under Section 469 -- that is, by a method other than an expert appraisal.

This means that valuation of a non-monetary contribution by an expert is not a legal requirement. It is possible to use another valuation method, provided the conditions of Section 469 of the Business Corporations Act are met, for example, valuation by a professionally qualified person who is not a court-appointed expert, or valuation based on a generally recognized methodology.

For joint-stock companies, the requirements for potential valuation of non-monetary contributions are not clearly defined in the law, as the institute of contributions outside registered capital is primarily regulated for limited liability companies. In practice, one may be guided by the rules for valuation of non-monetary contributions (Section 251 of the Business Corporations Act); however, for contributions outside registered capital, it is not necessary to comply with all requirements -- for example, it is not necessary to demonstrate that the contribution value corresponds to the issue rate of newly issued shares, since no shares are being issued -- see Section 143(4) of Act No. 90/2012 Coll., on Business Corporations: Unless this Act provides otherwise, the valuation of a non-monetary contribution may also be performed using the method specified in Section 469. This method does not require an expert appraisal but does allow the use of another professional valuation, for example, by a professionally qualified person with a documented methodology.