Repayment of contributions. On the occasion of a conference on company law a much discussed topic was the “repayment of contributions” to shareholders. The term contribution refers to capital shareholders have invested in the company. In principle the contributions are not to be repaid to shareholders as long as the company exists. Shareholders are entitled to receive only profits registered in the balance sheet. This principle is part of the concept of “asset conservation” established by the law on corporations and private limited partnerships in order to protect creditors and minority shareholders.
In practice, however, there are numerous violations of this principle ranging from the case in which a shareholder-manager withdraws money for his private needs to the cross-border transfer of assets within a group of companies. This conduct usually is not punished as long as the company is not in trouble. In this event the insolvency administrator has to reclaim on behalf of the company all funds wrongly paid out. Transactions carried out in violation of the principle of asset conservation are furthermore declared null and void.
The concept of repayment of contributions does not apply to the withdrawal of assets made in the framework of the reduction of the share capital. It is, however, necessary to make a call for creditors.