Share capital of an s.r.o.: how much and how to pay it in

When setting up a limited liability company (s.r.o.), you cannot avoid the question of how much share capital your s.r.o. needs and how to pay it in. It is one of the pillars on which a company stands, and although it may seem a formality, it has real legal and economic significance. In this article, we explain what share capital is, how it is formed and what to watch out for.

What is the share capital of an s.r.o.

Share capital is the total of all the shareholders’ contributions to the company. It represents the initial assets with which the company starts doing business, and it also serves as a form of guarantee for creditors. The amount of the share capital of an s.r.o. is entered in the Commercial Register (ORSR) and is publicly available.

Minimum amount and shareholders’ contributions

The law lays down the minimum amount of a company’s share capital as well as the minimum contribution of an individual shareholder. Check the specific amounts in the current version of the Commercial Code, as they may change. If the company has several shareholders, their contributions are added together to form the total share capital.

• Each shareholder contributes at least the statutory minimum contribution.
• The sum of the contributions forms the total share capital.
• A contribution can be in cash or in kind.
• The amount of the contribution determines the size of the ownership interest.

How to pay in the share capital

A contribution can be paid in cash or in kind, for example by contributing assets. For cash contributions, payment is usually evidenced by a declaration of the contribution administrator (správca vkladu). The procedure is as follows:

1. Specify the amount of the contributions and the contribution administrator in the memorandum of association.
2. The shareholders pay their contributions in the agreed manner.
3. The contribution administrator issues a declaration of payment.
4. You attach this declaration to the application for entry in the Commercial Register.

Cash versus non-cash contributions

A non-cash contribution, for example a car or a machine, must be capable of valuation, and its value must be determined in the manner required by law. Such a contribution also comes with an expert valuation. A cash contribution is simpler, which is why most founders choose it.

Practical tips for setting the amount

Although you can set the share capital of an s.r.o. at the statutory minimum, higher capital may come across as more trustworthy to business partners and banks. Consider how much capital you really need to get the business off the ground. Remember that share capital is not a blocked sum – once the company has come into existence, you can use it in running the business.

How the capital is reflected in the accounts

Share capital is recorded as part of the company’s equity, and its payment is recorded in the accounts from the first day of the company’s existence. Incorrectly recorded contributions can cause a mismatch between the entry in the Commercial Register and the financial statements, which later complicates, for example, a possible increase in the capital or a new shareholder joining. It is therefore worth paying attention to correct accounting right from the start.

• The contribution is recorded as part of equity.
• Payment is evidenced by the relevant documents.
• The details in the register must match the accounts.
• A non-cash contribution requires a valuation.

When to consult an expert

Setting up the contributions correctly and paying them in affects both the entry in the register and the company’s accounts. If you are not sure how to proceed with the share capital of an s.r.o., contact Bilvao’s accountants. We will help you prepare the documents and record the contributions correctly in the accounts, so that everything goes smoothly and without unnecessary mistakes that could slow down the formation of your company or later changes to it.

Related articles: Reducing and increasing a company’s share capital, How to set up a trade licence: procedure and costs, Managing director of an s.r.o.: rights, duties and liability.

Frequently asked questions

Can I use the share capital for the business once the company has been set up?

Yes, share capital is neither a tied-up nor a blocked sum. Once the company has come into existence, it uses the capital in the ordinary course of business and can spend it on buying goods or equipment or on paying costs. It serves as the company’s initial assets.

What is the difference between a cash and a non-cash contribution?

You pay a cash contribution with money, and a non-cash contribution by contributing assets, for example a car or a machine. A non-cash contribution requires a valuation carried out in the prescribed manner. A cash contribution is administratively simpler and is used by most founders.