Drafting a share premium agreement: what belongs in it

Drafting a share premium agreement involves clearly setting out on paper the amount of the capital contribution, its recording as share premium (without a share issuance), the tax treatment, and the conditions for repayment. The agreement stipulates that a shareholder contributes equity to the BV, that no new shares are issued in return, and that the shareholder structure remains unchanged. Below is a list of the components that should be included and what to look out for.

The short answer

1. Parties: the contributing shareholder(s) and the BV.
2. Amount and nature: the amount paid in, recorded as share premium (informal capital), without share issuance.
3. Shareholder dependency: to whom the share premium accrues upon repayment.
4. Tax treatment: no benefit at the BV, increase in acquisition price in Box 2.
5. Reimbursement: under what conditions and by means of which decision.
6. Shareholders' resolution: as an annex or recorded resolution of the general meeting.

Drafting a share premium agreement: the basics

When drafting, you start with the type of share premium. If it concerns informal share premium — a capital contribution without a share issuance — you can arrange this privately. If it concerns formal share premium associated with a share issuance, a notarial deed is required, and the agreement serves as a supplement to that. Most SME share premium agreements concern informal capital, where the director-major shareholder or a co-shareholder wishes to strengthen the BV without changing the structure.

Which parts belong in it?

• Parties and background. Who contributes, which BV receives, and why (strengthening equity).
• Amount and booking. The exact amount and the recording that it is booked as share premium in equity.
• No share issuance. Explicitly stipulate that no shares are issued and the shareholder structure remains unchanged.
• Shareholder-specific share premium reserve. In the case of multiple shareholders: that the share premium accrues to the contributor upon repayment.
• Repayment conditions. When and how repayment can take place, including the required decision.
• Tax provision. Specify the treatment for a BV and shareholder, so that the intention is established.

Record capital contribution without share issuance

The sharpest point of the agreement is that the contribution does not result in any shares. Without this provision, a dispute may arise as to whether the contributor is entitled to additional shares or a larger stake. Therefore, explicitly stipulate: the contributed amount is share premium, no shares are being issued, and the share capital and mutual relations remain unchanged. This prevents future disputes regarding dilution or control.

Protecting the shareholder structure

This does not apply with a single shareholder, but it does with multiple shareholders. Because the shareholding ratio remains the same, the share premium increases the value of all shares proportionally — even those of shareholders who have not contributed anything. Those who do not wish this can establish a shareholder-specific share premium reserve: the contributed share premium is administratively linked to the contributor and accrues exclusively to him upon repayment. Document this explicitly, including the consent of the other shareholders.

Example: In a private limited company (BV) with two 50% shareholders, one contributes €80,000 in share premium. Without a shareholder-specific reserve, the other party benefits upon sale or repayment. With the reserve, the amount is returned to the contributor.

Tax treatment in the agreement

Include a brief tax provision reflecting the intention: the contribution is a capital contribution, not a taxable gain for the BV, and an increase in the acquisition price of the shares in Box 2 for the shareholder. This is important in the event of a later repayment or sale. Have the accountant handle the entry to the share premium reserve and record the acquisition price so that the tax position can be substantiated later.

Arrange repayment

Stipulate that repayment of share premium is only possible by a resolution of the general meeting and after the statutory distribution test by the Board. The Board must assess whether the BV can continue to meet its due debts after the distribution. Without this test, directors risk liability if the BV subsequently runs into financial difficulties. State in the agreement that repayment is subject to these conditions.

Honest recommendation

If you are the sole shareholder of your BV and pay informal share premium, you can often draft the agreement yourself using a good template and the shareholders' resolution, and have your accountant handle the bookkeeping. In that situation, you do not need a lawyer; it is primarily about correct recording.

Do have the agreement drafted or reviewed by a lawyer whenever there are multiple shareholders, the share premium must remain shareholder-specific, or there is uncertainty regarding repayment and tax implications. In such cases, the risks of an error outweigh the costs.

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