A brief guide to payments made by a shareholder to the company

In a recent M&A transaction involving an SME (small and medium-sized enterprise), as is often the case, the agreements provided for a shareholder to make a payment to the target company. This provided an opportunity to “brush up” on the subject. Here is a very brief summary, not claiming to be exhaustive, with reference to a recent ruling by the Court of Cassation (Court of Cassation, Order No. 9629 of 15 April 2026, concerning a shareholder’s payment towards a future capital increase).

In the case examined by the Supreme Court, the shareholder intended to recapitalise the company by waiving a claim they held, on the condition that the general meeting resolved to carry out the capital increase within a predetermined timeframe. The case confirms that the treatment of sums paid by the shareholder depends on the classification of the contribution, a point on which the Supreme Court’s most recent case law has established fairly precise criteria.

The three forms of payment

• Shareholder loan
  This is a payment of money, i.e. a loan agreement, in which the shareholder acts as a “third-party” (vis-à-vis the company) lender: the amount paid does not form part of the company’s equity, and the company assumes an obligation to repay it.
• Capital contribution
  This is a payment of money that entails neither an obligation on the part of the company to repay it nor an immediate increase in share capital. The amount is included in the company’s net worth, usually in a specific reserve (“other reserves”), which the company’s general meeting may use at its discretion to cover losses or to increase the share capital without consideration. This amount is treated as equity capital; unlike a capital contribution, it does not require a resolution to increase capital or alter the shareholder’s stake.
• Payment towards a future capital increase
  This is a payment made in anticipation of a future increase in share capital and is intended to be applied towards the payment for the shares or quotas that the shareholder will subscribe to once the capital increase has been approved. The amounts form a “personalised” or “designated” reserve, belonging exclusively to the shareholders who paid them in and restricted to that specific purpose. If the capital increase is not approved, shareholders are entitled to a refund of the amount paid in, not as repayment of a loan, but because the justification for the capital contribution no longer applies.

Aspects relating to restitution

The consequences in terms of restitution vary considerably depending on the circumstances.

• Shareholder loan (in the form of a loan): The shareholder is entitled to a refund of the amount paid.
• Capital contribution: The shareholder has no right to repayment. Repayment is only possible under certain circumstances: it occurs during liquidation and only if, after all creditors have been paid, a surplus remains.
• Contribution towards a future capital increase: If the capital increase is not resolved within the set deadline, the company shall repay the amounts received; if, however, it is resolved and carried out within the deadline, the contribution is credited to capital and, naturally, no right to repayment arises.

The reclassification of contributions

The courts look beyond the label given to the contribution: in addition to the term used by the parties, they consider the parties’ contractual intent, the manner in which the transaction was carried out, and the interests involved. In the absence of a clear intention expressed at the time of payment, the entries in the financial statements approved by the shareholders become decisive.

A payment “towards a future capital increase” that is not actually one.
To qualify as “towards a future capital increase”, the payment shall be clearly and unequivocally conditional upon a capital increase, with specific details set out from the outset – such as the deadline for the resolution to be passed. According to the Court of Cassation (Order No. 29325 of 22 December 2020), the payment must have a specific legal basis and a concrete purpose within the shareholders’ planned transaction to increase their respective shareholdings. On this basis, the Supreme Court has classified bank transfers bearing the generic reference “on account of capital”, which lack any specific deadline and were made in the context of substantial losses subsequently covered by these funds, as non-refundable, non-recoverable payments.

The “loan” that does not have to be repaid.
When such payments have been recorded for years under “other reserves” in financial statements approved by the shareholders (including the shareholder who made those payments), they have been classified as “capital contributions”, even though the shareholder had described them as a loan.

The “indirect” loan.
The concept of shareholder loans encompasses transactions that, whilst lacking the formal structure of a loan, produce the same economic result: the company obtains resources or defers an outlay, and the shareholder accrues a receivable to be recovered. This is the case where a shareholder sells goods or services to the company on payment terms that are anomalous compared with market practice or supplies it exclusively with products over a long period without receiving payment. Recently, the Court of Cassation held that a shareholder-landlord who had not collected rent owed by the company for eight years had, in effect, financed it. The determining criterion is substantive: what matters is the economic function of the transaction, not the form chosen by the parties.

Conclusions

The message for entrepreneurs and directors is clear: substance takes precedence over form. Resolutions, reasons for bank transfers, terms and financial statements must align with the intended transaction. Anyone making a payment towards a future capital increase shall set a deadline and monitor its expiry: if the increase is not approved, the accounting records shall reflect the shareholder’s claim for a refund.