Share Capital vs Share Premium: What Every Founder of a Dutch B.V. Should Know
If you’re setting up a business in the Netherlands, you’ll quickly come across two terms that seem similar but have very different meanings: share capital and share premium. Both appear under “equity” on a balance sheet, both represent money invested by shareholders — but legally and practically, they serve different purposes. Understanding the distinction is essential if you want to structure your Dutch B.V. smartly, especially when bringing in investors or planning for future growth.
What Is Share Capital?
Share capital represents the nominal, or par, value of the shares issued by your company. It’s the base capital officially registered in your B.V.’s articles of association and filed with the Dutch Chamber of Commerce.
For example, if your company issues 1,000 shares with a nominal value of €1 each, your share capital is €1,000, even if investors paid much more than that per share.
Since the 2012 reforms of Dutch company law, there’s no longer a minimum capital requirement for B.V.s. That means you can start your company with as little as €0.01 per share, or even less if you want. This flexibility is one reason why the B.V. structure is so popular among startups and international businesses.
What Is Share Premium?
The share premium is the amount shareholders pay above the nominal value of the shares.
Let’s say those same 1,000 shares with a €1 nominal value are sold to investors for €10 each. The additional €9 per share — a total of €9,000 — becomes the share premium.
In your balance sheet, that looks like this:
Equity
Amount (€)
Share Capital
1,000
Share Premium
9,000
Total Equity
10,000
Why the Distinction Matters
1. Flexibility in Funding
Increasing or changing your share capital requires a notarial deed and an amendment to your company’s articles of association. That means paperwork, cost, and time.
By contrast, increasing your share premium is usually much simpler, it can often be done by a shareholder resolution, without going through a notary.
For that reason, founders often set a low nominal share capital and use the share premium to inject funds or bring in investors later.
2. Tax and Distribution Advantages
In certain cases, it’s possible to make tax-free distributions from the share premium reserve, provided the contribution was properly recorded and approved by shareholders.
Returning share capital, however, is more formal and can sometimes trigger additional tax consequences.
In other words, share premium offers both financial flexibility and potential tax efficiency if it’s structured correctly.
3. Investor Transparency
For startups, it’s also a question of optics. A modest share capital combined with a significant share premium shows that real money has been invested in the company, without making governance unnecessarily rigid.
For example, an American startup setting up a Dutch B.V. might issue 1,000 shares at €0.01 each (total capital €10) while investors contribute €100,000 in funding. The extra €99,990 becomes share premium. This setup keeps the nominal capital light while accurately reflecting the true level of investment.
Legal Framework
Both share capital and share premium are regulated under Book 2 of the Dutch Civil Code, specifically Articles 2:178–2:216. These provisions govern how shares are issued, what information must be included in the articles of association, and how distributions can be made.
In practice, your notary will ensure that the share capital is properly registered at incorporation, while the share premium can be added later via a shareholder resolution or upon issuing new shares.
Common Pitfalls to Avoid
· Not documenting share premium correctly. A verbal agreement isn’t enough, the contribution must be formally approved and recorded in the company’s accounts.
· Blurring the lines between capital and premium. Keep these accounts clearly separated; failing to do so can create problems during audits, financing rounds, or due diligence.
· Ignoring tax implications. A distribution from the share premium reserve must meet specific requirements to remain tax-exempt.
The Bottom Line
For founders and international businesses alike, understanding the difference between share capital and share premium isn’t just accounting trivia, it’s a strategic decision. The way you structure your company’s equity can affect everything from tax treatment and investor confidence to administrative costs and long-term flexibility.
If you’re establishing a Dutch B.V., think carefully about how much nominal capital to set and how to use the share premium reserve to your advantage. The right balance can give your company the credibility it needs and the flexibility it deserves.