As your sole proprietorship or general partnership grows, it may pay off to continue your business in the form of a private limited company. In that case, your company must be incorporated into the private limited company. There are two options: transferring in cash and transferring in kind (other than in cash). You can opt for transferring in kind upon incorporation and transferring in kind after incorporation. In this article, corporate law attorney Dirk de Waard takes a closer look at transfers in kind when setting up a private limited company.

Transfer in kind upon incorporation: an explanation

If a transfer on shares other than cash is agreed upon when a private limited company is established, this is referred to as a transfer in kind upon incorporation. The transfer may consist of the assets and liabilities of a company. What is transferred must be able to be valued according to economic standards. A right to perform work or services can therefore not be transferred. In the case of transferring in kind, a transfer description must be made. An auditor’s report must be made about this description..

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Valuation methods

The valuation methods applied must comply with standards that are considered acceptable in society (Section 2:94a, paragraph 1 of the Dutch Civil Code). When valuing the transfer made by the founders, it is checked whether the value is realistic in the given circumstances.

The transfer description

A transfer description is required by law for transfers in kind upon incorporation. The law sets the following requirements for the transfer description:

  • the founders must draw up a description of what is transferred, stating the value attributed to it and the valuation methods used;
  • this description must relate to the condition of what is transferred on a day not earlier than six months before the incorporation;
  • this description is signed by all founders and appended to the deed of incorporation.
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The transfer statement

The accountant must make a statement on the description and valuation of the transfer. In this statement, the accountant establishes whether the applied valuation method is considered acceptable in society. The value of what is transferred must at least correspond to the amount of the payment obligation, expressed in money, which must be met with the transfer. The auditor’s statement must be attached to the deed of incorporation. This statement must then be filed with the Trade Register.

Questions about transfers in kind upon incorporation? VIOTTA is happy to help!

Opting for a transfer in kind when setting up a private limited company raises many questions. VIOTTA’s lawyers are experienced with both transfers in kind and transfers in money. Please contact Dirk de Waard at dirk.dewaard@viottalaw.com | +31202480602

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VIOTTA is a law firm based in Amsterdam, specialising in providing advice in the areas of corporate law, mergers and acquisitions, contract law and corporate & commercial dispute resolution. We advise in transactional matters and litigate in commercial disputes. VIOTTA provides legal advice to its clients on Dutch corporate law matters, such as corporate governance, board structures, directors’ duties and liabilities, joint ventures and other collaborations. VIOTTA advises purchasers, sellers, management and other stakeholders in domestic and cross-border mergers and acquisitions (M&A).

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