Contribution in kind

Contribution in kind / Sacheinlage

December 14, 2022

The term contribution in kind refers to the contribution of property to the capital account of a company.

To establish a Limited liability company (GmbH), the share capital is usually provided in cash. In contrast to the entrepreneurial company, however, it is also possible to provide the share capital through a contribution in kind. For this purpose, the object of the contribution in kind and the nominal amount of the share to which the contribution in kind relates must be stipulated in the articles of association. For this purpose, the shareholders must set out in an asset foundation report the essential circumstances to the appropriateness of the contributions in kind and, in the case of the transfer of a company to the corporation, the annual results of the last two financial years (cf. section 5 (4) Limited Liability Companies Act (GmbHG).

In principle, all asset items can be used as a contribution in kind, provided they have a measurable value. Typically, tangible or intangible items as well as benefits from the following groups are contributed:

  • Tangible assets (for example, inventory, raw materials, land, buildings, machinery)
  • Intangible assets (for example, trademarks, patents, copyrights or licensing rights)
  • Financial investments (for example, company participations)
  • Receivables

Services, on the other hand, are only eligible for contribution in kind in the case of partnerships. For corporations, they are to be qualified as a hidden contribution in kind according to section 19 (4) GmbHG.


Valuation of the contribution in kind

The valuation of contributions in kind always causes difficulties. While the monetary value of a cash contribution is easy to determine, the valuation of a contribution in kind can be much more difficult. In contrast to the GmbH, where the contribution in kind only has to cover the nominal amount, section 183 (3) Stock Corporation Act (AktG) stipulates for public limited companies that the valuation must be carried out by at least one auditor. A formation in kind without external formation auditor(s) is only possible within the narrow exceptions of section 33a AktG.

Result of overvaluation

If it later turns out that the valuation of the contribution in kind was too high, a so-called overvaluation, there is an obligation to make an additional contribution. In the case of a limited liability company, the shareholder who contributed the share capital through an overvalued contribution in kind must make a cash contribution in the amount of the shortfall pursuant to section 9 (1) GmbHG. The company's right to claim the difference is subject to a limitation period of 10 years after registration of the company pursuant to section 9 (2) GmbHG.

Whether and to what extent the contribution in kind is profitable for the founding of a company should be weighed up in close consultation with the tax advisor and also in light of the costs of an asset foundation report.