How can you form the authorized capital of an LLC

LLC must form authorized capital. This is the monetary foundation of any company. It acts as a kind of guarantee of fulfillment of obligations to customers.

The term "authorized capital" means the amount of contributions that the participants agreed to give to the company upon its creation to form the minimum size of the company's property (former Article 87 of the Civil Code , which was excluded based on Law No. 2275-VIII dated 02.06.2018 ). These deposits are working capital of the company.

According to Part 1 of Art. 13 of the Law of Ukraine "On Limited and Additional Liability Companies" dated February 6, 2018 No. 2275-VIII, the contribution of a company participant can be money, securities, other property, unless otherwise established by law.

Formation of authorized capital is possible in three ways:

• monetary (cash and non-cash funds);

• property (equipment, securities, real estate, property rights to intellectual property objects, etc.);

• mixed (monetary together with property).

Is it possible to form the authorized capital with debt obligations?

According to Part 1 of Art. 190 of the Civil Code, property as a special object is considered to be a separate thing, a set of things, as well as property rights and obligations.

In accordance with the second part of Article 13 of the Law on Companies, the company cannot provide a loan to pay the participant's contribution or guarantee for loans, credits provided by a third party to pay his contribution.

Thus, property rights arising from the loan relationship of the company with its founder on the basis of a security - a promissory note cannot be a contribution to the authorized capital of a business company.

At the same time, the legislation does not prohibit the formation of the company's authorized capital by depositing funds received by the participant in the form of returnable financial assistance not from such a company, but from another person.

How can you not form the authorized capital?

In Art. 86 of the Civil Code prohibits the use of the following objects for the formation of the company's statutory (composite) capital:

• budget funds;
• property of state (communal) enterprises, which according to the law (decision of the local self-government body) is not subject to privatization;
• property under the operational management of budgetary institutions, unless otherwise provided by law.

However, the list of exceptions listed in Art. 86 of the Civil Code, is not exhaustive.

According to Art. 178 of the Civil Code , objects of civil rights whose presence in civil circulation is not allowed (objects removed from civil circulation), as well as objects that can belong only to certain participants of the circulation or whose presence in civil circulation is allowed, cannot be contributions by special permission (objects with limited turnover).

Special attention should be paid to special legislation, which often contains references to specific objects of civil rights, which are prohibited to be included in the authorized capital of an LLC.

For example: according to Clause 14 of the X "Transitional Provisions" of the Land Code of Ukraine, before the law on the circulation of agricultural land came into force, but not earlier than January 1, 2020, it was prohibited to enter the right to a land share (share) into the authorized capital of economic associations, signs are allowed from July 1, 2021 (Law on Amendments to Certain NPAs)

The contribution in non-monetary form must have a monetary value, which is approved by a unanimous decision of the general meeting of participants, in which all (!) members of the company took part. During the creation of the company, such assessment is determined by the decision of the founders on the creation of the company ( Part 3, Article 13 of Law No. 2275 ).

Similarly, this issue is regulated by Part 2 of Art. 115 Central Committee . However, with a small clarification: in cases established by law, the monetary assessment of the contribution of a member of a business partnership is subject to an independent expert review.

The size of the authorized capital

As of today, there are no legal requirements for the size of the authorized capital for most companies, except for exceptions provided by law.

The size of the authorized capital of the company consists of the nominal value of the shares of its participants, expressed in the national currency of Ukraine (Part 1 of Article 12 of the Law of Ukraine "On Limited and Additional Liability Companies" ).

The amount of the authorized capital must be recorded in the founding documents of the company, along with the indication of the size of the share of each of the participants (which can be additionally determined as a percentage) (according to the law on companies , the charter is not mandatory, according to the GKU - mandatory, conflict of interest: applies a more specific law and a law that was adopted later).

The parties have the right to decide at their own discretion what amount of authorized capital the company will have.

At the same time, the founders should take into account the fact that, according to established practice, the authorized capital of the company determines the minimum size of the company's property, and this guarantees the interests of its creditors. Therefore, it is natural that the larger the authorized capital of the LLC, the safer cooperation with it will be for counterparties.

The size of the authorized capital agreed by the founders must be fixed in the founding document — the charter of the LLC ( Part 4 of Article 57 of the Civil Code ).

Confirmation of the fact of adding property to the authorized capital can be an act of acceptance and transfer of property, delivery of a bill of lading or other commercial and administrative document for property. At the same time, since the right of ownership of real estate arises from the moment of state registration (Part 2, Article 3 of Law No. 1952), if the founder's contribution defines a building or a plot of land, the date of entry of the corresponding property into the authorized capital shall be considered the date of entry into the State Register of real property rights to real estate record of change of owner.

LLC is obliged to maintain the presence of assets with a value not less than the size of the authorized capital.

Terms of contributions by participants (terms of formation of authorized capital)

Article 14 of the Law of Ukraine "On Limited and Additional Liability Companies" dated 06.02.2018 No. 2275-VIII stipulates the obligation of a company participant in the formation of the authorized capital to " completely (with) contribute within six months from the date of state registration of the company, unless otherwise not provided for by the statute". Relevant provisions may be included in the charter, changed or excluded from it by unanimous decision of the general meeting of participants, in which all members of the company participated.

The above-mentioned Law provides for the measures to be taken if the participant is late in making the deposit, in particular:

• the executive body of the company must send the member of the company a written warning about the delay and set an additional deadline for repaying the debt, which cannot exceed 30 days;

• if a member of the company does not (fail) to make a contribution to pay off the debt within the given additional period, the executive body of the company must convene a General Meeting of members, which can make one of the following decisions:

1) on the exclusion of a member of the company who is in arrears from making a contribution;

2) on the reduction of the authorized capital of the company by the amount of the unpaid part of the share of the participant of the company;

3) on the redistribution of the unpaid share (part of the share) among other members of the company without changing the size of the authorized capital of the company and the payment of such debt by the relevant members;

4) on the liquidation of the company.

Useful templates

Decision on founding a company (one member)

Protocol on the creation of a limited liability company

Charter of a limited liability company (second version), (Ukrainian), Ukraine

Statute / Resolution / Minutes / Structure for a newly formed company, Ukraine

Agreement on the provision of repayable financial assistance, universal parties (Ukr), Ukraine

Loan agreement between individuals (English), universal !!

Loan agreement/Loan agreement (loan from a non-resident)

Loan agreement (financial assistance) (Ukrainian, English, Ukrainian-English), universal

Loan agreement (between non-residents), (English-Ukrainian), (English), universal

Loan agreement with a non-resident (Ukrainian-English), Ukraine

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