Companies that are capital companies have a statutory obligation to form registered capital.
A non-monetary contribution to the registered capital may be any asset whose economic value can be determined. This includes, for example, real estate, a trademark or cryptocurrencies. Cryptocurrency can also be used to increase the registered capital of an already existing company.
The procedure at a glance
- Decision to increase — a resolution of the general meeting, or a decision of the sole member.
- Declaration by the member — assuming the obligation to make a new contribution.
- Expert valuation — the cryptocurrencies are valued by an expert in the relevant field by way of an expert opinion.
- Transfer of ownership — the cryptocurrencies must pass into the ownership of the company.
- Managing director's declaration — on payment of the new contributions and the amount of the increase, plus the written report under Section 59b(4) of the Commercial Code.
If the members, or the sole member of the company, decide to increase the company's registered capital by means of cryptocurrency, the procedure is the same as for an increase of the registered capital by any other non-monetary contribution. An increase of the registered capital requires a decision of the company's general meeting in the form of a resolution, or a decision of the sole member on the increase of the registered capital.
A member who intends to use their cryptocurrencies to increase the registered capital must express their will by means of a declaration assuming the obligation to make a new contribution to the company. The cryptocurrencies by which the registered capital is to be increased must first be valued by an expert from the relevant field, in order to determine their value by way of an expert opinion.
In order for the increase of the registered capital to take place, the cryptocurrencies must come into the ownership of the company. At the same time, the managing director is obliged to make a declaration on the payment of the new contributions to the company and on the amount by which the company's registered capital is being increased.
One must not forget the managing director's obligation to draw up a written report in accordance with Section 59b(4) of the Commercial Code. In addition, the declaration that no circumstances have arisen that would significantly change the value of the non-monetary contribution as expressed in the expert opinion must not be overlooked.
Important
Two obligations are easily overlooked: the managing director's written report under Section 59b(4) of the Commercial Code, and the declaration that no circumstances have arisen which would significantly change the value stated in the expert opinion.
In this situation, however, it is worth reflecting on the nature of cryptocurrency, whose fundamental characteristic is the volatility determined by the cryptocurrency market.
What happens if the value of the cryptocurrency that was a non-monetary contribution to the company's registered capital changes?
The situation outlined above is best illustrated with a practical example.
A member makes a non-monetary contribution to the company in cryptocurrencies whose value was determined, on the basis of an expert opinion, at EUR 10,000.00. The cryptocurrency, specifically Bitcoin (BTC), was used to increase the company's registered capital to EUR 15,000.00. After the increase of the registered capital was recorded in the relevant Commercial Register, however, the value of BTC rose to EUR 20,000.00. As a result of the increase in the value of BTC, though, the member of the company is not obliged to file a further petition to increase the registered capital. The volatility of cryptocurrencies is, in fact, not taken into account when increasing the registered capital.
Example calculation
Given the volatile nature of cryptocurrencies, it would be illogical and even inconceivable for every increase or decrease in the value of the relevant cryptocurrency to require a change in the recorded amount of the company's registered capital. It is therefore clear that the legislature did not take into account in the Commercial Code, and at the time the relevant provisions of the Commercial Code were adopted could not have taken into account, the possibility of contributing cryptocurrency as a non-monetary contribution, with all the consequences that this entails.
Key point
Once the increase is recorded in the Commercial Register, later rises or falls in the cryptocurrency's value do not require any change to the recorded registered capital — its volatility is simply not taken into account.
Any increase or decrease in the value of the cryptocurrency used to increase the company's registered capital may possibly be reflected in determining the amount of the liquidation balance upon liquidation of the company.
A later change in value may still matter in one place — when the liquidation balance is determined on winding up the company.
When increasing the registered capital by a non-monetary contribution consisting of cryptocurrency, we therefore recommend that you turn to an attorney with experience in corporate law, who will guide you through the entire process of increasing the registered capital.
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Frequently asked questions
Can cryptocurrency be used to increase a company's registered capital?
Yes. Cryptocurrency is a non-monetary contribution whose economic value can be determined, so it can be used both to form registered capital and to increase it in an existing company.
What is the procedure for increasing capital with cryptocurrency?
It follows the same steps as any non-monetary contribution: a decision of the general meeting or sole member, the member's declaration assuming the obligation, an expert valuation, transfer of the cryptocurrency into the company's ownership, and the managing director's declaration on payment.
Does the cryptocurrency have to be valued by an expert?
Yes. The cryptocurrencies must first be valued by an expert from the relevant field, who determines their value by way of an expert opinion.
What happens if the value of the cryptocurrency changes after the increase?
Nothing in terms of the recorded capital. Once the increase is entered in the Commercial Register, a rise or fall in value does not require a further petition — the volatility of cryptocurrencies is not taken into account.
Are there obligations that are easy to overlook?
Yes. The managing director must draw up a written report under Section 59b(4) of the Commercial Code and a declaration that no circumstances have arisen which would significantly change the value stated in the expert opinion.
Can the change in value matter at any later stage?
It may be reflected when determining the amount of the liquidation balance upon liquidation of the company.