Shareholder financing is a frequently used instrument with which shareholders provide their company with financial resources. It primarily serves to secure liquidity, bridge temporary bottlenecks or finance investments. Unlike a capital increase, it does not constitute equity capital, but rather financing with a repayment claim.
Shareholder financing refers to the granting of a loan by a shareholder to their own company. The shareholder provides the company with funds without increasing the share capital or company capital.
In contrast to an equity injection (e.g. capital increase or shareholder contribution):
Shareholder financing is therefore more flexible than a capital increase, but it entails specific legal consequences.
Shareholder financing must be documented by a written loan agreement.
The loan agreement should in particular regulate the following points:
The contract must clearly state that the company is obliged to repay the loan. By concluding the loan agreement, the shareholder becomes a creditor of the company and acquires a claim to repayment of the funds provided.
Shareholder financing is recognised in the company’s balance sheet under liabilities and must be clearly distinguished from equity.
Shareholder loans are borrowed funds that are treated like other liabilities in the balance sheet. Proper documentation ensures a clear distinction from equity and is particularly relevant when assessing the company’s financial structure.
Caution is required when an undercapitalised company receives additional funds from shareholders. Undercapitalised means that equity is insufficient to cover the existing risks and liabilities of the company.
If a financial imbalance exists in which a capital increase would be economically appropriate, but shareholders grant a loan instead, special creditor-protection mechanisms apply.
In such cases, Article 2467 of the Italian Civil Code provides that:
This so-called subordination is intended to prevent shareholders from recovering their financing before other creditors, thereby weakening the creditors’ position.
Shareholder financing is an effective and flexible instrument for corporate financing. It allows shareholders to support their company in the short term without altering the company’s capital structure.
At the same time, it requires clear contractual arrangements, correct accounting treatment and particular caution in financially distressed companies. Only in this way can legal risks and disadvantages in the event of a crisis be avoided.