Contributions in kind – can a car, equipment or a business be used as share capital?
Yes, such assets can be used. Section 2-7 of the Companies Act requires the asset to be capable of being recognised in the balance sheet under the Accounting Act and, as a general rule, valued at fair value at the date of contribution. A car, machinery, equipment and a whole business can all be used. Your own labour, an idea or a promise of future work cannot. The contribution is documented in a statement under section 2-6, confirmed by an auditor.
What a contribution in kind is
You do not need NOK 30,000 in cash to start a limited company. If you are forming a company with NOK 30,000 of share capital and own a machine with a documentable fair value of NOK 40,000, the machine can be used as the contribution where the statutory requirements are met. The company takes over the machine, and you receive the shares. The share capital can also be a combination – NOK 15,000 in cash and assets worth NOK 15,000, for instance.
What can be used?
The general rule is in section 2-7: the asset has to be capable of being recognised in the balance sheet under the Accounting Act, and it is as a general rule valued at fair value. What matters is the value at the date of contribution – not what the asset cost new. A computer that cost NOK 30,000 three years ago is not worth NOK 30,000 today. Where a car has a fair value of NOK 150,000, it can be used as the contribution for shares with a total nominal value of NOK 30,000 plus any share premium.
You cannot work in the share capital
This is the absolute limit. An obligation on the shareholder to perform work or services for the company cannot be used as a share contribution. So you cannot form a company on the basis that «I will do consultancy worth NOK 30,000 for the company». The value has to exist at the date of contribution, not be created afterwards.
Software, patents and intangibles
Finished software, a registered trade mark or a patent can in principle be recognised in the balance sheet and therefore used as a contribution, provided the conditions are met and the value can be documented. But a loose idea, your own expertise, customer contacts or a promise of future development work cannot simply be valued at NOK 30,000 and used as share capital. The line lies in whether something can be recognised in the balance sheet – not in how valuable it feels.
The opening balance sheet is gone
Previously a formal opening balance sheet under section 2-8 had to be prepared for a contribution in kind. That rule was repealed with effect from 1 January 2018. Guides still requiring an opening balance sheet are out of date. Instead it is the statement under section 2-6 that documents the contribution and the valuation.
What the statement has to contain
The statement has to describe what the contribution consists of, the principles used for the valuation, and the matters of significance for assessing it. It has to be confirmed by an auditor, who among other things confirms that the assets are not carried at more than fair value. That applies even where the company is otherwise to opt out of an audit – a contribution in kind involves an auditor regardless. See Statutory audit
A whole business can be contributed
A contribution in kind is also the route when a whole business is to go into a new company – typically on converting a sole proprietorship. The specific rules on a tax-free conversion then apply as well, requiring a newly formed company, tax continuity and the deadline before 1 July – see When should a sole proprietorship become an AS? Note the difference: an ordinary contribution of individual assets is not automatically a tax-free conversion. Where assets with a latent gain are contributed without following the continuity rules, the contribution can be a realisation for tax purposes.
For tax, a contribution in kind is rarely neutral
This is the most important warning in the article. Using shares as a contribution in kind to another company is as a starting point treated as a realisation. That is precisely why you cannot move the shares in a valuable operating company into a newly formed holding company as a contribution without considering the tax first – see Can I put a holding company above an AS I already own? The same applies to fixed assets with a tax written-down value far below market value.
Practical consequences
Where assets with a VAT history are transferred, capital items and adjustment obligations have to be assessed – see The VAT adjustment rules for real property Where a car is transferred, the re-registration, the insurance and the financing have to be dealt with, and the car then becomes a fixed asset in the company with the rules that follow – see Depreciation and Company car or private car We can handle the valuation basis, the accounting for the contribution and the tax treatment. The statement under section 2-6 and the auditor's confirmation have to be handled by an auditor.
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This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.
More on starting up and choosing a company form
- Sole proprietorship or limited company – which should you choose?
- When should a sole proprietorship become a limited company – and can the conversion be tax-free?
- How to start a limited company – step by step
- Share capital – what can the NOK 30,000 be used for?
- NUF – what is it, and when does it make sense?
- ANS or DA – what is the difference, and how large is the personal liability?
- Your first year with a limited company – which deadlines and tasks matter?
- The shareholders' agreement – what should it contain, and when do you need one?
- When do you need an accountant – and when can you manage yourself?
- Winding up a limited company – how to dissolve and delete it
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