Commitment Issues: The Various Levels of Shareholder Funding
From loans to capital increases, understand the trade-offs behind each form of shareholder funding and how they shape your company’s financial future.
Shareholder funding is not just about injecting capital—it’s about balancing flexibility, risk, and long-term strategy. Companies (and their investors) must carefully choose the level of commitment they’re willing to make.Here’s how the three main options compare:
🔹1. Shareholder Loan (Suprimentos) – Flexible but Adds DebtAllows for deductible interest (~4-5% up to €1M/year).Can be retrieved at any time after junior debt is paid. Does not impact dividend distribution. Key trade-off: Increases the company’s debt exposure, potentially affecting bank financing. Interest received is also taxable.
🔹2. Auxiliary Capital Injection (Prestações Suplementares) – A Middle GroundDoes not count as debt, making it more bank-friendly.Does not impact dividend distribution.Key trade-off: Cannot generate deductible interest and can only be retrieved if the company maintains positive net equity—often a challenge in early stages.
🔹 3. Share Capital Injection (Capital Social) – The Highest CommitmentStrengthens the company’s financial standing (no debt impact).Key trade-off: Limits dividend distributions (if net equity falls below share capital, no dividends can be paid). Capital can only be retrieved under strict conditions, making it the least flexible option.
The Irreversibility Factor: A company can always convert a shareholder loan into auxiliary capital or share capital, but the reverse is not possible. This is why most businesses start with loans, preserving the ability to reassess their financial structure as the business evolves.
Choosing the right structure requires careful planning—not just for short-term funding needs, but for long-term growth, financing, and shareholder returns.
