We are going to consider how the founders-residents of Ukraine of the limited liability company (LLC) increase the share capital (SC) in view of the latest legislative changes. Here is an example of accounting for such transactions.
How AC to be increased
SC of LLC could be increased only when all participants have made their contributions in full. It is not allowed to increase SC of LLC, which has a share in its own SC (Art.16 of the Law of Ukraine “On Limited Liability Companies” of 22.02.2018 No. 2275-VIII; hereinafter - Law No. 2275).
There are only two variants for SC increasing: at the expense of additional contributions and without them.
SC can be increased without additional contributions at the expense of retained profit of LLC. Under such a condition, the proportion of sizes of shares of participants in SC should not be changed (Art.17 of Law No. 2275).
Each participant can make an additional contribution within the amount of SC increase in proportion to its share in it. If SC increases at the expense of additional contributions, the nominal value of the participant’s share of LCC can be increased by the amount within the additional contribution of such a participant (Art.18 of Law No. 2275).
In order to reflect in the account of the SC increase due to additional contributions of funds, stocks, non-current assets, the same correspondence of accounts is used, as during the SC formation.
The accounting of SC increase in various ways is illustrated in Examples 1, 2.
Example 1. SC of LLC increase at the expense of additional contributions
The general meeting of the participants of LLC decided to increase SC to the amount of UAH 240 000. The proportions of the participants’ share in such a condition do not change (50%, 30% and 20%). Participant 1 (VAT payer) introduced the inventory items, the rest of the participants made cash: Participant 2 - to the current bank account of LLC, Participant 3 - to the cashier of LLC.
|
No. |
Contents of business operations |
Accounting |
Amount, UAH |
|
|
Dr |
Cr |
|||
|
1 |
SC increase at the expanse of additional contributions of the participants was reflected: Participant 1 (UAH 240 000 × 50%); Participant 2 (UAH 240 000 × 30%); Participant 3 (UAH 240 000 × 20%) |
46/1 46/2 46/3 |
401/1 401/2 401/3 |
120 000 72 000 48 000 |
|
2 |
Received from Participant 1 of inventory items |
28 |
46/1 |
100 000 |
|
3 |
Right to a tax credit of VAT was reflected |
6442 |
46/2 |
20 000 |
|
4 |
Tax credit of VAT was accrued in accordance with the tax invoice registered in the URTI |
6412 |
6442 |
20 000 |
|
5 |
Money received from the Founder 2 |
311 |
46/2 |
72 000 |
|
6 |
Money received from the Founder 3 |
301 |
46/3 |
48 000 |
Example 1. SC of LLC increase at the expense of dividends reinvesting
General meeting of participants decided to increase SC at the expense of reinvesting dividends in the amount of UAH 25 000.
|
No. |
Contents of business operation |
Accounting |
Amount, UAH |
|
|
Dr |
Cr |
|||
|
1 |
Dividents were accrued to the LLC participants |
443 |
671 |
25 000 |
|
2 |
Changes in LLC statute in connection with the SC increase were registered |
46 |
401 |
25 000 |
|
3 |
Amount of dividends accrued to the participants was directed at SC increasing |
671 |
46 |
25 000 |
|
4 |
Amount of used income was written off |
441 (442) |
443 |
25 000 |
General participants meeting can decide to increase SC of LLC at the expense of additional contributions of participants and (or) third parties. However, third parties and members of LLC may make additional contributions only after each participant exercises its prerogative right or refuses to implement it. The amount of such additional contribution should be within the difference between the amount of the SC increase and the amount of additional contributions made by the participants (Art.18 of Law No. 2275).
