On 19 February 2020 the Supreme Court of Cassation (Decision 4261) clarified the distinction between:
- shareholder financing; and
- shareholder capital contributions.
The court stated that payments made by shareholders to a company under shareholders' financing are loans; therefore, a shareholder is a company's creditor and the company must repay the debt, plus interests if any, at the expiry date of the debt. On the contrary, shareholders' capital contributions are finalised as a capital contribution in order to finance a company for a future capital increase excluding the shareholders' right of reimbursement, except in the event of a company's winding up and limited to the residual assets.
Therefore, in order to assess shareholders' right to be reimbursed by a company, it is essential but not sufficient to verify the company's balance sheet in order to check if the shareholders' financing is a debt or a capital contribution recorded as net assets.
Following such analysis, the Supreme Court of Cassation ruled that the shareholders claiming the reimbursement of the amounts paid to the company must evidence not only how the sums paid to the company are recorded in the balance sheet, but also what the practical purpose of the financing is and its final destination.
Accordingly, the Supreme Court of Cassation ruled that shareholders' financing recorded in a company's ledger does not constitute sufficient evidence to demonstrate the shareholders' right to be reimbursed. Thus, shareholders must disclose further evidence in order to support their claim to be reimbursed by a company.
The Supreme Court of Cassation's decision confirms previous decisions which stated that the courts must assess shareholders' actual financial commitment to a company and not only the item recorded in the company's balance sheet.
