News

On issues of an in-kind contribution in the context of the economic crisis

At the time when every business fights the impacts of the global crisis and when credit financing is beginning to hit the bounds of possibilities in many companies, one of the famous investment companies is coming with a revolutionary solution to a lack of equity.

How to do it? In 2008 people in Key Investments decided to increase their engagement in the area of culture and sports. For this purpose they decided to increase their share in SK Slavia Praha – fotbal a. s., which is the owner of the famous football club of the same name. Unfortunately, as things are during a crisis and after it, liquidity was somehow lacking. Also the existing major shareholder objected to a decrease in its share. And here a creative solution had to come.

Key Investments decided for an in-kind contribution. As an asset which should be according to commercial law economically usable for the company’s business activities and which should have a specific value determined by an expert, they offered valuable rights to the company. And not any old valuable rights! They represented a sum of theoretical indemnifications from the life insurances of the football club players. Together this made a sizeable sum of CZK 618 million. A nice increase in a company’s capital!

We are ourselves surprised why we’ve never come up with such an elegant solution. Do you have a problem with equity? Have something valued that COULD HAVE some value. Do you have any life insurance? Bring it here! Or we can go further. Do you have your house insured against a natural disaster? Does your dog have this special health insurance for pets? Or do you have a nice porcelain mug at home that could cost 1x000 the price in 100 years? Excellent! The author of this article made a bet with one undisclosed lottery company not going bankrupt that the Indian pilot Narain Karthikeyan would win in this year’s season of Formula 1. The odds are 10000:1 and the bet was 10 euros. Soon he will increase the capital of his company by almost CZK 2.5 million. Only the tax acquisition price of the share will still be low.
As well as you, we cannot believe how something like this could have got away. The whole thing must have been sanctified by an expert. And an auditor. And also the Commercial Register should have noticed a thing like that. But this didn’t happen. As you can see, the economic usability of an in-kind contribution is not such a hot topic.

Author: Daniel Kovačovič

www.tacoma.eu