5.12 Shares as a Means to Purchase Other Goods 279declaration”.^722 Depending on the choices of the Member State, there can be three
important exemptions from the general requiring non-cash consideration for the
shares of a public limited-liability company to be independently valued. These are
the takeover exemption, the merger exemption,^723 and all shareholders’ consent.^724
Interpretation. Sometimes it is a matter of interpretation whether the company
must comply with such requirements as to form. It may be unclear whether the
company is regarded to have issued shares other than for a cash consideration. (1)
In order to prevent circumvention, company laws may look at substance rather
than form.^725 A classic example of circumvention prohibited by company laws is
when the allottee makes a cash payment to the issuer’s bank account and the issuer
immediately buys assets from the allottee with those monies. (2) Furthermore,
there may be differences as to what is regarded as “consideration in cash” or “con-
sideration other than in cash”.
In England, consideration in cash means that the company should receive “money or
money’s worth”,^726 because a cash consideration has been defined as “(a) cash received by
the company, (b) a cheque received by the company in good faith that the directors have no
reason for suspecting will not be paid, (c) a release of a liability of the company for a liqui-
dated sum, (d) an undertaking to pay cash to the company at a future date, or payment by
any other means giving rise to a present or future entitlement ... to a payment, or credit
equivalent to payment, in cash.”^727 In contrast, German law would not recognise the is-
suer’s own debts as “cash”. The conversion of debts into shares would therefore require
compliance with the same requirements as to form as the sale of capital goods for shares.
This means that the issuer’s own debts must be valued.^728
Permitted assets. Some goods are not recognised as suitable consideration for
shares according to the Second Directive. If the company issues shares for a con-
sideration other than in cash and the subscribed capital is increased, the considera-
tion must consist of assets capable of economic assessment. An undertaking to
perform work or supply services may not form part of those assets.^729
For example, a listed telecommunications provider might want to engage a consultancy
firm to assist in the development of corporate strategy. According to the wording of the
(^722) Articles 10a(2) and 10b(1) of Directive 77/91/EEC (Second Company Law Directive),
inserted by Article 1(2) of Directive 2006/68/EC.
(^723) Article 27(3) of Directive 77/91/EEC (Second Company Law Directive).
(^724) Article 27(4) of Directive 77/91/EEC (Second Company Law Directive).
(^725) In Germany, “der wirtschaftlich einheitliche Vorgang”. See Hüffer U, AktG (2002) § 27
number 15: “Schwierig bleibt die Abgrenzung gegenüber bloßen Verwendungsverbindun-
gen, also Abreden über Mittelverwendung, die sich nicht als Rückführung von Geldein-
lagen darstellen ...”
(^726) Section 589(5)(a) of the Companies Act 2006.
(^727) Section 583(3) of the Companies Act 2006.
(^728) Hüffer U, AktG (2002) § 27 number 25: “Die Probleme liegen nicht in der Einlagefä-
higkeit, sondern der Bewertung.” “Werthaltig ist die Forderung nur insoweit, als die AG
imstande wäre, sie ohne Kapitalerhöhung zu bezahlen ...”
(^729) Article 7 of Directive 77/91/EEC (Second Company Law Directive).