Restitution of contributions without reduction of capital

Every contribution made entails an increase in capital (or in capital and additional paid-in capital), but not every restitution of contributions generates a decrease in capital. The exception to the general rule is when the contribution is a temporary usufruct right over a certain asset.

Article 127 of the Code of Commerce (C. de Co.) establishes that assets in usufruct may be contributed to companies, in which case the company "will have the same rights and obligations of the common usufructuary". Likewise, Article 143 of the same bylaws establishes that "the associates may not request the restitution of their contributions, nor may the corporation do so, except in the following cases: (...) 1. During the partnership, in the case of things contributed only in usufruct, if such restitution has been stipulated and regulated in the contract".

According to Article 823 of the Civil Code (C.C.), usufruct is a real right consisting of "the power to enjoy a thing with the charge of conserving its form and substance, and to return it to its owner". Such term of restitution may be freely negotiated by the parties, provided that, being constituted in favor of a juridical person, it does not exceed thirty years. When the day arrives or when the condition set for its termination is accredited as fulfilled, the usufruct will be consolidated with the bare ownership, a fact that does not generate occasional gain according to the provisions of article 303 paragraph 3 of the Tax Statute.

Therefore, whoever contributes in kind a usufruct right for a determined period of time, is paying with such time of use and enjoyment his contribution to the patrimony of the company. Once such term is fulfilled, and the usufruct is consolidated with the bare ownership, it will be understood that the shares subscribed were effectively paid with such contribution. A similar case occurs with the contribution in industry, where, through an obligation to do, the shareholder pays its contribution and upon completion of such contribution, the subscribed shares will be considered as effectively paid.

The consolidation of the usufruct with the bare ownership is a natural effect when the usufruct contract is conferred for a fixed term.

And this seems to be the understanding of the commercial legislation when it establishes in its article 143 that, when a good has been contributed in usufruct, and when the term of this has been fulfilled, the restitution of the contribution will operate -by the referred consolidation-.

This case cannot be assimilated to the other events of restitution of contributions (when the contribution is restituted once the external liability is paid in a liquidation and when the corporate contract is declared null and void with respect to the partner requesting the restitution) since in these cases the counterpart of the asset restituted, in the balance sheet, is in the equity. In such a case, the restitution of contributions without reduction of capital operates.