Types of capital increase

There are times when capital companies need, for various reasons, to increase their resources to be able to carry out future actions, allowing for contributions from both existing partners as well as new partners (due to lack of liquidity, business expansion, entry of new investors, compensation of existing credits, etc.).

During such periods, companies often opt to increase their share capital, a process that can be tailored to their specific needs. This can involve the creation of new shares or participations, or the increase of the nominal value of existing ones. In both scenarios, the capital increase can be executed in a variety of ways, offering flexibility to the company.

Capital increase through monetary contribution

The capital increase is carried out through cash contributions to the company’s assets. In the case of public limited companies, the previously issued shares must be fully paid up, or the outstanding amount must not exceed 3% of the share capital.

Capital increase through non-monetary contribution

In this case, the capital increase is carried out through the contribution of other assets, not monetary contributions, whose ownership and economic valuation must be proven. A report from the administrators detailing the contributions available to the partners will be necessary to do this.

Capital increase for credit compensation

In the case of credit compensation, the contribution is made in lieu of existing credits. These credits must be liquid, due and payable in the case of limited companies, and in the case of public limited companies, they must be at least 25% of the credits owed. The remaining credits must be offset liquid, due and payable, and their maturity may not exceed five years. Understanding these conditions is crucial for companies considering this modality.

It will be crucial that the operation be accompanied by a comprehensive report from the administrative body. This report will detail the nature and characteristics of the credits to be offset, the identity of the contributors, the amount of the credits, and the number of shares to which they correspond. This level of detail will ensure that all stakeholders are fully informed and involved in the process. The operation itself involves the delivery of participation in the company’s capital in exchange for extinguishing the existing debt.

Capital increase charged to profits or reserves

It is that capital increase that is made at the expense of reserves or profits belonging to the company’s assets (available reserves, share premiums and legal reserve in its entirety for limited companies and legal reserve that exceeds the 10% of the share capital already increased in the case of public limited companies).

Additionally, a series of requirements must be considered and respected in capital increase operations, such as the preemptive subscription right that must be respected in some cases and the reinforced majorities necessary for adopting the agreements.

On the other hand, it is important to highlight thatthe capital increase implies the modification of the Bylaws. This legal change is a significant implication of the capital increase and must also comply with a series of formalities such as the obligation to make the agreements public. by public deed, and its subsequent registration in the Commercial Registry. Understanding these implications will make you feel aware of the legal changes that come with the capital increase.