Share capital increase in a public limited company
Last updated: 18 August 2022.
The share capital of a public limited company may be increased by issuing new shares, or by the company's own funds being transferred from unrestricted equity, also called bonus issue.
A new issue of shares means that the company is supplied with new capital or reduces its debt. A bonus issue involves only an accounting reposting from unrestricted equity into share capital, and will not supply fresh capital or reduce its debt.
The board submits a proposal to the general meeting
The first step in increasing the share capital is for the board to draw up a proposal to the general meeting that the capital is to be increased by a certain amount, and also to propose relevant changes in the articles of association. The board proposes whether the capital should be raised by transferring funds, by converting debt or by requesting further shareholder contributions. Additional share capital can be contributed in the form of cash or assets. The board must decide whether to issue new shares, or increase the nominal value of existing shares.
The general meeting decides on any increase of the share capital
The decision regarding the share capital increase and new articles of association is made by the general meeting. The board may decide to increase the share capital if an authorisation has been given by the general meeting.
As a minimum, a resolution to increase the share capital through issuing new share must state
- the amount by which the share capital is to be increased, or the upper and lower limit for such an increase
- the nominal value of the shares
- the amount to be paid for each share
- who is entitled to subscribe for the new shares
- whether the shares are to be settled by using non-cash assets or by offsetting
As a minimum, a decision to increase the share capital upon bonus issue must contain
- the amount by which the share capital is to be increased
- whether the share capital is to be implemented through increasing the nominal value of the shares, or by issuing new shares
In addition, it must specify information about the subscription deadline, settlement, dividend right and expenses.
The amount of the share capital and the value are always set in the company’s articles of association. Hence, a capital increase must be approved by the general meeting amending the articles of association.
If the share capital contribution is to be settled by offsetting, ie conversion of debt, or by using non-cash assets, the auditor must draw up and sign a separate statement for this. The timing of the valuation can be no earlier than four weeks prior to the general meeting’s decision.
Registration in the Register of Business Enterprises
The capital increase has to be reported to the Register of Business Enterprises within three months after the deadline for subscription has expired, otherwise the resolution will lapse. This deadline does not apply if the capital increase has been achieved through a bonus issue.
You must always enclose the following documents
- minutes from the generel meeting showing the resolution to increase the share capital and amendment of the articles of association, or minutes from the board meeting if the board makes use of an authorisation
- articles of association
- a statement from an auditor, financial institution, an attorney or an accountant confirming that the share capital contribution has been paid up, if this only consists of cash
If it is non-cash contributions or conversion of debt, you also need to attach
- a statement drawn up and signed by the auditor
- a statement from the auditor confirming the payment of the share capital contributions