How to increase a company’s share capital?
A capital increase is a decisive step in the life of a growing company. In addition to strengthening the company’s equity capital, it also enables new partners or investors to be integrated into the company’s share capital, in particular investment funds wishing to support the company’s development.
But how can you increase your share capital effectively? What are the different forms of capital increase, and what steps should you take to integrate a fund into your company’s capital?
What is a share capital increase?
A share capital increase is the operation by which a company decides to increase the amount of its share capital, generally set out in the company’s bylaws. This operation can take several forms:
- Cash capital increase: injection of new funds by investors, including investment funds;
- Capital increase through contribution in kind: contribution of assets, equipment or securities;
- Capital increase by incorporation of reserves ;
- Capital increase by offsetting receivables.
Each form of share capital increase has its own specific procedures that need to be mastered in order to secure the process.
Why proceed with a capital increase involving a fund?
Including a fund in the company’s share capital via a capital increase has many advantages:
- Financing organic growth or acquisitions,
- Strengthen share capital without increasing the company’s debt,
- Benefit from a strategic partner involved in governance,
- Prepare for the eventual sale or transfer of your business.
This capital operation must be aligned with the partners’ strategy and adapted to the company’s legal structure.
What are the steps involved in increasing share capital and integrating a fund?
1. Determine the amount of the share capital increase
Before proceeding with a capital increase, it is essential to determine the amount required, based on the development project, the fund’s desired level of participation and the company’s valuation.
2. Choosing the form of capital increase
Most funds opt for a cash capital increase, but there are other methods such as incorporating reserves or offsetting receivables.
Each form requires adaptation of the company’s bylaws.
3. Amend company bylaws
Any increase in share capital must be the subject of an amendment to the bylaws, approved at an Extraordinary General Meeting. The new partners, including the fund, are then officially integrated into the company’s share capital.
4. Deposit of funds and legal formalities
The amount of the capital increase must be deposited in a blocked account, and a certificate of deposit is provided. Next, the transaction must be registered and published in a legal gazette, then reported to the Registrar of Companies for updating of the company’s share capital.
What are the consequences of a capital increase for existing shareholders?
Integrating a fund via an increase in share capital modifies the distribution of shares, which can dilute the rights of existing partners. Anticipation is essential:
- The new distribution of share capital,
- The fund’s rights and obligations (dividends, voting rights, shareholders’ agreement),
- Business plan and reporting commitments.
The success of a capital increase depends on careful preparation and balanced negotiations between all parties.
How do you determine the optimal amount for a share capital increase?
The amount of the share capital increase depends on the investment project, the negotiated valuation, the level of the fund’s stake, and the legal form of your company.
Having an expert guide you through the valuation process means you can secure the process and optimize the structure of the company’s new share capital.
