A capital increase can take four forms , each meeting a specific objective.
Posted: Tue Jan 07, 2025 9:21 am
assets of your structure.
How does a capital increase work?
As its name suggests, a capital increase ultimately consists of increasing the initial amount of a company's share capital.
What are the different forms of capital increase?
Capital increase france phone data by cash contribution
This operation is actually one of the most commonly used methods by companies in order to strengthen their equity . The cash contribution will then consist of injecting liquidity into the company's capital. Two methods can be used in this case: a cash reinforcement on the part of the shareholders already present or the integration into the shareholding of the structure of new investors.
The company, in return for this financial contribution, will issue new shares . These will be allocated to the shareholders who participated in the capital increase. The shares acquired by the new shareholders joining the company generally grant them the same rights as those of existing shareholders, particularly in terms of voting and dividends. Only a specific clause in the articles of association stipulating otherwise can limit or modify these rights.
To ensure transparency and shareholder protection, the capital increase by cash contribution is subject to a strict legal framework as well as legal obligations.
Capital increase by contribution in kind
In the context of a capital increase by contribution in kind , the shareholders contribute to the increase by transferring assets other than money to the company. This could be, for example:
material goods: land, buildings, machines, vehicles or various equipment;
intangible assets: patents, licenses, brands, software, goodwill, but also know-how.
This type of increase is an interesting strategic option compared to cash contributions. These contributed assets then become the property of the company in exchange for the issuance of new shares to the contributors. This offers the latter the opportunity to increase its share capital without requiring liquidity.
Be careful, however, because contributions in kind are subject to extremely strict legal requirements . These requirements were introduced in order to avoid any abuse or overvaluation .
Capital increase by incorporation of reserves
This operation consists of transforming the company's reserves or undistributed profits into share capital. More concretely, this means that rather than being redistributed in the form of dividends to shareholders, these amounts are reinvested in the company. This strategy is therefore distinguished by its simplicity of implementation and the absence of external financial flows. This can, therefore, include:
legal reserves which are part of the profits that the law requires to be kept in reserve;
optional reserves . These are amounts set aside voluntarily for future needs;
carried forward profits , i.e. surpluses from previous financial years not yet distributed.
The company issues, in return, free shares or increases the nominal value of existing shares, thus reflecting the increase in its share capital. The capital increase by incorporation of reserves, although it does not require any cash contribution, is a legal operation involving compliance with several important steps.
How does a capital increase work?
As its name suggests, a capital increase ultimately consists of increasing the initial amount of a company's share capital.
What are the different forms of capital increase?
Capital increase france phone data by cash contribution
This operation is actually one of the most commonly used methods by companies in order to strengthen their equity . The cash contribution will then consist of injecting liquidity into the company's capital. Two methods can be used in this case: a cash reinforcement on the part of the shareholders already present or the integration into the shareholding of the structure of new investors.
The company, in return for this financial contribution, will issue new shares . These will be allocated to the shareholders who participated in the capital increase. The shares acquired by the new shareholders joining the company generally grant them the same rights as those of existing shareholders, particularly in terms of voting and dividends. Only a specific clause in the articles of association stipulating otherwise can limit or modify these rights.
To ensure transparency and shareholder protection, the capital increase by cash contribution is subject to a strict legal framework as well as legal obligations.
Capital increase by contribution in kind
In the context of a capital increase by contribution in kind , the shareholders contribute to the increase by transferring assets other than money to the company. This could be, for example:
material goods: land, buildings, machines, vehicles or various equipment;
intangible assets: patents, licenses, brands, software, goodwill, but also know-how.
This type of increase is an interesting strategic option compared to cash contributions. These contributed assets then become the property of the company in exchange for the issuance of new shares to the contributors. This offers the latter the opportunity to increase its share capital without requiring liquidity.
Be careful, however, because contributions in kind are subject to extremely strict legal requirements . These requirements were introduced in order to avoid any abuse or overvaluation .
Capital increase by incorporation of reserves
This operation consists of transforming the company's reserves or undistributed profits into share capital. More concretely, this means that rather than being redistributed in the form of dividends to shareholders, these amounts are reinvested in the company. This strategy is therefore distinguished by its simplicity of implementation and the absence of external financial flows. This can, therefore, include:
legal reserves which are part of the profits that the law requires to be kept in reserve;
optional reserves . These are amounts set aside voluntarily for future needs;
carried forward profits , i.e. surpluses from previous financial years not yet distributed.
The company issues, in return, free shares or increases the nominal value of existing shares, thus reflecting the increase in its share capital. The capital increase by incorporation of reserves, although it does not require any cash contribution, is a legal operation involving compliance with several important steps.