Share capital increase
Last updated: 29 May 2024.
The share capital of a company may be increased by issuing new shares or by the company's own funds being transferred from unrestricted equity to share capital (bonus issue).
A new issue means that the company is supplied with new capital or reduces its debt. A bonus issue involves, however, only an accounting reposting from unrestricted equity into share capital, and will not supply fresh capital to the company 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 submit 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 is going to be raised by transferring funds, by converting debt or by requesting further contributions from current and/or new shareholders. Additional share capital can be contributed in cash or in the form of other assets. The board must also decide whether to issue new shares or increase the nominal value of existing shares.
The general meeting decides on any increase of share capital
The decision regarding 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 company’s share capital must always state
- the amount by which the share capital is to be increased, or specify upper and lower limits 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.
In addition, it must specify information about the subscription deadline, settlement, dividend right and expenses. If the share capital contribution is to be settled by offsetting or by using non-cash assets, the decision must include information about this. If you need more information, please take a look at the Limited Liability Companies Act.
The amount of the share capital and the value are always set out in the company’s articles of association. Hence, a capital increase can only be decided by the general meeting amending the articles of association.
If the capital increase takes the form of a bonus issue, the resolution must, as a minimum, state the amount by which the share capital is to be increased and whether the increase shall take place through raising the nominal value or through issuing new shares. If new shares are issued, the existing shareholders must be assigned shares in proportionately the same ownership percentage as previously. It is not permitted to assign new shares to only a few of the shareholders through bonus issue.
If it is to be possible to settle the share capital contribution by offsetting (debt conversion) or using other non-cash assets, a special statement shall be prepared in this connection. The statement shall be signed by the entire board and confirmed by the auditor. The timing of the valuation can be no earlier than four weeks prior to the general meeting’s resolution.
Registration in The Register of Business Enterprises
The Register of Business Enterprises must be notified of the capital increase within three months after the final date for subscription, or the resolution will lapse.
The final subscription date can be put to maximum three months. This means that the time limit for the notification of the decision is six months after the decision is made in the general meeting. This deadline does not apply if the capital increase was achieved through a bonus issue.
You must enclose the following documents
- minutes from the general meeting showing the resolution regarding share capital increase and amendment of the articles of association. (minutes from the board meeting if the board makes use of an authorization).
- updated articles of association
- a declaration from an auditor, a financial institution, an attorney or an accountant confirming that the capital has been paid up (doesn’t apply for bonus issues)
If it is non-cash contributions or conversion of debt, you also need to enclose
- a statement dated and signed by the entire board and confirmed by the auditor
The share register must be updated with new information about shareholdings, if any.
