A capital increase is understood to mean all capital measures aimed at increasing the equity of a company and which can be carried out both as internal financing and by way of external financing . The opposite is the capital reduction .
Capital increases are mostly based on economic causes and mainly affect corporations because their capital requirements are high and their liability is usually limited to the company's assets (there is no separate liability of the shareholders beyond the contribution obligation). In the case of commercial partnerships , in addition to the company's assets, there is also unlimited liability for the private assets of the fully liable partners. These are the reasons why capital increases are regulated in detail in the Stock Corporation Act, which applies to stock corporations and limited partnerships based on stocks . The AktG is designed for financially strong companies, so that capital increases represent an essential source of their financing. The legislature has only created fragmentary capital increase regulations for other legal forms.
Reasons for capital increases
When converting any legal form into a stock corporation, capital increases often occur, because the AG is the most capital-intensive legal form and therefore there is a need to catch up due to the legal form. Capital increases are necessary for economic reasons if investments are planned (physical investments or acquisition of shares) and their previous coverage ratio is to be maintained by equity. Without special investment plans, equity increases if, for reasons of creditworthiness, an increase in the equity ratio is necessary to improve the balance sheet structure or if the proportion of debt is to be reduced in order to reduce the interest burden ( finance leverage ). The latter leads to a trend towards more favorable earnings, so that the operational break-even is reached earlier with lower fixed costs ( operating leverage ).
Capital increases at the AG
The AktG deals in great detail with the various types of capital increases in Sections 182 to 206 AktG. A general distinction is made between the effective and the nominal capital increase. Effective capital increases lead to an increase in the amount of equity, nominal merely mean a shift at the expense of the reserves and in favor of the share capital ( liability swap ). All capital increases have in common that they have to be resolved in advance by the general meeting and only become legally effective when they have been entered in the commercial register.
Effective capital increase
Here the law differentiates between ordinary, conditional and authorized capital increases. These forms represent external financing because the inflow of funds comes from sources outside of society.
- As a rule, the capital increase is the inflow of new capital through an ordinary capital increase (§ issuing new shares at a fixed issue price that must not be below the nominal value ( AktG). to AktG). It requires a resolution by the general meeting to amend the articles of association (Section 182 AktG) and is implemented by
- A conditional capital increase ( to AktG) exists if, after a corresponding resolution by the general meeting, the increase in the share capital is only to be carried out to the extent that shareholders make useof an exchange or subscription right(§ 192 AktG). she
- With the authorized capital ( to AktG), the general meeting authorizes the management board for a maximum of 5 years to increase the share capital by a maximum of 50% of the previous share capital. It serves to facilitate the procurement of capital and gives the management board the opportunity to select the right time for the capital increase ( capital market conditions at the time of issue) without having to obtain a new resolution by the general meeting.
Forms of effective capital increase
There are basically two forms of capital increase:
- Rights issues in which existing shareholders receive subscription rights to participate in the capital increase (i.e. the purchase of new, additional shares ). As a result, the existing shareholders can keep their percentage stake in the stock corporation at the same level and are not subject to the dilution effect .
- Capital increases excluding subscription rights .
Various ways are conceivable for carrying out a capital increase.
- In the bookbuilding process , after an advertising phase, just like an IPO, a subscription period is set, which later leads to the allocation of the new shares .
- In the block trade, on the other hand, all of the new shares are sold to an investment bank , which in turn tries to place them in the market at its own risk.
- The third variant, which has become more and more established in recent years, is accelerated bookbuilding , in which the new shares are sold to interested investors in a short time (depending on the market situation, often in a few hours up to 1–2 days).
Nominal capital increase
Nominal capital increases are contested from company funds (§ retained earnings and capital reserves of the most recently approved annual financial statements are convertible in the event of capital increases from company funds. The “other” reserves may - with the exception of an existing balance sheet loss or loss carryforward ( (2) AktG) - be converted in full; the statutory reserves and capital reserves, however, only if they together exceed 10% of the share capital (Section 208 (1) AktG).to AktG) and are therefore internal financing. Only the
The balance sheet preceding the capital increase must be checked and may not date back more than 8 months ( balance sheet date .) AktG). In addition, when registering the capital increase, it must be ensured that the financial situation has not deteriorated since the
The nominal capital increase is technically done by issuing bonus shares ( bonus shares ). There is no inflow of funds (liability swap) because the shareholders do not have to make any cash contributions. By issuing bonus shares, the total value of the company remains unchanged, but it is spread across more shares, which causes the price of each share to fall. The shareholders receive nothing for free from the nominal capital increase; the term “bonus shares” is therefore misleading.
The reason for this form is the lowering of a high share price ("heavy shares") to improve the attractiveness of the stock market. Even nominal capital increases only become effective when they are entered in the commercial register (AktG), whereby it is legally faked that the new shares are fully paid up.
Capital increase at the GmbH
According toGmbHG, the effective capital increase requires a resolution to amend the articles of association, acceptance of the capital contribution to be made and entry in the commercial register. Since the old shareholders do not have a right to participate in an effective capital increase by virtue of law (no statutory subscription right as with the AG), changes to the participation rates and loss of assets are possible, provided the articles of association do not make any provisions. An "indirect" type of capital increase is the possibility of calling in additional contributions ( and GmbHG), which considerably simplifies the capital increase in the GmbH.
Capital increase in other legal forms
In the case of partnerships, unless otherwise stipulated in the articles of association, all shareholders must agree to a capital increase at the shareholders' meeting, because the shareholdings may be shifted. Thereafter, the capital increase takes place through informal write-up of the added equity amounts to the variable equity account of the shareholders (HGB) or through the non-withdrawal of annual surpluses. However, increases in the nominally bound contributions of the limited partners require entry in the commercial register ( HGB). Capital increases through the admission of new shareholders mean that the new shareholders are also liable for the company's previous liabilities (Sections 28, 130, 173 HGB).
The takeover of new shares in the cooperative is carried out by the previous or new members (§, and GenG). The declaration of membership required for this must be submitted to the cooperative register.
Capital increase by silent partners
The inclusion of silent partners leads to an inflow of funds and is regulated in § to HGB. Silent partners do not need to participate in the loss, but must participate in the profit ( HGB). A change of legal form is not necessary due to the entry of silent partners; the existing legal form forms an internal company with the silent partner, which does not appear externally. A silent partnership can only be shown as equity if it also participates in losses; a mere profit sharing leads to passivation as outside capital . In the case of a stock corporation, the silent partnership requires the approval of the general meeting. The silent partner's participation in the loss is transferred to the company's assets ( (2) HGB).
Legal situation in Switzerland
In Switzerland, too, there are special regulations that define the type and scope of capital increases. These can mainly be found in Articles 650 to 653i of the Swiss Code of Obligations , but other provisions such as the Banking Act are also applicable in some cases. According to the Code of Obligations, there are three variants of the capital increase, the ordinary, the approved and the conditional capital increase.
Ordinary and authorized capital increase
The ordinary capital increase is decided by the general meeting. The board of directors is obliged to do this within three months and to enter it in the commercial register. If the resolved capital increase is not carried out during this time or is not entered in the commercial register, the resolution expires.
The authorized capital increase allows the increase in equity to be more flexible. In particular, the General Meeting authorizes the Board of Directors to independently increase equity by a certain amount. If the increase is not made within two years, the decision is forfeited. In addition, the authorized capital may not exceed 50% of the existing share capital.
Conditional capital increase
In the case of the conditional capital increase, the company issues convertible bonds , i.e. bonds that are converted into equity either at the request of a party (voluntary convertible bond) or on a specific date (mandatory or compulsory convertible bond). Like the other two forms, the conditional capital increase must be resolved by the general meeting. As with the authorized capital increase, the amount is also limited to 50% of the existing share capital.
Special instruments for banks
In addition to the general options for capital increases according to OR, since the revision of the Banking Act (BankG) and the implementation of the so-called “too big to fail” proposal on March 1, 2012, there are additional options for capital increases for banks and mainly financially oriented groups in accordance with Art 11–13 of the Banking Act. Specifically, this concerns on the one hand the creation of additional conversion capital through the issue of Coco bonds or buffer notes and, on the other hand, the creation of so-called reserve capital, a special form of conditional capital increase that is not subject to any legal restrictions in terms of amount and time.
- Hans-Ulrich Wehler, German History of Society , Volume 2, 1987, p. 67.
- Österreichs Verbund starts capital increase , Börsenzeitung dated November 9, 2010, p. 13 on the investment-related capital increase
- In this case, own shareholders are considered outsiders from the company's point of view
- Willi Albers in: Lexikon der Betriebswirtschaft (Ed. Wolfgang Lück), 1989, p. 64
- Willi Albers, Finances to Trade Barriers , 1981, p. 63.
- Art. 650 Swiss Code of Obligations
- Art. 651 Swiss Code of Obligations
- Amendment of the Banking Act (BankG): "too big to fail" Law News, accessed on June 6, 2017