To increase its capital is an important moment in the life of any company. It could condition its future, through financial reorganization, equity restructuring and change of control. All these factors could give a new impulse to the activities of a company. The reasons for a transaction differ from company to company. It is the financing needs related to the investment program that can justify this growth and fund raising.
What is the capital increase?
The capital increase consists in increasing the amount of the capital so that it becomes higher than the value previously mentioned in the statutes. This financing tool helps to face new projects’ financial demands of the company. The increase of capital can be done through different processes. The first one is to add a new partner. The second one is to increase the social share that each partner should pay. The last one requires an investment of funds made by the company itself. The objective is to improve its financial situation.
How to carry out the capital increase?
The procedure for increasing the capital of a company involves following certain steps. Firstly, the manager of the company, whether he is the manager of the SCI or the SARL or the president of the SAS, should organize the Extraordinary General Meeting (EGM) in order to obtain the opinion of each partner. This is an essential step, because no capital increase is possible without the agreement of the partners. During an EGM, the associates will decide on the extent and the modalities of the increase of the capital which one seeks to achieve. Certain formalities are required to officially record this increase. Afterwards, the minutes should be registered with the tax authorities. Then, when a company increases its capital, third parties should be notified. For this purpose, a legal announcement must be drafted and published within one month. The last step is the creation and submission of a file at the Business Formalities Center.
What is the advantage of increasing the capital of a company?
There are many reasons why partners increase the capital of a company. In case of a decrease of activity, the capital increase improves the financial situation of your company. It allows to welcome new partners in the company and to inject new capital in order to invest new projects. The increase strengthens the company financially. The goal of the partners is to benefit from more available cash to keep their business running smoothly. The cash capital allows to make other investments. Another reason to increase capital, is to avoid resorting to indebtedness to a bank or to a financial institution.