Capital Increase 1

Meaning of Capital Increase

For you as a company, your company’s equity plays an important role. For this reason, a capital increase can be quite important and also useful. This is primarily a common practice in a stock corporation or a GmbH . But how is capital actually increased and what should be considered?

What is a capital increase?

According to ELECTRONICSENCYCLOPEDIA.COM,  a capital increase is a measure with which a company increases its equity . You can find the increase at an AG, a stock corporation and at the limited liability company, the GmbH. The self-financing measure is used to continue financing the company .

Reasons that speak for a capital increase

A capital increase at your GmbH or AG can have many different reasons.

  • With your company, you have the desire to get a better credit rating with more equity .
  • It is used by your company to pay off debts .
  • Are you planning a larger investment or want to take over another company.
  • You want to keep growing your company and issue new shares to get more investors.

Forms of capital increase

In order to increase your equity, you have various forms or types of capital increases available. But these are precisely defined by the legislature. For an AG, this is regulated in § 182 AktG to § 220 of the AktG . For the GmbH this is described from § 55 GmbHG . If you take a closer look at the Stock Corporation Act, then there are the following options for increasing the capital.

The ordinary capital increase

With this form, new or young shares are issued. This means that existing shareholders have a subscription right to these shares. This subscription right serves to avoid a price loss. On the one hand, the shareholders maintain their voting rights and, at the same time, their share in the company. With this capital increase, it is strictly ensured that the increase always takes place in a certain subscription ratio. For example, if an existing shareholder owns three shares, he has the option of buying a new share. However, he can also have the value paid out, but at the same time waives the safeguarding of his voting rights. It is important for you to know that this increase can only be carried out at an AG if the approval of at least 78.5% of the general meeting is available.

The authorized capital increase

The authorized capital increase differs significantly from the ordinary increase. In this case, the main board of the AG receives the authorization to increase the share capital. The stipulation here is that this increase is limited to a maximum of five years and the increase may only be up to 50% of the currently available equity. No further approval is required from the main board during this period of five years. This form is often used when a company intends to be able to react flexibly to changes in the capital market. With the approved increase, you plan to issue new campaigns without having to hold a general meeting each time.

The conditional capital increase

The form of the conditional capital increase is dependent on a certain amount. This dependency is that investors will perceive a share swap that is offered to them. It then takes place, for example, by exchanging convertible bonds . In this form, there is also no provision for existing shareholders to have no subscription rights. It is therefore possible for them to experience a decline in the value of their shares. This depends entirely on how many new shares are created through the exchange of bonds.

Special features of the capital increase of the legal form AG

When it comes to the capital increase, there are a few things to consider for both a stock corporation and a GmbH.

Effective capital increase at the AG

The effective capital increase of the AG always results in an inflow of funds from outside. The AG thus receives actual fresh capital, for example through the ordinary increase in the form of the issue of fresh new shares. You can also divide the effective increase into two categories .

Category Description
Rights issue When issuing subscription rights , your AG issues new shares and all existing shareholders receive subscription rights to these shares. As already mentioned above, you will receive new shares according to the specific subscription ratio to your old shares.
Capital increase excluding subscription rights However, the AG also has the option of completely excluding subscription rights in the event of an effective capital increase .

With the effective capital increase you also have to differentiate between three possible procedures.

Procedure description
Block trade Block trade is a process in which new shares are sold as a block, for example to an investment bank. This then brings the new shares onto the market at its own risk.
Bookbuilding There is a so-called subscription period for the bookbuilding process . New shares can only be subscribed within this period. Allocation takes place when the newly issued shares have been subscribed.
Accelerated bookbuilding This procedure is a kind of sub-form of the Block Trade procedure. The difference here is that the shares are sold to investors within a few days.

Capital Increase 1