Types of Share Capital Increases: Framework and Impacts

Share capital corresponds to the contributions made by the shareholders and represents the nominal value of all of the shares. Its increase, carried out in accordance with the applicable legal and statutory rules, strengthens the company’s equity and directly affects both its financial structure and the shareholders’ position.

Types of Share Capital Increases

A share capital increase may take different forms, depending on the source of the funds used:

• Cash or inkind contributions: new contributions made by existing shareholders or new investors; this is the most common form of capital increase.
• Incorporation of reserves or retained earnings: conversion of amounts already existing in the company’s assets into share capital, without any new funds entering the company.
• Conversion of credits into capital: frequently used in financial restructuring, allowing creditors to become shareholders.

Each method produces distinct financial, accounting and corporate effects, and must therefore be chosen according to the company’s specific circumstances.

Purpose and Impact on Shareholders

Companies resort to capital increases to finance investments, increase equity, improve their financial standing with third parties or enable the entry of new strategic shareholders. In some situations, these operations may also benefit from favourable tax treatment.

One of the main effects is the potential dilution of shareholders who choose not to participate in the capital increase. To mitigate this impact, pre-emptive right to subscribe to new shares or quotas may be granted to the shareholders, allowing them to maintain their relative position in the company’s share capital.

Conclusion

A share capital increase is a key corporate management tool with significant legal, financial and strategic implications. Its implementation should follow a thorough analysis of the company’s situation and the shareholders’ interests, ensuring that the operation contributes to creating sustainable value in the medium and long term.

Many companies remain unaware of the potential and advantages of a wellstructured capital increase.

VPA provides comprehensive support throughout the entire process, from identifying the most suitable solution to its implementation, ensuring legal precision, regulatory compliance and adherence to all applicable deadlines.