Capital Increase or Decrease: Requirements and Procedure

Capital Increase

A capital increase is generally carried out by issuing new shares or units. This can be done either by granting subscription rights to existing shareholders or by bringing in new investors. Certain legal requirements must be fulfilled for a capital increase. First, the shareholders’ general meeting must approve the measure. A change to the company’s articles of association is required in order to embed the higher capital amount. This is achieved by amending the share capital provision in the articles. Furthermore, the capital increase must be registered in the Commercial Register to become legally effective. Only upon registration does the capital increase become official and binding for all parties involved.

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Capital Decrease

A capital decrease is undertaken by companies in order to reduce their equity. There can be several reasons for this: reducing losses, improving the capital structure, or repaying excess capital to the shareholders. A capital decrease can be effected either by reducing the nominal value of the shares or by repaying capital to the shareholders. Repayment of capital is particularly important when restructuring a company or remedying financial bottlenecks. Shareholders must likewise approve this measure in a general meeting. The process involves reducing the nominal value of the shares or repaying capital to the shareholders. Here too, the change must be entered in the Commercial Register.

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Procedure

Both processes begin with a resolution by the general meeting, followed by an amendment of the articles of association and registration in the Commercial Register. Compliance with legal requirements is essential for both measures in order to avoid legal consequences. Capital increases and decreases are important instruments for companies in Switzerland, but they must be carefully planned and executed.

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