Rules for increasing the authorized capital in limited liability companies

The Federal Republic of Germany

The minimum authorized capital of a Limited Liability Company in the Federal Republic of Germany is 25,000 Euros. A minimum face value of 1 Euro per share has been set for easy distribution of shares between different shareholders. In the form of a legal entity, all partners become one shareholder, but they can then become more shareholders as a result of the transfer of an existing share or the issuance of new shares. The issuance of new shares is possible only at the discretion of the partners, which in turn leads to changes in the charter. Based on the shareholders’ decision, the newly issued shares will be offered either among existing partners or to third parties. New shares can be realized through cash or cash equivalent values. If cash equivalent values ​​are used, the value of that investment is assessed by an external auditor and an opinion is obtained and submitted to the registration authority. In Germany, the increase in the authorized capital of limited liability companies is regulated by the Act on Limited Liability Companies. According to this act, the authorized capital of LLCs is increased in one of the following two ways: 1 – Increase in the nominal value of the existing share 2 – Issuance of new shares. Each LLC, regardless of the type of capital increase, must be notarized and reflected in the commercial registration. Capital increases that are not registered within three months are considered illegal. The balance sheet reflecting the capital increase and the auditor’s opinion on the increase must be submitted to the court conducting the commercial registration. When an LLC increases its authorized capital by issuing new shares, the newly issued shares are distributed among the shareholders in the percentage they have. Any deviation from this is against the law. With the increase of the authorized capital, the rights to shares remain unchanged.

The Swiss Confederation

The Swiss Confederation is the body that decides to increase the authorized capital of the general meeting of founders in accordance with Article 781 of the Code of Obligations, Part 5 of the Federal Law on Amendments to the Swiss Civil Code. Pursuant to Articles 786 and 787 of this Code, the transfer of capital investment and shares of a company must be fully approved by the participants (shareholders) at the general meeting. Execution of this decision is the responsibility of the board of directors. Acquisition of shares by existing founders and capital investment are regulated by the provisions of the company’s memorandum of association. Increasing the company’s capital through the acquisition of shares can only be done by existing founders. At the same time, capital investment through the acquisition of shares is not open to the public. Commercial registration of the increase of the authorized capital must be carried out within three months after the decision of the general meeting of participants, otherwise the decision is considered invalid. In addition, the following conditions must be met for capital growth through the acquisition of shares: 1. Decision of the general meeting of participants 2. The right of participants of the company to participate in the acquisition of shares3. Increase in the company’s capital on the basis of equity4. Capital growth report and audit approval5. Announcement by the general meeting of participants of changes in the provisions of the charter6. Commercial registration of the increase of the authorized capital According to the mentioned code, additional capital investment is regulated by special conditions. Under these conditions, additional capital investment may be used to meet short-term liquidity or capital needs provided for in the founding agreement. Pursuant to Article 821 of the Code of Liabilities, LLCs must be liquidated in the following cases: 1. When the conditions specified in the memorandum of association occur2. Decision of the general meeting of participants3. Initiation of the bankruptcy process4. In other cases provided by law, the decision on liquidation must be made public after the decision on liquidation made at the general meeting of participants. However, according to the first paragraph of Article 822 of the Code, each participant (shareholder) has the right to refuse to participate. To do this, the participant (shareholder) must apply to the court. Pursuant to paragraph 2 of this article, shareholders also have the right to refuse to participate (without going to court) within the conditions specified in the memorandum of association. This situation is possible only if the memorandum of association contains the right to refuse to participate. Pursuant to Article 822 of this Code, information on a company’s participant (shareholder) refusing to participate by filing a lawsuit or exercising the right granted to him by the founding agreement must be communicated to the participants by the board of directors without delay. If other participants (shareholders) receiving such information in accordance with paragraph 2 of this Article do not apply to the court or the founding agreement for refusal to participate (share), the refusing participants shall be treated equally in relation to their shares in the capital investment. If there is additional capital investment, it should be added to the face value.
In parallel, Article 823 of the Code gives the company the right to exclude its participants (shareholders) from participation. This right can be exercised in two ways: 1. The company may apply to the court with a good reason for disqualification.2. If there is a provision in the founding agreement that provides for such a right of the company, and if the conditions specified in the founding agreement exist, the decision of the participants to remove the participant without going to court. Because, the legislation does not allow confiscation of the share of the participant who was excluded or refused to participate.

Rules for increasing the authorized capital in limited liability companies
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