It is possible to raise the share capital over the life of a company. Any company can conduct this operation which will modify its statutes. Why conduct a raise in the share capital ? What procedures you should follow for this capital raise to be valid? Here is everything you need to know about this subject and French law.
Why raise the capital of a company ?
A raise in share capital is a major step, its objective is often to bring in fresh capital into the project, or to receive outside investors. Indeed, it is about bringing to the company greater solidity and greater credibility, with a larger amount of financial capital.
But the capital raise is also a financing tool used in many specific cases in France. In particular, it is possible to raise capital in order to deal with debts accumulated in the past. Finally, the contribution helps to honor new investments, either through direct use of funds or through credit granted by a bank, given the new greater borrowing capacity.
How to conduct a capital raise ?
In France, there are several solutions to increase the share capital of a company.
Capital raise by incorporation of reserves: through the allocation of new securities to shareholders, or increase of the securities value (company shares or shares), it is possible to raise capital. In this case, it is the company itself which includes the retained earnings into its share capital.
Capital raise in cash: this is the issue of new securities or the increase in the nominal value of existing equities. This increase takes place through the provision of new liquidity. Prior to this increase in cash, the constitutive share capital must have been fully paid up. (The capital raise can also be done by incorporating a partner’s current account).
Capital raise by contributions in kind: this is an increase by the contribution of assets, which are therefore not, by its nature, sums of money. The intervention of a shares auditor, responsible for assessing the value of the property brought, is critical (within the limit of a certain value) for this procedure.
Capital raise of a company : what are the formalities ?
A capital raise does not take place in the same way in all companies, because it is notably done according to its legal status. Thus, if your company is a EURL / SARL, it will not have to follow the same formalities as a SASU / SAS. Between the holding or not of a board of directors, the respect of the instructions registered in the statutes of the company, or the methods of progress of the collective decision-making, a capital raise cannot be improvised.
In addition, since it is a “strategic” operation, the purpose of which may be to increase financial stability, credibility in front of partners, or even financing capacity, it is appropriate to choose the right form of increase.
This operation is preparing day after day and is also structured upstream of a planned sale, transmission or interest rate project with professional investors.
That is why we recommend that you seek assistance from a certified public accountant from CF Henderson to help you.
He will be able to support you thanks to a precise outlook on your business finances, but also openness to all aspects of the management / life of the business.
Even better, a chartered accountant can take care of the organization and drafting of documents relating to the capital raise in France.